Napa Valley’s Economic Woes as Harvest Approaches

Harvest season is underway and that should be a festive time for everyone in the Napa Valley. But that may not be the case. I spent the last two days in the Napa Valley driving from Napa to Calistoga, hitting the crossroads, doing some photography and of course wine tasting. During my travels I spotted some troubling signs that the recession is taking its toll on the Napa Valley wine industry. I’ve read the reports and watched news segments indicating that hard times are ahead for wineries and growers, but until you see some concrete examples it’s hard to judge the reality of those reports.

For the first time since traveling to the wine country I saw a sign in front of a vineyard by Whitehall Lane in Rutherford that read “20 plus Tons of Cabernet Sauvignon grapes for sale.” Wow, I thought, here we are 4 to 6 weeks away from harvesting these grapes and this vineyard as of Thursday, August 20, 2009 had no buyers. Out of curiosity, I called the phone number on the sign and talked to a person who did not want to identify himself. Last year he said these grapes sold for $4100 a ton and were purchased by V. Sattui Winery. This year V. Sattui has decided not to buy these grapes and now the grower is left holding the bag, so to speak. At this late date this grower is desperate enough to put out the sale sign in hopes of selling the nearly 7 acres of grapes by harvest time. By the way, the person on the phone told me that this vineyard is just one of many in the Valley in the same situation.

Later that day, I visited Doug Boeschen, owner and winemaker at Boeschen Vineyards. Doug stated he has seen other grapes for sale and he believes there is going to be a lot of unsold fruit at the end of harvest. Does that translate into a shortage of wine 2 to 3 years down the road?

Adding to the misery of the growers who can’t sell their grapes are those who want to sell entire vineyards. I came across three, yes three, different “For Sale” signs by real estate companies posted on plots of vineyards. Apparently these vineyard owners are in a financial state where they need to get out now. Aren’t vineyard sales usually handled behind the scenes? The last time I viewed a plot of vineyards for sale was about 40 years ago and I mused then, if I’d had $20,000 I could have bought those 26 acres of vines.

What is next? Will I be driving along Highway 29 and see a sign outside a winery that reads, “This Winery is For Sale?”

Comments

  1. Gary Kozel says:

    That sign has been up for some time, since around the 4th of July. And I was a struck by it as you. I’d never seen a sign like that previously.

  2. Lenny Pepperidge says:

    I hate to say it, but if hubris begets a fall, then Napa Valley has one hell of a fall in store. That valley came to represent everything that had gone off the rails not only in the wine business but in American culture.

    If our society, at the first sign of economic life, rushes back out to buy over-hyped and over-priced trophy wines at the expense of truly resetting our economic priorities and behavior, then this country will truly deserve the momentous economic crash to come.

  3. Wow, Lenny. Lighten up.

    There are hundreds of tons of Cab fruit available still in Napa Valley. The average price for valley floor Cab is $1800 per ton – over half price compared to last year. But oh, the Napa Valley is not the only hurting place, nor the only place destined for Lenny’s fall.

    Sonoma County has hundreds of tons of Chard and Pinot still up for sale. The Central Coast is hurting, as is the Santa Barbara County area. Many wineries that had contracts have chosen not to renew this year, resulting in a glut of grapes still unsold.

    The really smart guys are taking advantage of the reduced price and buying it up. It takes 12 plus months to go from grape to bottle, on average. Hopefully, in 12 months, we will see even more signs of a recovery.

    Sorry, Chicken Little, the sky is still up there.

  4. Ralph-Louis says:

    There is only one NAPA VALLEY. There will always only be one NAPA VALLEY. Ever industry has it’s cycles of boom and bust. The Napa Valley is just experiencing the bust cycle after almost 20 years of boom. Time to separate the wheat from the chaff.

  5. Wine prices drive grape prices which drive vineyard and winery prices. It’s that simple.

  6. ED KELLER says:

    In every business it’s about cash flow, cash flow , cash flow plus ample reserves to get through the down turns

  7. Lenny Pepperidge says:

    Greg, while the sky might still be up there, it is very dark and not looking to clear any time soon. I suggest that you read two recent surveys on American consumer behavior. The first was done by agrobank and concerned the American Wine consumer specifically. Its essential conclusion was that this is not a temprory “trading down” but rather a long-term systemic change in wine buying habits.

    The second was conducted by Met Life and takes a larger macro look at American consumption habits but comes to the same conclusion. The American consumer has been scared straight and will not be returning to his/her profligate ways when the economy rebounds.

    This is a good thing. America can not think that we can base an economy off of trading houses back and forth between each other, while maintaining a zero percent saving rate.

    It’s obvious to a lot of people that over the last ten years what was “good for Napa Valley” was not good for America. Napa enjoyed a boom of epic proportions at the same time that our economy was headed for a collapse that almost plunged us into a second Great Depression.

    I’m not saying that Napa can’t survive, but it will have to adapt to new market conditions and consumer behavior patters. If its legendary hubris prevents it from doing so, then it will justifiably be cast onto the ash heap of American business history.

  8. Ron Saikowski says:

    My prayers go out to these poor farmers. However, reality is that high priced wines and condos are not selling. People are looking for values and especially in wines. One region of the world produces great grapes and wines with land costs at one-thousandth of that in Napa. Guess who will be selling their wines for a good return on investment. The economy will cause huge downward value spirals for many banking on high profits. Many of the French have cut their absurb prices by 50%, making their wines over-priced and over-hyped. Only a very small part of our society can afford the most expensive wines and it appears they are no longer buying. For me, I am enjoying my $14 bottle of CA Zin while relaxing in Texas. I will continue to enjoy my wines daily, but value wines are what I seek, not over-priced, over-marked wines. Thank you California for your contribution to the wine world. I will be buying California grapes and making wine (55 gallons Pinot Grigio & 110 gallons of Chardonnay) for my personal consumption.

  9. As of September 14, the sign is still up.

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