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(Although this is a pitch by wineaccess.com, an internet wine marketing company, to sell some fledgling Napa estate wines, this article has some good, pertinent information on the roots of the wine crisis in Napa Valley.)
(All side commentary, red-lining & photos copyright 2009 by Gerry Dawes.)
Understanding the Crisis in Napa: Part 1
It's impossible to deny the appeal of the Napa Valley. Close to six million wine drinkers work their way up Route 29 each year, hopping from one glittery tasting room to the next. That flow of traffic -- generating massive direct-sale opportunities -- coupled with a worldwide love affair with high-end, highly scored boutique brands, fueled unprecedented price escalation in Napa.
Few of the boutique Napa Valley wineries grow grapes. Most buy fruit. As bottle prices escalated, particularly in direct sales, margins exploded. Suddenly, grape growers of the most coveted vineyards could pick their customers. Grape prices soared, and growers were able to lock in their clients to long-term grape contracts. Those contracts are part of the root of the crisis.
But for the purposes of this portion of the story, we've chosen to focus on a different part of the market: the fairly new, estate-bottled wineries. These estates, many as small as 10 acres, spent lots on land, then spent much more ripping up the land and planting. Some began by simply growing and selling grapes before bottling wine on their own. Some went directly into bottling under their own brand. They built business models (most of which have turned out to be Excel Spreadsheet Fiction) based on what was going on up and down the Silverado Trail. They spent fortunes on French barrels (as the dollar dropped precipitously), hired consulting winemakers, and prepared for the gravy train.
Few of the boutique Napa Valley wineries grow grapes. Most buy fruit. As bottle prices escalated, particularly in direct sales, margins exploded. Suddenly, grape growers of the most coveted vineyards could pick their customers. Grape prices soared, and growers were able to lock in their clients to long-term grape contracts. Those contracts are part of the root of the crisis.
But for the purposes of this portion of the story, we've chosen to focus on a different part of the market: the fairly new, estate-bottled wineries. These estates, many as small as 10 acres, spent lots on land, then spent much more ripping up the land and planting. Some began by simply growing and selling grapes before bottling wine on their own. Some went directly into bottling under their own brand. They built business models (most of which have turned out to be Excel Spreadsheet Fiction) based on what was going on up and down the Silverado Trail. They spent fortunes on French barrels (as the dollar dropped precipitously), hired consulting winemakers, and prepared for the gravy train.
Silverado Trail, Napa Valley. Photo by Gerry Dawes©2009.
To really taste the crisis, we've created a sampler made up of three of the most inspired releases from these new, small estates. There's Tim Milos's brilliantly rich and elegant Rubissow Cabernet Sauvignon from Mount Veeder, the Crane Brothers' "perfect blend" (the best of the best from this pristine vineyard) called Brodatious, and the delicious, opulent Maple Lane Cabernet from their vineyard between St. Helena and Calistoga. Two bottles each of these tiny-production Napa gems, sold for less than 50 cents on the dollar! Here's why.
Almost uniformly, the wineries above, and dozens of others up and down the valley, were faced with a stark new reality. Just as the winegrowers were ready to launch their brands, the wholesalers clammed up. $50 bottles that had been flying out of wholesale warehouses backed up. Rather than taking on new suppliers, wholesalers were cajoling existing suppliers, explaining how the market was on its ear, why prices had to come down. For the new guys on the block, the wholesale market fell apart in just a few months at the tail end of 2008.
Almost uniformly, the wineries above, and dozens of others up and down the valley, were faced with a stark new reality. Just as the winegrowers were ready to launch their brands, the wholesalers clammed up. $50 bottles that had been flying out of wholesale warehouses backed up. Rather than taking on new suppliers, wholesalers were cajoling existing suppliers, explaining how the market was on its ear, why prices had to come down. For the new guys on the block, the wholesale market fell apart in just a few months at the tail end of 2008.
Less stretch limos in Napa Valley these days. Photo by Gerry Dawes©2009.
As to direct sales, traffic slowed on Route 29. Other wineries with more mature programs stepped up their direct-marketing budgets. These new wineries weren't positioned for the direct game; their mailing lists were small, their direct-marketing prowess immature. The phones that would have been ringing off the hook 18 months before were silent. Wine was backing up in the warehouse and grapes -- well, grapes just keep growing, year after year.What will happen to these businesses? Some will close. But the family-owned and -operated businesses will scramble, figure out how to survive. The vineyards are excellent, the wine is already very good and as the vines mature, it too could be excellent. They tighten their belts, and they look for ways to get wine-sophisticated consumers to taste their wine. Many now are contacting WineAccess. --wineaccess.com
Dr. Wilkinson's Hot Springs Mud Baths, Calistoga, Napa Valley.
(A lot of wineries around the world may have to open wine spas, because somebody is going to take a bath in all the unsold. I have an idea; they should rachet up the alcohol even further, so they can offer hot springs wine baths. We know there is a worldwide wine crisis, but does anyone see a connection between dropping consumer demand and high prices, wine made with a load of high-priced French oak as a flavoring agent and alcohol levels so high that the wines can be used to flambeé a dish and are practically guaranteed to turn off women and people with a sensible palate? Text & photo by Gerry Dawes©2009.)
About Gerry Dawes
Gerry Dawes was awarded Spain's prestigious Premio Nacional de Gastronomía (National Gastronomy Award) in 2003. He writes and speaks frequently on Spanish wine and gastronomy and leads gastronomy, wine and cultural tours to Spain. He was a finalist for the 2001 James Beard Foundation's Journalism Award for Best Magazine Writing on Wine, won The Cava Institute's First Prize for Journalism for his article on cava in 2004, was awarded the CineGourLand “Cinéfilos y Gourmets” (Cinephiles & Gourmets) prize in 2009 in Getxo (Vizcaya) and received the 2009 Association of Food Journalists Second Prize for Best Food Feature in a Magazine for his Food Arts article, a retrospective piece about Catalan star chef, Ferran Adrià.
". . .That we were the first to introduce American readers to Ferran Adrià in 1997 and have ever since continued to bring you a blow-by-blow narrative of Spain's riveting ferment is chiefly due to our Spanish correspondent, Gerry "Mr. Spain" Dawes, the messianic wine and food journalist raised in Southern Illinois and possessor of a self-accumulated doctorate in the Spanish table. Gerry once again brings us up to the very minute. . ." - - Michael & Ariane Batterberry, Editor-in-Chief/Publisher and Founding Editor/Publisher, Food Arts, October 2009.
Mr. Dawes is currently working on a reality television
series on wine, gastronomy, culture and travel in Spain.
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