All Posts Tagged: Napa

What the 2014 Crush Report says about the wine industry

Adam Beak
Posted by Adam Beak
Agribusiness Banking

While the 2014 California Crush Report shows a 12% decline in production from 2013’s peak, we continue to see very high levels of production across the state.

Closeup on a cluster of grapes one a vine near a path through the vineyard.Given California’s incredible yields each year since 2011, the Premium Wine Group had some initial concerns that the industry may find itself in an over-inventory situation. In some regions, that’s been true. In the Central Valley in particular, pricing is necessarily low because of excess inventory.

In areas like the North Coast, however, inventory remains light despite three years of strong crush numbers. Looking ahead, supply and demand would dictate that North Coast fruit prices (and by extension North Coast wine prices) would have some elasticity to start moving upward. We’re already seeing some of that with Napa Cab prices crawling up fairly dramatically, and we may see even more in the coming cycles.

The ‘trade up’ factor

The difference in Central Valley and North Coast inventories speaks to more than just the quantity of grapes produced by each. It also reflects the broader trend of wine consumers moving up price points. We’ve seen this “trading up” effect in play for a couple years now, and as of year-end 2014, the trend remains strong. In fact, consumption of wines at the higher price points continues to be the fastest-growing area in the wine industry.

Even though North Coast production has been robust for three years running, demand is still outstripping supply as consumers look to the more expensive appellations. As a result, there simply aren’t a lot of North Coast reds available in the bulk market.

These details really illustrate a truism about the wine industry: It’s a business that defies broad generalization. More often than not, it functions as a group of micro-industries, with different price points, appellations, and varietals reacting differently in terms of production and actual consumption.

The drought’s impact

The strong crush numbers also show how lucky we got in terms of the weather cooperating to minimize the drought’s impact. Last year delivered the best-case scenario that growers could hope for in a period of historic drought. Despite record low rainfall, what little precipitation we got came at exactly the right time to moisten the ground as the vines were waking up.

We also had the remarkable combination of an early spring with very little frost pressure. Generally, an early spring gives growers a far longer minefield to maneuver in terms of frost protection, but we managed to avoid that in 2014. This was a double blessing since California growers typically rely on water to protect vines from freezing. Without the pressure of frost, they were able to redirect what limited water was available to irrigation.

Now California is coming out of yet another incredibly dry winter, and while we certainly hope that the weather will duplicate what we saw in 2013/2014, we can’t count on it. That said, the 2014 Crush Report shows that despite the pressures of ongoing drought, the U.S. wine industry remains in very strong shape. That’s something we can all raise a glass to.

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Post-quake tips to help wineries, other businesses get back on track

Adam Beak
Posted by Adam Beak
Agribusiness Banking
Closeup of large cracks in a road with dense groups of green trees on either side.

For businesses that are cyclical and dependent on Mother Nature, these tips can help with post-disaster recovery.

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