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California's Wine Industry Enters New

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California's Wine Industry Enters New RESEARCH ARTICLE ▲ ▲ California’s wine industry enters new era Phil Schermeister Since the 1970s, when lower-quality jug wine dominated the market, U.S. consumers have developed a taste for better, more expensive wines. Concurrently, California vintners began producing world-class wines and growers planted tens of thousands of acres of new vines. Above, Many connoisseurs learn about wine and buy directly at the winery. September 2002, California wines were dramatically improving, IN grape growers picketed a Gallo U.S. consumers in the 1980s and 1990s grape-receiving facility in Fresno, pro- took a new interest in wine and the testing the $65 a ton — just enough to lifestyle associated with fine wine and Dale Heien cover picking costs — offered for their food (see page 76). At the same time, Philip Martin grapes. Meanwhile, swank restaurants consumers increasingly appreciated ▼ were serving wines made from Napa and understood that the taste of wine Cabernet Sauvignon grapes worth reflects where the grapes are grown The wine industry in California and $3,700 a ton. The wine industry in Cali- and how the wine is made. These and the world is entering a new era, fornia and the world is entering a new other changes have contributed to a marked by consolidation and era, as people drink less but better reconfiguration of the California, and globalization. People are drinking wine. Will producers of lower-priced world, wine economy. In the 21st cen- less but better wine. Will producers grapes raise their quality enough to at- tury, the California wine industry is of lower-priced grapes raise quality to tract more upscale wine drinkers, put- changing as a result of consumption pat- attract more upscale wine drinkers, ting downward pressure on all grape terns, consolidation of production and putting downward pressure on all and wine prices, or will the wine-grape the globalization of sales and tastes. industry continue to fragment into dis- grape and wine prices, or will the Quality, not quantity tinct quality and price segments, allow- wine-grape industry fragment into ing one segment to prosper while an- U.S. wine drinkers upgraded their distinct quality and price segments? In other languishes? tastes over the past quarter century as 2001 and 2002, an increased grape In 1976, a revolution took place in baby boomers with more leisure time supply and the recession led to the California wine industry. A blind and money began to explore wine. declining prices for wine grapes in all tasting in Paris pitted several California Consumption of cheaper table wines, areas of California except the North wines against top French vintages. To costing $3 a bottle or less, was stable Coast. Predictions of a severe wine- the eternal chagrin of the (French) during the 1980s. In November 1991, grape glut obscure the possibility judges, the California wines — Stag’s the CBS TV program 60 Minutes aired a that a fragmented wine industry is Leap Cabernet Sauvignon and Chateau segment on the “French paradox,” developing in which some segments Montelena Chardonnay — were voted which found that moderate consump- prosper while others languish. superior. In part because domestic tion of red wine lowers the risk of coro- http://danr.ucop.edu/calag • JULY-SEPTEMBER 2003 71 TABLE 1. U.S. table wine consumption by retail price (750 ml bottle) and percentage of total volume, 1991–2001 1991 1995 1998 1999 2000 2001 Cases sold (retail price) . million cases . Ultrapremium (over $14) 2.4 3 5.5 10.1 14.4 14.8 Super-premium ($7 to $14) 7.1 10.1 21.4 24.5 24.5 26.4 nary heart disease, making wine con- Popular premium ($3 to $7) 28.1 34.5 48.1 49.5 52.6 51.3 sumption more acceptable among Jug wine (below $3) 69.2 69.4 67.8 65.7 55 52.6 health-conscious consumers. Wine con- Total 106.8 117 142.8 149.8 146.5 145.1 sumption, especially of better-quality Average price $3.44 $3.88 $4.60 $5.21 $5.88 $5.96 Total volume . % . table wine, rose sharply (table 1): wines Ultrapremium (over $14) 23471010 carrying labels such as “Chablis” or Super-premium ($7 to $14) 7 9 15 16 17 18 “Burgundy” and classified as jug wine Popular premium ($3 to $7) 26 30 34 33 36 36 Jug wine (below $3) 65 59 47 44 37 36 fell from 65% of consumption in 1991 to Source: Fredrikson 2003. 36% in 2001. Wines costing $7 a bottle or more were 9% of sales in 1991, and 28% in 2001 (Fredrikson 2003). The av- erage, inflation-adjusted price of a had three wires, for the irrigation hose, tracts with guaranteed prices (Goodhue bottle (750 milliliter [ml]) went from cordon or vine, and a catch wire to sup- et al. 2002). Plantings increased 48% be- $3.50 in 1991 to $4.60 in 2001, 2.5% an- port foliage. During the 1990s, trellises tween 1991 and 2001, with the fastest nually. This increase in consumption of became more complex, often having growth in the North Coast and Central higher-priced wines and decrease in wires to guide the shoots upward, fos- Coast areas (table 3; CASS 2002). consumption of jug wines led to the tering growth and facilitating exposure Nonbearing acreage increased even phrase that consumers were drinking to sunlight. Some growers remove faster, although the exact amount re- “less but better.” The popular premium leaves by hand to increase the exposure mains uncertain because some growers category, also known as “fighting of the grapes to sunlight. Grape clusters have not fully reported their acreage. varietals,” now has a share equal to the that are slow to ripen are removed, in- In 2001 and 2002, the increased once-dominant jug wines. tensifying the flavor of the wine pro- grape supply and the recession led to Higher grape and wine prices led to duced from the remaining clusters and declining prices for wine grapes in all more plantings in California, especially increasing the quality of the wine. areas except the North Coast. In the in coastal areas associated with higher- Grape growers have become more southern San Joaquin Valley, the result priced wine grapes. At the beginning of sensitive to terroir, or local conditions. was extremely low prices, which the wine boom in the late 1970s, pro- Rootstocks have been developed for prompted the protests at Gallo. Over ducer prices for wine grapes rose in all particular areas so that vines are more 60% of grape acreage in the southern areas. However, increased production disease resistant or drought tolerant, San Joaquin Valley (Madera, Fresno in the 1980s led to lower prices and a suggesting that parts of California may and Tulare counties) is Thompson 10% reduction in acreage between 1982 develop a French-style system that as- Seedless, grapes that can be marketed and 1991. As the dollar rose in value in sociates specific grape varieties with as table grapes, dried into raisins, or the 1980s, wine imports surged, achiev- particular areas, such as Cabernet in the crushed to make wine or grape juice ing a 27% market share in 1984. During Napa Valley, Chardonnay in the concentrate — a natural sweetener the late 1980s, the California wine in- Carneros area of Napa and Sonoma added to soft drinks and confectionery dustry again began to expand, but this counties and Zinfandel in the Sierra products. Many southern San Joaquin time growers planted varietal grapes foothill counties. Valley growers do not have contracts such as Chardonnay, Zinfandel, During the 1990s, the demand for with wineries, which explains why they Cabernet Sauvignon and Merlot. The wine increased and some wineries of- were protesting low spot-market or top five wine-grape varieties accounted fered growers multiyear planting con- harvest-time prices in 2002. for 45% of the acreage in 1972 and 65% in 1997, but only French Colombard and Zinfandel were among the top five TABLE 2. California wine-grape varieties and percentage of acreage, 1972 and 2001 in both years (table 2; CASS 2001). Wine-grape production methods 1972 2001 also changed. In the early 1970s, most Carignane 12 Chardonnay 21 growers planted vines in rows 10 to French Colombard 10 Cabernet Sauvignon 15 12 feet apart, which reduced disease Zinfandel 9 Merlot 11 Grenache 7 Zinfandel 10 risks by increasing air circulation but Barbera 6 French Colombard 8 also limited yields on what was becom- Total 44 65 ing more expensive land; rows today Source: CASS 2001. are spaced 8 feet or less apart. The most common trellis system during the 1970s 72 CALIFORNIA AGRICULTURE, VOLUME 57, NUMBER 3 Photos: The Wine Institute Wine-grape production methods have changed since the 1970s. Many growers have become attuned to local growing conditions and are focusing more attention on trellising, pruning and thinning grapes in the field. As a result, high-value Chardonnay and Cabernet Sauvignon dominate the market. wineries are buying smaller ones, in Manischewitz, Cook’s, Taylor and Wild Farm, food industry consolidation part to improve their bargaining posi- Irish Rose. The Wine Group owns Glen The farm and food industries are tion with retailers such as Costco. For Ellen, Franzia and Mogen David consolidating so that fewer and larger example, Constellation Brands owns (Franson 2002). Consolidation enables firms account for an increased share of Canandaigua Wine Co. — the second- one producer to market many labels, total sales. The same squeeze on midsize largest wine producer after E. & J. gaining shelf space in retail stores and players is occurring in the wine industry. Gallo — as well as Franciscan Estates, facilitating exports and joint ventures.
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