Wine by the Numbers

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There is some profound information in numbers relating to wine. The information will probably not let you enjoy the wine more, but it should up your wine snob coefficient of wine facts. In the final analysis, wine has a lot of data points that are taken into account on wine’s journey from the vineyard to the shelf.

The consumer, in a free market, dictates demand. Of course they are influenced by industry advertising, news reports, recommendations from friends, pricing, and tastings and yes, even trends. As we all know, wine can be trendy. This is not new information, but in wine this is easily overlooked; sometime the romance overwhelms logic. Wine producers try to guess the next great change in varietal demand and vineyards respond to the risk of being too far ahead of the curve. That is probably why some wineries will test the consumer’s tastes in new blends before committing. In that it takes a few years for vines to start producing fruit, accurate forecasting varietal demands are tricky.

If we discount the California weather impact in 2014 crush, some of the major varietals saw a reduction in tonnage except for Melbac; even Zinfandel had a 24% drop in crush numbers. This can explain why some vineyard companies are moving to more profitable crops–low demand decreases yields.

It is easy to look at the California wine industry in simple terms if we just focus on: acreage, crush and gallons. The marketing side of the industry (such as pricing, direct-to-consumer shipping, etc.) is another subject that is both quantitative and qualitative.

ACREAGE

According to a USDA report released in April 2015 and produced in co-operation with the California Department of Food and Agriculture, there were 27,000 acres of grapes taken out of production in 2014 in California. Cabernet Sauvignon did see an increase in acreage comparing 2013 over 2012. But, some like Merlot saw a drop in total acreage in California. Relative to the whites, the champion Chardonnay grape (the largest white wine varietal) took a slight hit (144 acres), otherwise white wine grapes are flat relative to acres planted. Note: Total acreage is defined as bearing and non-bearing. For analysis purposes it can be interesting to see total commitments to acres planted as total and bearing only.

For example, Malbec has seen a surge in planted acreage over the last few years. If we consider bearing acreage versus non-bearing it will be noted that planting commitments were made in 2012 to plant new Melbac (data prior to 2012 is not definitive enough). Roughly, 30 percent of the total acreage for Malbec is just coming on-line in 2015. This means that wineries and vineyards are anticipating an up-swing in demand for Melbac wines. Comparatively, Syrah has seen a negative 3% change in 2014 versus 2013; granted the Syrah base isn’t very large (approximately 19,000 acres in California). Cabernet Sauvignon continues to be the star performer in California considering commitment to acreage. But, in crush numbers alone, even Cabernet Sauvignon decreased in 2014.

California acreage committed to all types of grapes (2014) was 928,000 of which wine grapes account for 66% of the total committed acreage. Overall, acreage committed to all grapes was down 0.5 percent 2014 vs. 2013. Elaborating on the point made earlier; the time before the vines become “bearing” is 3 to 4 years and farmers today are projecting that other crops can produce higher yield crops than grapes (wine, raisin, or table grapes).

Consumer’s drive the wine market and wineries produce wines that satisfy their market niche, not just in varietals but in flavors, aromas, and style and price points. This explains why there are so many wineries producing labels in each varietal category. Conversely, it is expensive to be a trail blazer in the wine business. The selection of grape’s or varietals to be grown (table, raisin or wine), are based on demand forecasts, consumer appreciation of the terroir, and the market revenue per ton for the fruit.

The varietals responsible for the most committed acres in California are: Chardonnay (97,826 total acres) and Cabernet Sauvignon (87,972 acres). These two varietals represents 53% of all white wine grapes by acreage and 28% of all red wine grape acreage respectively. These two varietals are the top acreage commitments out of 41 red and 32 white grape varietals planted in California in 2014.

In summary, 2014 California grape bearing standing acreage for white wine was 175,054 and 290,914 for red wine. Total bearing wine acreage was 465,968.

CRUSH

On the subject of California grape yields, the 2014 average price of all varieties of wine grapes were up.6% over 2013 to $758.69 per ton; red wine grape prices were up 5% to $892.06 per ton. Interestingly, the total 2014 crush totaled 4.14 million tons, down 12% versus 2013. The red wine crush was down 12% from 2013. Be mindful that there are different tonnage by varietal and production by terroir.

Total California crush in 2014 was 4,142,934 tons.

The USDA, in cooperation with the California Department of Food and Agriculture, has a report that details crush results. Because Napa and Sonoma/Marin Districts (Districts 4 and 3 respectively), are the largest by far in California, a quick look at their standings relative to the state in general is helpful. Within California in 2014, the largest varieties crushed were Chardonnay (17.3% of total) and Cabernet Sauvignon (12.3% of total) followed by Zinfandel (8.6%). In Napa, the highest average price per ton in 2014 was $4,077.31 per ton (average). Sonoma average yields were $2,318.92 per ton. These prices are for all varietals harvested. Note: depending on the vineyard, the Cabernet Sauvignon was the highest priced grape.

Gallons produced and cases shipped are still the standards by which winery success is measured, and the consumer dictates such. There are many reasons for the growth in number of wineries and not all reasons relate to economics; ego is maybe a significant factor on a long list.

The gallons of wine produced in the U.S. in 2013, according to the TTB (Tax and Trade Bureau), was 836,106,493 and that was up 11% over 2012. Of the total gallons produced, California recorded 728,939,759 gallons which is 87% of all U.S. wine produced.

WINERIES

As of January 2015 there were 4,150 wineries in California and 6,040 in the remaining states. In Sonoma and Napa there are 1,630 bonded wineries, these 2 counties represent 40% of all wineries in the state of California. Obviously, not all wineries are profitable. The old adage: the way to make a small fortune in the California wine business is to start with a large one, is true.

Wine Business Monthly reported in 2010 the top 30 U.S. wineries produced 90 percent of domestically produced and sold wine (all of which have a major California presence). In 2010, those winery owners produced 263.6 million cases of wine. Domestically, E&J Gallo Winery produced 70 million cases of wine. Assuming the 90 percent number for these 30 largest wineries the total U.S, cases produced (12 bottles/case) would be 292.9 sold in 2010, domestically.

In discussions with a large wine retailer, consumers upping their game in wine experiences are reported to be paying attention to the AVA designation for their wine buying selections. According to the TTB/Department of the Treasury there are now about 135 AVA’s in California and 37 of these are in Napa and Sonoma Counties. Obviously, wineries investing in AVA designations must see a return on that investment at some point. Of the 440 varietals of wine grapes approved for wine labels, California is home to approximately 80 varietals planted for wine production. These AVA’s offer special soils and climates that add to very unique wine profiles relative to flavors and aromas.

There are a couple of takeaways from this discussion on the numbers that try to summarize the California wine community:

  • Even in a global marketplace the U.S. wine industry is the 3rd largest in the world. According to the Wine Institute CA produces 90% of all U.S. wine production. If California were a country it would be the 4th largest producer of wine in the world.
  • In 2014 there were 565,000 acres of bearing wine type vines and 50,000 non-bearings in California.
  • The Cabernet Sauvignon and Chardonnay grape was the largest wine grape crop in California.
  • The crush of 2014 was 4,142,933 tons in California
  • The harvest of 2012 and 2013 were records and the 2014 harvest was diminished due to less than ideal climate conditions early and late in the vintage year.
  • 30 winery owners produce 90% of wines in the U.S. The largest is E&J Gallo in the Central Valley of California
  • The average price per ton of wine grapes in Napa was $4,100 and Sonoma averaged $2,300 per ton. Chardonnay and Cabernet Sauvignon represented 17.3% and 12.3% respectively of the 2014 crush.
  • There are 10,190 wineries in the U.S. and 4,150 are in California with 1,600 being in Sonoma and Napa. These 2 counties have 37 AVA’s.
  • In 2013, wine federal excise tax (FET) collections from California totaled $494.5 M. Total U.S. FET was $703.9 million. In 2014, FET from California totaled $507.5 million. Total U.S. FET was $729.5 million.

Wine consumers may be a fickle lot that respond to or dictate the fashion trends of wine. These trends may be one reason for the increase and decrease in acreage by variety. Another factor dictating changes in consumer preferences are the trends toward craft beer and spirits. Whatever precipitates changes in preferences, the wine industry is still a product and the manufacturers (wineries and vineyards) of that product must respond to foreseeable trends.

For example, Chardonnay has been a strong varietal and over the past 10 years has had a 2% growth, however, since 2012 acreage of Chardonnay as been relatively flat. Looking at Cabernet Sauvignon acreage there has been only a 0.7% increase. The star performer in California now is the Pinot Noir; a 1.5% increase in acreage over the past 3 years and 65% increase since 2005. The up and coming varietals in 2005 were: Merlot, Sauvignon Blanc, Syrah and Zindandel. Today these 4 varieties have seen a reduction in acreage that average about 2%. It seems the new trend setter is the Petite Syrah; nearly doubling in acreage over the past 10 years.

The “take-away” from this analysis is: wine can be trendy and addressing trends can be difficult to spot and expensive to address relative to vineyards. As an aside, in 2002 Merlot was the red wine trend and it has fallen out of favor over the past few years.

The wine industry in the U.S. has been around since 1779 (primarily in Southern California), thanks to Father Serra. The Gold Rush in Northern California of 1848 is probably the historic event that brought commercial wine operations to the area. The initial impetus of the Gold Rush brought vineyards to 10 counties in Northern California. However, in the final analysis, Sonoma Valley is considered the birthplace of a commercially viable wine industry thanks to names like: Haraszth, Krug, Wente, Beringer, Wetmore, and Niebaum.

In spite of the general history, we do not have a lot of historical production records of the wine industry in California. We do know the first president to sign a law to tax products was George Washington. We do know that California became a state in 1850, so one would assume taxes on alcohol, paid in all other states at the time, would be paid starting in September 1850. The Alcohol, Tobacco and Firearms (ATF) Bureau was started in 1886 for the collection of taxes. So, it is easy to assume accurate records and reporting of alcohol beverage production in California was tracked starting around 1850-1886. Thanks to the TTB and USDA we are able to understand the trends of this important industry.

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Source by Steven Lay