As others shed jobs, California wine growers look to expand

Sacramento BeeJanuary 29, 2009 

After a years-long wine glut, grapes are scarce again in California.

So even as the national economy sheds jobs by the tens of thousands, the Central Valley's wine-grape growers are looking cautiously to expand.

Nobody's talking yet about the sort of planting frenzy that swept California in the late 1990s, which boosted vineyard acreage by 50 percent but ultimately flooded the market.

But grape prices are nudging up, wine sales have more than caught up with grape production, and after years of watching bulldozers clear thousands of acres of Valley vineyards, growers' moods have clearly shifted.

"The tide is turning," said Nat DiBuduo, president of Fresno-based Allied Grape Growers, during a standing-room-only presentation Wednesday in the Hyatt Regency Sacramento ballroom at the Unified Wine and Grape Symposium.

On the floor of the conference's huge exhibit hall at the Sacramento Convention Center, farm lenders reported that interest in new vineyard land is up, though most growers are still cautious. Farmers who planted new vineyards during the last few lean years were feeling good about their decision.

The Lodi region looks to be particularly well positioned for the next few years. High-end wine sales are getting hammered by the bad economy, but sales of good-quality midrange and low-priced wines – $10 and under – have stayed strong. It's not very profitable to make those wines from pricey coastal-region grapes, which can cost five times as much as Lodi fruit.

"We're the best alternative for a winery that is trying to sell at a price point that is competitive," said Brad Lange, an owner of Lange Twins Vineyard and Winery Estates in the Lodi region.

Still, Lange and other growers said they're not rushing things.

Gary Patterson, who farms 2,100 acres east of Lodi, started betting on a turnaround three years ago and was steadily adding acreage until recently. He's holding off on buying new land, he said, until the economy settles down a bit, and it's clearer that cash-strapped consumers are willing to keep buying wine.

"We're saying, let's just see," he said.

U.S. wine consumption rose last year even as the recession took hold. Wine was a relative bright spot during a wretched 2008 holiday season for retailers, with sales growing 5.3 percent, according to industry consultant Jon Fredrikson.

This week's conference in Sacramento is the domestic wine industry's largest gathering of the year. Organizers expect a record crowd, surpassing last year's 11,600.

If grape prices do rise in the coming years, wine shoppers won't necessarily see much change in retail prices. Grapes account for only a small fraction of the cost of a bottle, and it can take years for changes to trickle through the industry's production and distribution lines. Competition from low-cost imports is also likely to keep prices in check.

Within the wine industry, though, pricier grapes stand to shift profits from wineries to growers, who have said for years that grape prices don't support their farming costs.

One problem with the current shortfall of California grapes is that the industry risks losing market share to imports, said wine broker Bill Turrentine.

"On the other hand," Turrentine said, "we have the chance to gain margins. Particularly coming out of seven years of excess, that looks pretty good."

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