Outlook good for California wine lovers

Robert Eyler, an economist at Sonoma State University, valued the Napa and Sonoma wine business at over $10 billion in annual sales, and he estimated that billions more were generated by enotourism. “The fire, even though it was relatively large in acreage, was still relatively concentrated in specific areas,” he said. Many hotels, bed and breakfasts, and wineries survived intact and were not affected by the fires.

By Lynn Brezosky
San Antonio Express-News

While the loss of life and property damage from this month’s California wildfires are paramount on people’s minds, now that the fires have finally been contained, wine enthusiasts may be wondering about their favorite pinots and chardonnays.

California is by far the leading producer of U.S. wines, and even wineries in Texas’ fast growing winemaking industry source some of their grapes there.

The good news: Some 85 percent of this year’s grapes were harvested before the fires sparked. According to a report last week by James Lapsley and Daniel Sumner of the University of California, Davis, fires devastated Napa and Sonoma counties and spread into Mendocino and Solano counties, which are among California’s most famous wine growing regions.

But they are not the most prolific.

The Central Valley region, which provides the grapes for 70 percent of the wines on supermarket racks and in restaurant wine cellars, was not seriously affected. And while more than a dozen wineries had been directly damaged at the time of the report, they make up less than 1 percent of the more than 1,900 licensed wineries or wine cellars in Napa and Sonoma counties.

“Most grape and wine production in California broadly and even in the North Coast will not be affected dramatically,” the authors wrote, adding that even damaged North Coast wineries were producing wines more or less on schedule.

Where fans might feel the pain is with some of the most expensive wines, most notably those made from 2017 cabernet sauvignon grapes that hadn’t been harvested yet.

As an example, they said, a 25 percent harvest reduction for the 2017 vintage of Napa cabernet sauvignon could send the price of a $66 bottle to $100, and a 50 percent decrease in the supply of 2017 Sonoma cabernet could push the price of a $30 bottle to $45.

But most consumers aren’t buying $66 or even $30 bottles of wine.

According to Nielsen data reported by winebusiness.com, the hottest sales have been for wines priced above $10, with the fastest growth being for wines in the $15 to $19.99 segment.

Sales in the above $20 category grew 9.5 percent in 2015, compared to 16 percent for the mid-priced range.

And even for those who do splurge on that high-end Napa cabernet, it will be several years before the 2017 vintage even reaches the shelves.

“For the most part, we’re not expecting any kind of shortage in supply at all,” H-E-B spokeswoman Dya Campos said. “If you’re looking on the shelves now, obviously that was not impacted and we have plenty of supply. And so we are not expecting any kind of fluctuation in price.”

H-E-B is Texas’ largest retailer of California wines, and its buyers have relationships with larger vineyards like Kendall-Jackson, Beringer and Robert Mondavi as well as some of the hard-hit smaller vineyards.

“We sell wines all across the board from really high-end wine to the more common wine that people buy for every day,” Campos said. “We sell all across the spectrum, and some of the smaller vineyards that we work with very closely have reported that their grapes were already in tanks and they feel confident in their supply of this vintage.”

One unknown, Campos said, is how fire damage will impact future vintages, as it takes years to replace damaged vines. Another unknown is how the heavy smoke will affect grapes that were still on the vine or even in tanks for processing. Wine journalists have been wondering about the extent of “smoke taint,” a term for an ashy taste that may present in this year’s vintage.

“They think it’s still a little too soon to determine how this will impact future production as they’re still surveying a lot of different vineyards,” she said. “But the true tragedy is really loss of the life and the loss of people’s homes, just the sheer destruction of what the fires did. … They think the vintage will for the most part be OK.”

Debbie Reynolds, executive director of the Texas Wine and Grape Growers Association, said no major impact is expected for Texas wineries that may buy California grapes or bulk wine. While some find it misleading, Texas law says a bottle can be carry a Texas label as long as 75 percent of the grapes used come from Texas. The other 25 percent of the wine may be from grapes or juice sourced outside the state, which usually means California.

“At this time, the bigger hit is to tourism as Napa hosts a tremendous number of visitors and conferences,” Reynolds said by email.

The industry vulnerability is worth noting for Texas, which has a wine industry that’s small compared with California’s, but still has an estimated $717 million in annual wine tourist spending and has been called the “next Napa.”

Texas wineries are not immune to fires. The Rockhouse Fire in 2011 damaged some 60 percent of the vines at the Pleasant Hill Winery in Brenham.

But Kay Ledbetter of Texas A&M AgriLife Research and Extension Center in Amarillo said rangeland rather than crop growing areas were more likely to see wildfire damages.

Texas’ wine grape crop is more likely to be threatened by insect outbreaks or a climate that can damage crops with ill-timed freezes, A&M’s Paul Schattenberg said.

Wine sales and enotourism, the term for all the wine tasting tours, harvest participation and special events like weddings and corporate retreats, are the key economic driver for some of the areas most affected by the fires.

Robert Eyler, an economist at Sonoma State University, valued the Napa and Sonoma wine business at over $10 billion in annual sales, and he estimated that billions more were generated by enotourism.

Tourists for now may have general concerns about general safety issues such as air quality and soil toxicity, he said, but all that should clear within a few weeks and make the main concern one of keeping would-be visitors from changing their plans and attracting new ones with creative marketing or discounts.

“The fire, even though it was relatively large in acreage, was still relatively concentrated in specific areas,” he said. Many hotels, bed and breakfasts, and wineries survived intact and were not affected by the fires.

“The traffic’s actually been horrendous because people are moving around all over the place and they’ve got road closures in certain places,” he said. “Once all that lifts it will be somewhat business as usual, short of the idea that when you’re driving it won’t be the sort of beautiful foresty views everywhere. There will be some fire damage areas where it’s going to look a little bit like a blight.”

Going into the 2018 season, which starts around March and continues through early November, one of the biggest problems may be finding affordable housing for all the agricultural and seasonal workers.

“Disasters come and go,” he said. “You don’t want them to happen anywhere, but when they do happen there’s disaster response which kind of chokes up industry for the time that it’s being dealt with.”

“But then, business kind of gets back to normal. And as long as the assets are not destroyed, you just kind of get back in the groove,” he said. “And for the most part, the biggest concern here is not necessarily short-term demand but medium to long-term labor market retention, because housing has changed and so the cost of housing workers is likely to increase in the short term.”