Pandemic sours wine industry
Coronavirus disrupts everything from grape farms to table.
Ann Kraemer’s vineyard, Shake Ridge Ranch, covers 46 acres of rocky hillsides near Sutter Creek, in the Sierra Foothills of California.
Kraemer takes scrupulous care of the vines, farming organically and maintaining a permanent cover crop on the well-drained basalt soils. The grapes, including zinfandel, Grenache, barbera, syrah, tempranillo and petite sirah, have for years been in high demand.
Ordinarily, she sells to roughly two dozen winemakers, including influential oldguard producers such as Steve Edmunds of Edmunds St. John, and an array of in-demand, new-wave winemakers such as Angela Osborne of A Tribute to Grace and Hardy Wallace of Dirty & Rowdy. Kraemer has a waiting list of new customers.
But this year is different. The coronavirus pandemic has jolted the American wine industry across the board, affecting each element all the way back to the source, the farmers who grow the grapes.
For many growers, the year has been thrown into turmoil.
At this point in an ordinary season, buying arrangements have largely been made based on wineries’ production projections.
But the disruption in sales, whether caused by restaurant closings, distribution slowdowns or the inability to make marketing trips, has forced many winemakers to reevaluate their arrangements for 2020.
Some are planning to cut production because their inventory is overflowing with unsold bottles. Others see the market shrinking in the future despite momentary sales spikes as the novelty of lockeddown life wears off. And many small producers, whose sales this year finance the next year’s production, lack the cash to buy as many grapes in 2020 as they had wanted.
Kraemer has talked to many of her customers, and understands their plight. They have discussed cutting prices, delaying scheduled payments and reducing grape orders.
“They’re small, they’re successful, but they’re still struggling,” she said of the wineries that buy her grapes. “I love these guys and gals. At the same time, I don’t want to end up with a bunch of fruit. I really don’t know.”
In the popular imagination, a winery grows grapes in its own vineyard and transforms them into wine. That simple setup is often true, and for many in the wine business it represents the ideal.
But making wine is just as often a far more complicated scenario in which grape growing and wine production operate as separate entities.
Especially for younger winemakers who have not inherited vineyards or made a fortune in other businesses, buying vineyard land is often out of the question. Real estate prices are too high.
Instead, they buy grapes, investing in long-term relationships to assure a steady supply. Often, roles overlap.
Winemakers may arrange to take over the management of a vineyard and farm it themselves, even though they don’t
own it. And vineyard owners such as Kraemer may make a little wine as a side business.
In the Applegate Valley of southern Oregon, Herb Quady also does some of everything. He owns a vineyard, sells grapes and makes wine under the label Quady North.
His company, Applegate Vineyard Management, manages the farming at a number of small vineyards. He owns a custom-crush operation, Barrel 42, where clients can use equipment and the facility to make wine.
He has had discussions with his grape-buying customers and said that, with an exception or two, hardly anybody is proceeding with business as usual.
“Everybody wants to stay involved, but they’re cutting back some,” he said. “It makes sense to cut back if you are worried about cash. We all sort of do that, but it becomes a crisis when they all do that at once.”
Brianne Day of Day Wines in the Willamette Valley is one of Quady’s customers. She makes a wide array of wines, buying grapes from sources throughout Oregon. She hopes to keep her production steady in 2020, making the same number of bottles but with a few adjustments.
“I am going to focus my efforts on growing the wines that are in very high demand, and rein myself in on my flights of fancy,” she said.
In the Russian River Valley of Sonoma County, Steve Dutton and the Dutton
family farm Dutton Ranch, some 1,200 acres, mostly pinot noir and chardonnay, and work with about 70 wineries that buy grapes.
Dutton, who also makes wine at Dutton-Goldfield, knows that many of them are concerned, but expects to be able to sell all the Dutton grapes, in part by being flexible.
“We’re working with them to try to come up with a plan to make sure we don’t over-deliver, or we cut prices,” he said. “We’re in it with them, that’s for sure.”Ben Merz is a partner at Coastal Vineyard Care Associates in Buellton, California, in the heart of the Santa Barbara wine region, which manages more than 4,000 acres of vineyards. It also serves as a conduit between growers and buyers for the grapes.
Many producers in Santa Barbara depend on tourism to sell wine, he said. But wineries and tasting rooms are closed to tourists for now, with no prospects as of yet for reopening. As a result, Merz and his clients are discussing some difficult solutions, including not harvesting parts of some vineyards.
“For some clients, allowing certain less-preferred blocks to go fallow this year is the answer,” he said. “For others, it is yield management (or) farming certain varieties and not others. And for some it is more mechanization and less hand farming. There is no one-size-fits-all answer, but we are doing everything we can to help sustain our clients’ businesses.”
For many farmers, letting a vineyard section go fallow is a short-term, money-saving solution that can have long-term consequences.
“If you let it go, it becomes really expensive to bring that back,” Quady said. “And you run the risk of causing problems for the rest of your vineyard.”
If things don’t turn around, other possible options for growers include selling grapes intended for small wineries instead to bulk wine producers or large companies hoping to improve their blend. Some farmers may even lease portions of their vineyards to larger companies to farm themselves.
Doug Margerum of Margerum Wine Co. is one of Coastal’s clients. Margerum, a veteran of the Santa Barbara wine industry, grows about 25% of the grapes he needs at his own vineyard and buys the rest.
Much of the wine he sells has been through restaurants and a new tasting room, which opened in May in a developing part of Santa Barbara known as the “Funk Zone.”
“It was just killing it, and then March 16 came and we had to close it,” he said.
Margerum Wine Co. has tried to swivel toward direct-to-consumer sales. Margerum said he has relied on the help of his 24-year-old son, Remy, to devise internet sales strategies, but still he’s anticipating changes.
“We’re not going to make as much wine as we did, and we’re not going to buy as many grapes as we do,” Margerum said. “We know it’s going to end at some point, and we’re not going out of business. But it forces us to focus a little more on what we do and how we do it.”
Ann Kraemer prunes vines on her 46-acre vineyard Shake Ridge Ranch, in Sutter Creek, California.
Steve Dutton, an owner of Dutton Ranch based in the Russian River Valley of Sonoma County, in Sebastopol, California.