California Wine Market Sees Incremental Uptick of Activity in March

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As prices soften, the California bulk wine market has experienced increased activity during the past four weeks with plentiful inventories of Cabernet, Pinot Noir, Chardonnay, and Pinot Grigio throughout the state.

New buyers have entered the market in search of establishing new coastal brands—a reflection of where planting has predominantly occurred during the past few years—but long-standing buyers also are back, although later than usual, according to Ciatti Global Wine and Grape BrokersCalifornia Market Report for March.

Outside of the four major varietals—Pinot Grigio, Chardonnay, Pinot Noir, and Cabernet—selection and volume of other varietals are not as plentiful, which means buyers should move quickly to acquire what they need.

As for the Lodi and Central Valley stock, the delay in purchasing activity seems due to wineries having excess inventory of whites, which required extra time to work through and which are now being put back onto the market to alleviate a lack of storage space. Although activity is delayed, the region’s market has been relatively normal, with buyers showing no indication of changing their grape sourcing plan.

In general, bulk wine prices have dropped to their lowest in five years, and more high-quality wines from premium wine markets are being listed, providing plenty of opportunities for buyers. Water reserve concerns are also somewhat abated for the time being, as February brought significant precipitation to most growing regions.

The future of land sales

The market for vineyards and undeveloped land for vineyards also has seen a surge in sales as of the past 12 to 18 months, according to the report. Particularly desirable properties with planted vineyards in Napa Valley, for instance, can go for $300,000 to $400,000 per acre, or even $500,000 per acre for super premium properties with California grapes used in wine that sells at $250 or more per bottle.

Although the softening wine and grape prices could affect the land and vineyard market, industry leader Tony Correia, owner of The Correia Company, believes the value of land tends to remain stable, even when grape pricing experiences cyclical downturns. Premium vineyards in the North and Central Coast, for instance, are receiving plenty of competitive buying activity.

In the future, the open California grape market may shrink as the older generations sell vineyards to wineries or investment groups, although buyers themselves are keeping an eye on projected operating costs. The price of the vineyard or land is only one piece; rising costs of water and labor, as well as regulatory pressures, also need to be factored in. For example, opportunistic buyers should take California’s new long-term Sustainable Groundwater Management Act and labor regulations into consideration.

Oregon’s wine scene

Oregon has undergone new plantings—with the state’s harvested grape area increasing from 27,658 acres in 2016 to 31,008 acres in 2017—and experienced notably healthy crops in the past few years, resulting in a generous supply. In particular, the 2018 vintage Pinot Noir has a large presence, although the 2017 Pinot Noir is nearly sold out.

Interested buyers in California should be aware of discussion within the Oregon industry about players becoming more aggressive in terms of bulk wine production contracts.

Industry news updates

With the California wine and grape market frequently in flux, bulk wine brokers, grape buyers and producers, and investors should remain aware of what is transpiring in the industry. Ciatti’s monthly Global and California Market Reports help professionals keep up to date with industry news that can affect their business outlook and opportunities.