Gold rush in California? Not really

One would think that higher tariffs on European wine would help California winemakers crawl out of their financial hole. But that’s not necessarily the case.

Depending on the final tariff - if any - consumers may set aside their love of French burgundy and bordeaux. But my guess is that wealthy collectors are not going to be deterred by a 10 percent increase. The rest of us may - I certainly will cut back purchases of European wine if prices escalate substantially.

But no one can assume California wine prices will drop. In fact, they are likely to increase with tariffs. The reason? U.S. winemakers get their corks, bottles and other winemaking parts from Europe.

California winemakers agree that tariffs are not good for them either. They also aren’t good for high-end restaurants that cater to customers who want European wines. Can you imagine going to an Italian restaurant and not finding chianti on the menu?

Stop drinking? Bah!

Research shows that more than 40 percent of consumers are drinking less alcohol, following a report from the Department of Health and Human Services that show any amount of alcohol increases the risk of several types of cancer. The news was enough to make a wine drinker cry — then hide along with cigarette smokers on the back stoop.

Everyone needs to judge their risk of cancer based on their personal health and they need to decide if the risk is worth it. Many will just give up wine and die of something else. Others could decide the risk is no greater than crossing a New York City street.

I’m not giving up my wine — but I am consuming less. If you’re in the same fix, you’re looking for alternatives.

I’ve been tasting a lot of non-alcoholic wines lately in search of the impossible. Based on what I have tasted so far, there is no substitute for wine unless you count sweet fruit juice as one of them. I don’t.

As the industry struggles to find the perfect recipe, the consumer is left with two basic choices: alcohol free wine and dealcoholized wine. The latter is much closer to wine because the process starts with alcohol and keeps much of the aroma, acid and flavor.

Alcohol can be removed in a number of ways. There is reverse osmosis in which it is filtered out. You can boil the wine much like you do when you cook with it. And a winemaker can remove alcohol with a centrifuge of fixed and spinning cones. The latter method is often used when a crop is high in sugar and the alcohol level is off the chart. Think zinfandel.

Look at the label and you can discover if the wine was dealcoholized. “Alcohol free” means that it is just a fruit juice and likely not a good one at that.

Personally, I’m turning to flavored water if I’m not drinking wine.

Beer vs. wine drinkers and health

So, maybe the stereotype is accurate. You know, the picture of the fat gut, driving a beat-up truck, smoking a cigarette and waiting in line at a fast-food restaurant. The picture of health? Hardly.

And, so says researchers at the Tulane School of Medicine’s internal medicine residency program. According to the study, beer drinkers — mostly male smokers with low incomes — take in more calories and exercise the least. Comparatively, wine drinkers are associated with meals containing vegetables, fruity and dairy.

Of course, neither group came close to the study’s adequate diet score. Red wine drinkers are just not as bad.

Will wine glut lower prices?

As I sit here today, the historic property of Foppiano has announced its sale to Martin Rey. Foppiano has been in family hands for more than a century. Like other family owned wineries, it got to the point where sales were no longer lucrative.

Alas, that’s where were at. A steep decline in sales and a campaign to make alcohol a health risk have combined to end California’s golden era. And, it’s not just in the United States. European wine producers are reporting a decline in sales.

What does this mean to consumers? I’ve been predicting for months that producers will be dumping their unsold wines at steep discounts. Some California grape growers are saying they can’t sell their crop even at dramatically reduced prices. Most of their product will go into bulk sales. But, I predict third-party producers such as deNegoce and Cameron Hughes will find a lot of good wine to sell under their labels.

I buy wines from K&L and Wine Spies. They are like negociants who sell wines for producers who can’t sell their product through conventional channels. These wines are reduced in price. I think we will see more of these wines become available for a couple of years. But, eventually producers will have to address long-term solutions if they want to stay financially healthy.

Already, we’re hearing about wine companies ripping of vines to reduce their crops while holding their prices. This is especially true among luxury winemakers who don’t want to see the prestige of their label drop with the advent of bargain prices. In Europe, some grape growers are planting olive trees where vineyards once stood — the olive oil market is more lucrative than grapes.

Isn’t it interesting how this market has changed since the halcyon days when “60 Minutes” made wine a healthy product to extend life spans? Now, wine and every alcoholic beverage is life-shortening even in small doses.

More of Sea Smoke to come

Constellation’s recent purchase of Sea Smoke, a premier pinot noir producer in Sta. Rita Hills, was a blockbuster announcement. But it wasn’t a surprise.

Constellation has been moving fast into the premium wine industry to get ahead of the trend towards consumers buying less but buying better. Sea Smoke will join Schrader, Booker and others in Constellation’s growing portfolio.

The deal also is just an inkling of the shakeup that is yet to come in California. With profits squeezed as sales plummet, more and more privately held companies are going to either cave to lucrative offers from large corporations, such as Constellation, or declare bankruptcy. I think many of the small producers who launched in the last decade are going to close up shop in the next several years. Many of them are over-extended now.

I also believe you will see many struggling wineries cut back production and eliminate poor selling wines in an attempt to hold prices. I’m seeing a lot of great deals suddenly appear on the market by third-party vendors, such as Wine Spies and Wine Slash. Many of these wines are from producers I’ve never heard of but who are located in good regions. Their sudden appearance on the bargain market indicates soft sales. Maybe even desperation.

What state consumes the most wine?

We often get reports from analysts for the wine industry that touts the growth of wine consumption or laments its fall — which is the recent case. Now, I saw a report from the National Institute on Alcohol Abuse and Alcoholism that ranks the states according to consumption. It reminds me of the time I gave my guests a portable breathalyzer to determine if they were too drunk to drive home. Instead, they used it to see who was the most intoxicated. Ranking states can be seen a judge of success or failure.

Washington, D.C., was number one. The per capita consumption is 1.07 gallons. It’s top ranking is no surprise given that legislators are literally wined and dined. More surprising was the second state for per capita consumption: Delaware. I guess there is nothing else to do there. Same for New Hampshire and Vermont, two cold-weather states ranking third and fourth respectively.

Oregon and California, two states that make the most wine in this country, ranked fifth and sixth.

Holding down last place was West Virginia, where I suspect beer is king.

State of the wine industry

The highly anticipated and respected report on the state of the U.S. wine industry has been released by Silicon Valley Bank. In the report, the bank forecasts that while full-category wine sales by volume will be down for a third consecutive year,

• 2023 year-end premium wine sales will likely end with another year of positive value growth.

• Tasting room visitation was lower in the premium segment in 2023, but improvement is expected in 2024.

• Direct-to-consumer sales will grow again modestly in 2024.

• Conditions for overproduction in the total wine category are present, but inventory supply is more balanced in the premium segment.

DAOU's surprise

Treasury Wine Estates recently announced that it had acquired DAOU Vineyards in Paso Robles for a whopping $900 million. It caught me by total surprise because I didn’t think Georges and Daniel Daou was willing to part with a project they were so passionate about. The price was even more staggering.

I have interviewed Daniel a number of times and was impressed with his family story and his insistence that he found his place for grapes the closest to Bordeaux in soil. He and his brother narrowly escaped death during the bombing of Beirut. Both suffered emotional and physical scars before their father evacuated them to safer grounds. Inseparable, they launched Daou Vineyards in 2007 and got good reviews. Soul of the Lion, a Bordeaux blend, is named in honor of their father.

I’m sure the price was too good to pass up. But $900 million? Wow. Treasury says aligns with its strategy to build a luxury portfolio and expand in the United States. But I wouldn’t call Daou a luxury wine. Outside of its Soul of the Lion blend, its wines are pretty pedestrian. They are pretty ubiquitous on the market, though.

I’m sorry to see Daniel Daou leave the wine market, but best of luck to the brothers.

Altitude with an attitude

I know you’re not suppose to drink on airplanes because the altitude change dehydrates the body and affects your energy more so than it would if you were on terra firma. But there is something special about crossing the pond to Europe with a drink to celebrate the occasion.

When flying overseas, I usually have a couple of glasses of wine before sleep and have never felt worse for it.  But until recently I didn’t know the more important impact was on how the wine tasted.

Wine consumed at 3,000 to 5,000 feet will taste different than at ground zero.  We read one report that you taste about 20 percent less sugar and 30 percent less salinity in wines consumed on planes. .

TAP Air Portugal actually sent up a team to determine what wines go best with altitude. With a vast portfolio from all regions in Portugal, they came up with a list that took this into account and matched the cuisine.  They chose fruity and fresh wines that showed better with their food, especially that served in business class.

Wines grown close to the sea usually have high salinity.  We notice it albarinos from Spain and assyrtiko from Greece. Sweet wines, such as moscato and sauterne, aren’t going to taste the same with 20 percent less sugar.  There are some chardonnays that could be better without the obvious sugar.

Dehydration also influences the wine experience. You don’t recognize as many aromas – some say you lose as much as 25 percent. Since the palate only picks up five elements – sweet, bitter, salt, acid and umami (the savory character that is akin to beef stock) – most of a wine’s character is determined by the aromas. Try pinching your nose the next time you taste and you’ll see how much you are missing.

Drinking a glass of water alongside wine will go a long way in enjoying the wine.

Meanwhile, steer towards fruity and less tannic wines.

France has a wine glut; let's rip up some vineyards

That sanitizer you spray on your hands may be a cru bourgeois.

France is reporting a wine glut so severe that it allocating $216 million for producers to destroy a portion of their wine to hold up prices. The alcohol from this wine can be used in hand sanitizers, cleaning products and perfume.

The crisis is a result of several factors. French wine growing regions had a good harvest last year in a time when consumption was heading downhill. Production was up 4 percent, but demand was down about 15 percent in France. Other countries face similar drops in consumption: 7 percent in Italy, 10 percent in Spain, 22 percent in Germany and a whopping 34 percent in Portugal. On top of this vortex are the lingering after-effects of the Covid-19 shutdown of restaurants and bars and higher cost-of-living expenses in France.

Hardest hit was the Languedoc region, France’s largest wine area. Rose and red wines were particularly affected. Bordeaux was not spared either. According to a local agricultural association there, one in three wine producers face major financial challenges.

The French government is providing financial incentive to wine producers who rip up vines and grow alternative crops, such as olives. Bordeaux is looking to uproot 23,500 acres. That’s a lot of vineyards and most likely not those that produce grapes for first growths.

I had hoped the glut would lower prices, but that’s not likely to happen. Prices may even increase as quantities decrease.

I’m headed for southern France in a couple of weeks. I’ll be eager to hear directly from wine producers about their futures.

Small wineries lead the way

A recent report in Wine Business Monthly confirmed for me the suspicion that more and more wines are being made by small producers whose stock is hard to find.

The report found that there are now 11,601 wineries in the United States — mostly on the West Coast. A whopping 83 percent of them produce less than 2,000 cases a year — half of that produce only 1,000 cases annually.

Almost all of the American wine you find in grocery stores and retail outlets are made by Gallo, The Wine Group, Trinchero, Delicato or Constellation Brands. Gallo’s production is more than the others combined.

I constantly find a special wine while traveling on the West Coast and am frustrated when I can’t get it locally. It costs a lot to ship wine, but I often do that just for the pleasure of having it here.

Small producers are likely to multiply in number because it’s a business formula that works. Small scale means high consumer prices but even at $100, the producer does not have to sell a lot. He sells it in his tasting room and wine club, thus avoiding the costs of a national distributor.

The cost of fame hurts consumers, helps producers

If you’re planning a trip to Napa Valley soon, you may need a loan.

In a remarkable “2023 Direct to Consumer” report by Silicon Valley Bank, the average tasting of basic-level wines is now $81 - an increase of $21 over 2022. And if you like what you taste, be prepared to spend for it - the average cost of a Napa Valley wine passed $100 for the first time. Up $17 from the previous year, a bottle averages at $108.

But wineries aren’t too concern, although their tasting rooms aren’t as packed as they were before the covid pandemic. The average sales taps in at a whopping $488.

Even more noteworthy is that it is becoming very difficult to just walk into a tasting room without a reservation. Although walk-ins were welcomed decades ago, the pandemic closed all of them. Eventually, they reopened on a reservation system that allowed producers to minimize the crowd. Once that crisis was over, 60 percent of the tasting rooms elected to keep the reservation requirement.

Better deals can be found in other regions. The average tasting fee for basic-level wines in Sonoma County is $38 and in Paso Robles it is $28, according to the report. In Virginia, it’s only $18.

Tasting room fees are spreading through Europe too. I’ll be traveling to southern France in a couple of weeks and expect to pay for tastings that were once free.

I understand that producers are not pleased with freeloaders who are there for a buzz and don’t buy any wines, but their fees should offset only part of what they pay. If a visitor spends $400 on their wines, the fee should be waived.

Down memory lane by mouth

It is always a remarkable experience to revisit wines — not just the ones you have collected over the years, but also the wines you wished you had. There are pleasant surprises among older wines and also disappointments.

I joined a group of friends who amassed a nice collection of Napa Valley cabernet sauvignons from our cellars. The wines included the 2016 Joseph Phelps Insignia, 2013 B Cellars Paradise Hills, 2013 Beringer Private Reserve, 2012 Blankiet, 2005 Shafer Hillside Select, 2005 Karl Lawrence Herbert Lamb Vineyard, and 2017 Chappellet Pritchard Hill.

Some — such as the Chappellet — I knew would show well because of its pedigree. And it did. Still a baby, it was a mouthful of bliss with great complexity and power.

The disappointment was the Beringer. This wine dominated the Napa scene before the turn of the century, but the wine hasn’t impressed me since Treasury Estates bought the property in 2011. By itself, I’m sure it would have been enjoyable, but when compared to similar wines, it falls short. Too ripe, lacking finish and structure.

On the other hand, the Insignia reminded me of the old, rustic style of Napa cabernets from the 1980s. I always thought the wine was vastly overrated, but the 2016 I tasted changed my mind. It was big with a long, long finish.

The B Cellars and Blankiet were new to me. Blankiet got started with the help of viticulturist David Abreu and wine consultant Helen Turley. It showed more of a Bordeaux style than a Napa style — not big, bold and fruit-forward, but more feminine with sophistication and finesse.

B Cellars sources grapes from the vaunted Beckstoffer vineyard. The 2013 was a brute with complexity, depth and surprising young after a decade in the bottle. Similarly, the Shafer Hillside Select — always a favorite of wine — was still tannic but with riper, more forward dark berry fruit and smoothness.

The Karl Lawrence more simple than we expected, but I’m told that’s just their style. It’s a wine that got my head spinning, trying to reach for an elusive flavor or scent. Heidi Barrett was once involved in making this wine.

Champagne's powerful burst

I don’t think I ever fully appreciated the pressure inside a bottle of sparkling wine until I returned from a three-week vacation to find the power was out in one of my refrigerators.

My garage refrigerator was used largely for prosecco and other inexpensive wines, as well as beer, water, energy drinks and White Claw. I don’t know how long the power to the refrig was out, but by the smell of the spoiled food in the freezer part, it was at least a week.

I dumped all of the beer and wine, but was worried about the sparkling wine bottles. There is about 80 pounds of pressure per square inch in one bottle and is enough to damage an eye if it isn’t handled carefully. The first cork came out with a loud pop and bubbled over into the sink. The other bottles were another matter: one cork came out with such force it knocked the bottle out of my hand and literally showed both me and the outdoor counters around me.

The remaining corks exploded out of the bottles and into the 12-foot ceiling as if they were NASA rockets. By the end of the ordeal, I was sopping wet with champagne and a 12-foot parameter around me was doused with bubbles. Fortunately, I did all of this outside. Still, the cleanup was extensive.

All of this is written as a warning to anyone who leaves a bottle of sparkling wine in a hot car or, like me, an un-airconditioned garage in the middle of the summer. I was very luck none of the bottles exploded — a testimonial to the glass maker.

What state consumes the most wine?

If you think you and your friends are contributing to your first place win in statewide wine consumption, forget it.

Although California accounts for 80 percent of the country’s wine production, its residents don’t drink the most. That title goes to Washington, D.C. with 1.01 gallons per person. The reason is most likely the political arena and people coming from neighboring states for cheaper wines and better selection.

I lived in Maryland for 35 years and often traveled to Washington, D.C., to purchase wine at lower prices. Maryland ranks 26th with a meager .40 gallons per person.

New Hampshire is second in per capita consumption, but probably for the same reason.

The South drinks the most wine by volume but the West drinks the most wine per capita.

These numbers come from the National Institute on Alcohol Abuse and Alcoholism.

Number of U.S. wineries is growing

I am often asked an opinion of an obscure wine from California. People are perplexed that I, a writer, never heard of XYZ Winery. I just get to them all, folks. Even after covering the wine industry for more than 35 years, there will be forever a wine I haven’t tasted.

My theory was confirmed when I recently read a report from the Wines Vines Analytics
Winery Database that reported the U.S. has 11,691 wineries. I doubt that I’ve tasted wines from more than 200 of them. The good news is that there is still work to be done.

Large wineries (more than 500,000 cases a year) that account for most of the wine you buy in grocery stores number only 71. Smaller producers — those who produce less than 5,000 cases a year — account for 82 percent of all U.S. wineries.

I have been tasting countless wines from producers who make less than 2,000 cases a year. In general, these are great wines focused more on quality than quantity. Alas, to purchase them you have to go through their web sites and that’s frustrating. But in 2022, I ordered more wines to be shipped than ever.

Alaska has 15 wineries; Hawaii has 6. It’s unlikely I’ll live long enough to taste any of their wines.

The industry added 400 wineries in 2022. Since 2019 the growth has been 1,215.

This is an amazing growth rate, especially in light of flat consumption. Young people, except for those in their 30s, aren’t drinking much wine and that portends ominous warnings for the wine industry as the baby boomers die off. I suspect in the next decade we’ll see the market shrink.

What we draw from these statistics is that the best wine being made in California won’t be found in stores. They are best found visiting these areas and either joining a monthly wine club or shipping home your favorites. You need to let your fingers do the walking.

Corkage fees rising

Not all restaurants allow you to bring in your wine and those that do are charging high corkage fees to discourage you.

In San Francisco, you will pay $100 at Danko’s. Other restaurants may be charging less, but not much less.

According to a report I recently read, the average is $50. In my hometown of Naples, Florida, I have noticed a dramatic increase. One restaurant charged $54 and most other restaurants are in the $40 range.

Alcohol delivers the most profit for restaurateurs. Some of them have dreadful wine lists, so I’m incentivized to bring my own. My justification is that I’d rather spend $40 for a great wine from my cellar than $65 for plonk from a restaurant’s crappy cellar.

Wine consumption in 2022

Several studies recently emerged that give us an idea of what and how much we drank last year. The results indicate that consumers adjusted their drinking habits in a post-pandemic environment.

In a United Wine & Grape Symposium report, the number of regular drinkers decreased since 2015 from 37 percent to 35 percent. However, consumers didn’t lower the cost of their wines, as you would expect in inflationary time. They just drank less, which could be a result of going out to restaurants much less.

Direct to consumer sales drop

The rapid rise of direct-to-consumer wine sales took a downturn that may be related to consumers no longer being confined to their homes because of the covid pandemic.

According to Sovos ShipCompliant and Wines Vines Analytics, the volume of DtC shipments decreased by 10.3 percent (876,848 cases) in 2022. While the return to normalcy drove consumers back to their local stores, higher costs also contributed to the decline.

Equally notable was what the consumers were willing to spend on their wine. The average price of a DtC wine increased nearly 10 percent in 2022. Those who spent $50 or less on a bottle of shipped wine ordered less. But those who spent more than $100 did not change from 2021.

DtC sales represent only 12 percent of off-premise sales, but over the years the number has increased as states dismantled their bans on out-of-state shipments of alcoholic beverages.

By grape variety, the shipment of cabernet sauvignon faired better than other grape varieties.

The principle of scarcity

I was listening to a podcast on persuasion the other day and was struck by one of the first elements in persuading someone to buy something: the principle of scarcity.

If you have used Amazon before and noticed that an item has “only three left” or if a store salesman said “this is the last one left,” you know the power of scarcity. Numerous tests have shown that people are driven to buy something if they feel it may not be available if they think about it overnight.

It’s a principle that works in the wine industry just as well.

Screaming Eagle is the poster child, but there are hundreds of wine producers who drive up prices and sales by limiting production. In many cases, there is a waiting period just to lay your hands on a wine that can cost more than $300 a bottle. If they increased production, there would be no scarcity and thus no stampede to their door.

That was the case with iconic wines like Silver Oak, Caymus and even Dom Perignon whose productions are significantly larger than that of Screaming Eagle, Schafer, Opus One and others.

I got an offer from de Negoce, a reseller of wine owned by Cameron Hughes. The Napa Valley cabernet sauvignon was available from the producer for $195. Hughes was selling it for $27 — he gets the same wine from the producer with the understanding he won’t identify the source.

He wrote, “The winery bottled their portion and sold us the rest of the blend out of the tank so we have the exact same 100% Cabernet Sauvignon blend as the original bottling.”

In short, the original producer didn’t want to increase production and reduce the notion of scarcity.