A large 2018 harvest coupled with some declining case good demand in the wine market has created an unclear picture of the California Bulk Wine and grape market, where activity continues to be minimal. Unseasonably wet weather in the late spring as a result of the El Niño has led to projections of a healthy and potentially later crop for 2019.
Vine development is running about two to three weeks behind, although temperature projections for mid-June onward seem to be higher than average, according to the June market report from Ciatti Global Wine and Grape Brokers.
The damaging effects from inclement conditions – with growers potentially facing further issues, such as keeping canopy density under control and set issues at bloom – could impact the harvest season for California wine grapes. The degree to which the harvest will be affected is yet to be determined.
Meanwhile, California’s bulk wine market is sluggish, and wine prices are at the lowest they have been in five years, with further decreases a potential. The Coastal and Central Valley wines are reaching some price parity, with Coastal wines cheaper in some cases.
An opportunity for buyers
The market is facing severe buyer reluctance, which may be further exacerbated by the delayed crop. Wine suppliers are unlikely to clear out their existing bulk wine inventory, they need this space for crushing the 2019 crop that helps them generate cash flow.
Most of the current activity in the market can be attributed to wine negociants, who buy and bottle finished wine from sellers then distribute products on the market wholesale. Other activity at present is primarily due to the renegotiation of existing contracts or resigning at prices more on par with current market rates.
However, with bulk wine pricing being so low and suppliers open to negotiations, buyers can opportunely step into the market and secure quality California wine, by contract or on spot. In particular, 2016, 2017, and 2018 Cabernets and other red varietals – including Pinot Noir – from premium Coastal markets can be bought or contracted for multiple years at amenable pricing. Additionally, more bulk wines are entering the market each day. Now is also an opportune time to secure multi-year, reasonably priced contracts for 2019 grapes.
Domestic and international obstacles
Because of a slowdown in the growth of wine sales at home and abroad, there is currently a noticeable build-up of wine of several varieties, including Cabernet, Chardonnay, Zinfandel, and Pinot Noir.
Consumers have been reining in their spending habits since 2017, which puts wine – currently priced at $2.15 per five-ounce glass – at a competitive disadvantage compared to beer and spirits, which are priced at $1.28 per bottle and $0.93 per shot, respectively. Additionally, the general upward trend of wine being imported from foreign suppliers contributes to the challenges faced by California wines within the domestic market.
Finally, as the United States continues its trade war with China, the latter has imposed high tariffs on American wine imports, another burden on the California wine market that likely won’t be alleviated in the near future. U.S. wine exports to China, however, only account for about $80 million of the California wine market’s approximate $34 billion worth.
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