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NAPA — Wine industry economics in California have changeddramatically in the last year — even since the beginning ofthis year — as more wine producers realize the marketplacefor grapes and wine in bulk won't be large enough to keeppace with sales of finished wine. And the outlook for addingsignificant supply of major varietals in the state, particularly inthe North Coast, will be challenging for the foreseeable future,according to experts at a major industry seminar last week in Napa. Glenn Proctor of winegrape and wine brokerage Ciatti Co. and RickAldine of grape merchant and negociant Agajanian Vineyards told theaudience of about 220 at the 17th annual Vineyard Economics Seminaron May 15 that two historically large winegrape crops constrainedin size because of bad weather have sent the prices for redvarieties cabernet sauvignon, pinot noir, zinfandel and evenmerlot, plus wine varieties chardonnay and sauvignon blanc, soaringin the past two years. "It seems like someone turned the light on in January,"said seminar founder David Freed of Silverado WineGrower andSilverado Premium Properties, which own more than 12,000 acres ofCalifornia coastal vineyards. Forty-five percent of the 84 respondents to the seminar'sannual survey of vintners, growers and professionals in industryfinance said they want to plant winegrapes this year, including 100more acres in Mendocino County, 400 in Napa County, 570 in SonomaCounty, 312 somewhere in the North Coast and 10,000 more acresstatewide. The premium wine boom of nearly two decades ago sent grape pricessoaring as growers and wineries planted thousands of acres ofvines. But today, planting more vines encounters seriouschallenges, mainly from a current lack of vine materials atnurseries, followed by the cost of materials then the time and costof environmental regulation, according to survey respondents. Regulation is the biggest single impediment to putting grapes inthe ground, particularly in the California coastal regions, Mr.Freed said. In 2009 and 2010, buyers of grapes and wine were selling excessesas they trimmed inventories, but in recent months the market asbecome the tightest its been in a decade, according to Mr. Proctor.Large-volume buyers are out looking for grape contracts andoffering multiyear terms, and brand-builder vintners are becominggrape buyers because of limited bulk wine for sale. "If demand continues to grow, we don't have the supplyto back it up," Mr. Proctor said. The cost escalation isgiving California competition from imported finished and bulk wine. Summarizing Silicon Valley Bank's annual premium wineindustry forecast, released last month, report author Rob McMillantold the seminar audience that a number of economic indicatorspoint toward an improving economy and greater consumer spending,particularly on luxury goods. Mr. McMillan disputed claims that the wine industry faces animmediate shortage of grapes and wine. "We don't have a drastic shortage we're sittingon right now," said Mr. McMillan. "We're movingto a shortage." In the near term, the relative dearth of significant new winegrapescoming into production statewide and especially the coastal regionswill push grape and bulk-wine prices higher, he said. When input costs are rising quickly along with bottle sales butpassing higher costs to consumers is challenging because ofincreased competition and a sluggish economy, wineries must shoreup supply in longer-term, flexible-pricing contracts to ease theimpact on net revenue, according to seminar speaker Lise Asimont,director of grower relations for Francis Ford Coppola Winery inSonoma County's Alexander Valley. The winery's cost of goods sold for its brands have increasedby a quarter to a half in the past two weather-constrainedvintages, whiles bottle sales have increased 68 percent in the pastfive years. "Our competitors are raising their FOBs, but not 25 to 50percent," she said about prices to wholesalers. Vintners were able to raise FOBs during the wine sales boom in thelatter half of the 1990s that also sent winegrape pricessoaring, but the sluggish recovery of the U.S. economy togetherwith many more wine options for consumers from private- andcontrol-label brands in the past 15 years have made wholesalersmore resistant to taking price increases, according to Ms. Asimont. Through a number of sourcing strategies, Coppola has been able tolimit the increase in costs of goods sold to just 13 percent so farthis year, she said. The company has shifted sourcing more tovineyards along the California coast from bulk wine, signedgrape-purchase contracts of three years or longer at pricing notsolely tied to percentages above winegrowing district averagepricing, strategically moved sourcing for a given brand when costsrise by more than 15 percent to 25 percent, extended grape contractterms at higher prices and recruited new long-term grape suppliers. How quickly the supply crimp becomes a crunch depends on whetherthe 2012 crop is larger or smaller than relatively sizable harvestsof the past few years, Mr. McMillan said. "Consumers are not going to drink worse wine," he said. Producers of brands made from ample, inexpensive wine for sale inbulk will have to change their tactics to keep store shelf pricesstable amid rising costs, he noted. Makers of such brands will haveto buy grapes or move the brand from domestic wine sources tointernational ones. With a crunch on bulk cab for sale, buyers are hunting forCalifornia and imported bulk merlot as a blender or replacement redwine program anchor, particularly for negociant brands, accordingto Mr. Proctor. The variety plummeted in popularity after theone-liner from the 2004 movie Sideways , and growers across the state ripping out the vines or grafted toa more en vogue variety. This year, asking prices for bulk merlot from Napa County rangefrom $19 to $25 a gallon, a 38 percent to 46 percent increase from2010, according to Ciatti figures. Statewide, bulk merlot priceshave shot up even more dramatically, rising 63 percent to 69percent. "Merlot is back," Mr. Proctor said. I am an expert from laseriplmachine.com, while we provides the quality product, such as Laser IPL Machine , Teeth Whitening Machine, Laser Tattoo Removal Machine,and more.
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