California wine takes a dip

Shipments of California wine to market, the numbers that track the volume of wine actually sent out from wineries, bottled or in bulk, are the most useful indicator of the status of the California wine business. For most of the past three decades, they’ve increased year-to-year, with only a few occasional and slight recessionary dips; progress seemed pretty much inevitable as wine became more and more commonplace in American life. However, 2009 saw a decrease, the first in 16 years, that may be different—and telling.
       On a percentage basis, it wasn’t a lot: shipments were down by 1.6 percent; still, that amounts to more than 4-million cases of wine. Furthermore, while past decreases reflected temporary
declines in the overall market, U.S. consumption actually grew in 2009, by 2.1 percent, according to Jon Fredrikson, of leading wine research firm Gomberg, Fredrikson & Associates.
       What’s behind it? A number of observers blamed a slowdown in sales of higher-priced wines (a retailer in Los Angeles told the L.A. Times that his sales of Opus One in the average Christmas season had gone down from about150 bottles to 6 last year, coining a new phrase at the same time, saying the marketplace was “over-culted”). Some super-premium wines have appeared at discounted prices on internet sales sites, and there have been rumors of cuts in wholesales prices, to provide inducements by way of higher margins to distributors. Still, those high-end wines are a drop in the wine ocean, and part of a larger trend of general trading-down across all price bands. Americans were still drinking plenty of wine, just paying less for it (and drinking a bit more imported wine).
       As it turns out, it was the rest of the world that was jumping ship. The largest part of the decline—a drop of about 3.2-million cases—was in exports to foreign countries. In England, where more than 80 percent of wine is sold in supermarkets and convenience-store mini-markets, the competition at the bottom of the price pyramid is savage; cost-cutting and discounting are the norm, and there’s a wide range of choices from all over the world: Chardonnay, Cabernet Sauvignon, Syrah/Shiraz, and Merlot from Australia, Chile, southern France, Italy, South Africa, and California, as well as Pinot Grigio from Italy, all in the £4-5 ($6-8) range, sometimes even less. In addition, every supermarket has its own proprietary brands, even more ruthlessly discounted.
       Gallo rules the California roost with several labels (Gallo Family, Turning Leaf, etc.), and after that it’s a scattering of corporate brands—Fish Eye from the Wine Group, Echo Falls and several others from Constellation (including the Woodbridge Robert Mondavi line, just to show how the mighty have fallen). There are a lot of odd blends in this category (Chardonnay/Pinot Grigio from Blossom Hill, anyone?), plenty of pinks, especially White Zinfandel, and this is where surplus Merlot goes to die; needless to say, the only regional identity here is “California.” Altogether, it’s as edifying and aspirational as “Alvin and the Chipmunks.”
       A lot of the wines are shipped from California and Australia in bulk and bottled here in England, or Spain, or France, which heightened the irony of California wineries importing wine from Italy and France to sell in America—commodity wine has become an international two-way street. Gallo recently hit a bump in that road when several wineries and cooperatives were hauled into a French court and accused of selling it fake Pinot Noir, for its popular Red Bicyclette brand; the wine comes from the Languedoc region of southern France, where there are allegedly just enough Pinot Noir vines to supply about one-tenth of the total amount Gallo bought. In the understatement of the year, the French prosecutor said the case “might lead to a loss of confidence in French suppliers,” and one British writer likened the arrangement between Gallo and its suppliers to the American military’s “Don’t ask, don’t tell” policy on gays. The verdict will be announced next week, on February 17th. Whatever happens, commodification is here to stay.
       California wineries come to London next month, in mid-March, for their annual roadshow. It will be interesting to see what they make of this lively market--and vice versa.