Recently there has been an amazing bull-market run for wines from Napa and Sonoma valleys. Can that continue with the 2019 vintage?
I have just returned from winery visits to California’s north coast, and there is quite a buzz. After the devastating fires of 2017 that caused so much smoke taint to Bordeaux varietals still hanging on the vine in that area, 2018 was a bumper crop of high quality. While this article was authored prior to harvest, 2019 has been a steady, even-growing season that most vintners believe will come in above average.
Of course, until the grapes come off the vine, Mother Nature can still be unpredictable. Nevertheless, after the 2018 harvest there was not enough room for the crop, and wineries will be hard pressed to find space for if 2019 is another above-average crop.
The Napa and Sonoma bulk market has had a huge run-up over the last four years. But now there are signs that there will be excess supply, and prices are due to drop precipitously in the coming months.
While the two wine juggernauts, Constellation and Gallo, are waiting to see if their deal will go through, observers believe that neither player has been purchasing wine on the bulk market as they usually do. If these wineries are staying pat, or selling excess juice, this could potentially rock the bulk market
As demand for wines from Napa and Sonoma has skyrocketed, wineries have been steadily raising prices over the past several years. If the supply outstrips demand in 2019, and the economy falters (as some financial predictions believe), there could be a major adjustment in the works.
Wineries that have developed programs will find their COGS go down, and may find more flexibility in pricing if sales become more challenging.
After three successful cabernet sauvignon crops from 2012 to 2014, there was a rude awakening after that tiny 2015 harvest. The economy had been buzzing along back then, and demand for wines from Napa and Sonoma soon went up 10, 20, even 30%. This led to an increase in pricing — and wineries scrambled to find excess juice to fill their programs.
After that average 2016 vintage, which was much needed, there was significant smoke taint to many big reds from the 2017 vintage. Those unfortunate fires made the prices for Bordeaux varietals jump even higher. And now with the huge 2018 vintage on the heels of an average-to-above average 2019 crop will certainly bring prices down to earth.
Many wineries are very concerned that they will have more supply than demand, and not enough space for excess supplies. Prices for Napa Valley cabernet sauvignon, in particular, have risen to lofty heights, and hopefully there will be industry-pricing adjustments to allow retailers and consumers better purchasing opportunities.
As chairman of the Pennsylvania Liquor Control Board, Jonathan Newman was once the nation’s largest wine buyer, and brought a number of popular innovations to bear, including the Chairman’s Selection program and opening of local stores for Sunday sales. Jonathan has received significant industry accolades during his career. Follow him on Twitter at @NewmanWine and visit his website: newmanwine.com.