tag:blogger.com,1999:blog-941731830705031230.post2264478405322090271..comments2024-03-11T03:24:58.582-07:00Comments on SVB on Wine: Grape Prices are Heading Lower.Rob McMillan rmcmillan@svb.comhttp://www.blogger.com/profile/12396624790174552807noreply@blogger.comBlogger15125tag:blogger.com,1999:blog-941731830705031230.post-75963634366490630742013-10-01T15:41:03.847-07:002013-10-01T15:41:03.847-07:00Adam - good catch. Blog-osis here. I was thinking ...Adam - good catch. Blog-osis here. I was thinking though the supply chain and didn't say it right. The 2011's are currently in release and we are going to the 2012's soon. I don't think there will be any problems selling the 2012's to distributors. I think I did a more credible job of explaining the point in the subsequent week's blog: http://svbwine.blogspot.com/2013/09/inventory-days-higher-grape-prices.htmlRob McMillan rmcmillan@svb.comhttps://www.blogger.com/profile/12396624790174552807noreply@blogger.comtag:blogger.com,1999:blog-941731830705031230.post-20479251409118588682013-09-28T16:47:36.449-07:002013-09-28T16:47:36.449-07:00Rob,
A question for you. In your comments you ta...Rob,<br /><br />A question for you. In your comments you talk a great deal about the Distributors having taken on the 2012 vintage, like it was a thing of the past ("Distributors have greatly increased their days of inventory this year to make up for the short 2011's. Unless the consumer spikes purchasing, I don't think the distributors will be taking on the 2013 vintage like they did the 2012 vintage. They needed the 2012 vintage.") <br /><br />What % of 2012 wines produced have even been bottled, much less released? Do distributors already have sufficient inventory in their warehouses? If so, and if the majority of 2012s have yet to be released, isn't that fairly significant problem><br /><br />Thanks,<br /><br />Adam Lee<br />Siduri WinesAdam Lee/Siduri Wineshttp://www.siduri.comnoreply@blogger.comtag:blogger.com,1999:blog-941731830705031230.post-15406991720802395152013-09-26T09:58:45.441-07:002013-09-26T09:58:45.441-07:00Viewing it solely against European wine, I wouldn&...Viewing it solely against European wine, I wouldn't necessarily call the dollar strong against the Euro, Rob. It's floated in the 1.25-1.35 for quite some time now. In fact the Californians have actually benefited from the Euro structure since, in its absence, certainly the Greeks, Italians, Spanish and Portuguese and possibly even the French would have seriously devalued their currencies against the Dollar.<br /><br />Another interesting look is at the four year window from 2003-2007 when the dollar absolutely crashed against the Euro (going from around $1.15/E to as weak as $1.65). Even at this stage, import (and European specifically) wine gained market share each year.<br /><br />The above tells me that this is primarily being driven by changing consumer trends that are so strong as to negate underlying economic trade theory.Unknownhttps://www.blogger.com/profile/08650449136836434227noreply@blogger.comtag:blogger.com,1999:blog-941731830705031230.post-1631352978402682712013-09-24T15:44:00.946-07:002013-09-24T15:44:00.946-07:00707WG - Thank you for logging in!
What I can tell...707WG - Thank you for logging in!<br /><br />What I can tell you is the wine inventories were actually low because of thet weak vintages. They are selling through. 2012 is well received and needed. <br /><br />The question is about 2013 which should be another big vintage. Now that the 2012 has made up for 2011 shortages, will 2013 have a harder time moving off of what is a great 2012 if its almost as large as 2012. (depends on how 2013 turns out of course in quality) Back to the point, if it does get stickier selling 2013's, does that depressurize the need for fruit in 2014 and can that be an average or below average year and still not impact supply need. I still get back to price again being flat to slightly lower in that circumstance unless the economy starts to take off. Rob McMillan rmcmillan@svb.comhttps://www.blogger.com/profile/12396624790174552807noreply@blogger.comtag:blogger.com,1999:blog-941731830705031230.post-77038629769799407822013-09-24T13:53:11.452-07:002013-09-24T13:53:11.452-07:00Unk 1:08, thanks for offering your comment. I woul...Unk 1:08, thanks for offering your comment. I would say you are partially right. Demand for foreign wines are on the rise at the expense for domestic, but planting enough grapes is a subset of the discussion. <br /><br />The issue is one of value when the consumer makes a buying decision. California can't grow grapes economically at the lowest price points anymore because of the strength of the dollar relative to other importing countries, and the difference between land costs here and alternative land uses. <br /><br />At the high end of the market there is a similar dynamic. The consumer is still looking for value and many foreign countries can make as good or better wine with their own impacted currencies giving them a market advantage. <br /><br />I see many who seem to think this is a money grab by domestic producers and they are charging ridiculous higher prices for their wines because they are elitist snobs and holding consumers hostage ... they may be even in the 1% .... maybe their parents were communists!! (OK .... not that far.) <br /><br />Anyway, wine prices here reflect a market that includes very high costs of production and foreign producers largely have an advantage there. Take a look at the blog post here titled "How much do wineries make." You will be surprised to find out the answer is, not as much as you might think.<br /><br />Domestic wineries will continue to focus on making the best quality wines they can and foreign wineries will do the same. May the best wine win. Thats what the consumer is voting.Rob McMillan rmcmillan@svb.comhttps://www.blogger.com/profile/12396624790174552807noreply@blogger.comtag:blogger.com,1999:blog-941731830705031230.post-30042804076940354572013-09-24T13:08:28.730-07:002013-09-24T13:08:28.730-07:00I think this gives lie to the ridiculous argument ...I think this gives lie to the ridiculous argument that I increasingly hear repeated in California that imports' market share has steadily increased only because California can't grow enough grapes to supply demand. If that were so, California grape prices would show steady price increases at or above the rate of imported wine sales.<br /><br />Import market share is increasing for the very simple reason that demand for those wines is increasing at the expense of demand for domestic wines.Unknownhttps://www.blogger.com/profile/08650449136836434227noreply@blogger.comtag:blogger.com,1999:blog-941731830705031230.post-43872949571586174812013-09-24T12:11:50.933-07:002013-09-24T12:11:50.933-07:00I completely agree Rob. Another major downward pr...I completely agree Rob. Another major downward pressure on bulk is the overpricing of CA wine in general. As GenX/Millenials become more of a force, $$ wine doesn't hold the same cache for them as it did the Boomers. Everyone is scrambling to make a $100++ bottle to sell to the 1%ers, but that microscopic pool is becoming exponentially crowded. Prices will have to plateau as result.<br /><br />Speaking to the situation here in Napa, there is some danger in the premium++ market. 2010 and 2011 were small yet very poorly rated vintages. Even though there is less inventory, pull-through for these two weak years back-to-back will be an issue followed by a huge/highly rated year. If wineries don't plan accordingly, I expect initial orders for 2012 will be much smaller than expected and/or you'll see large scale discounting of 2010/2011 to compensate, leading to a possible glut when 2013 tries to hit the shelf.<br /><br />707WineGuyhttps://www.blogger.com/profile/13489598286470310737noreply@blogger.comtag:blogger.com,1999:blog-941731830705031230.post-46870456113056545572013-09-23T16:33:26.654-07:002013-09-23T16:33:26.654-07:00Glenn Poctor is in the house ladies and gentlemen ...Glenn Poctor is in the house ladies and gentlemen .... .....!!! <br /><br />Glen, since you are in the house, I've been wondering when the Ciatti Company is going to change their name the Proctor Company? I mean Joe has been working with the Zepponi Group for how long?<br /><br />OK I'll stop. <br /><br />When it comes to the present perspective on grape prices and volume, I would never disagree with the Ciatti Company or my friends at Turrentine Brokerage. Looking at long term trends however is a different thing. I can have a different opinion because I weigh the factors impacting longer term supply and include demand factors to make a guess on supply and price. <br /><br />I'm not doom and glooming. Actually I am acknowledging the runup in grape prices over the past few years that returned price per ton to something more sustable for growers. I do note the current period stabilizing of price, and I am suggesting based on what I seem, that if the harvest comes out particularly large again, there will be downward pressure because distributors have sufficient inventory in their warehouses. <br /><br />Note I stopped way short of talking about the severity of the pressure or from using hyperbole to fan the flames of debate or sell a bias I might hold. What we are all looking for is right size vineyard planting/investments relative to winery demand for grapes, and right size grape price/volume relative to retail demand. As you you told me in the past, it would be nice if they lined up at the same time but they never do. We'd have nothing to talk about then!Rob McMillan rmcmillan@svb.comhttps://www.blogger.com/profile/12396624790174552807noreply@blogger.comtag:blogger.com,1999:blog-941731830705031230.post-24354976247242612182013-09-23T13:47:15.787-07:002013-09-23T13:47:15.787-07:00Hello Rob
I am not sure the sky is falling yet. S...Hello Rob<br />I am not sure the sky is falling yet. Some of the grapes for sale we are seeing now are due to overages and capacity issues, So I think we need to be careful before we draw comparisons to 2009. <br />What makes this business so fun is all the ways mother nature can change some of our assumptions at a moments notice. <br />Glenn Proctorhttp://www.ciatti.comnoreply@blogger.comtag:blogger.com,1999:blog-941731830705031230.post-52007570815827947782013-09-23T12:07:26.423-07:002013-09-23T12:07:26.423-07:00WC - My favorite low price advocate!! Thanks for l...WC - My favorite low price advocate!! Thanks for logging in and commenting. <br /><br />You are referring to retail pricing I believe. But either way, when supply increases, it still depends on what the relative supply of grapes are, and what is happening with demand. Coming off an allocated year selling the 2011 harvest, distributors still had some work to do with getting sufficient supply for the wineries they represented. In addition, the 2012 crop while heavy, is being touted as one of the best ever in the US. Many are waiting with baited breath .... (isn't that a strange saying?) .... for the 2012 release into the market. At this stage looking at retail price in 2012, considering thet relative price for wine already dropped in the recession and didn't recover, its difficult for me to say we should categorically wine price decreases in the 2012 vintage. I can't see consumption growth either as noted above so don't expect any support for price increase in the vintage.<br /><br />When we do release the 2013's, we have a different ballgame. Distributors have greatly increased their days of inventory this year to make up for the short 2011's. Unless the consumer spikes purchasing, I don't think the distributors will be taking on the 2013 vintage like they did the 2012 vintage. They needed the 2012 vintage. Will they need the 2013 vintage in terms of the amount produced and price required? My crystal ball is a little foggy on that prediction but if things continue to trend as they are, I will lean to more promotional allowances expected in 2013 and marginally lower prices in specific price tiers. That said, recognize the harvest isn't even in the barrell so its a really early WAG.Rob McMillan rmcmillan@svb.comhttps://www.blogger.com/profile/12396624790174552807noreply@blogger.comtag:blogger.com,1999:blog-941731830705031230.post-71338420194293698362013-09-23T11:50:57.179-07:002013-09-23T11:50:57.179-07:00Rob, doesn't the price increase chart speak vo...Rob, doesn't the price increase chart speak volumes, and especially the bit about spirits? I don't think it's any coincidence that the biggest drinks companies are pounding the market with new products and line extensions, increasing supply. And what happens when supply increases?Wine Curmudgeonhttp://winecurmudgeon.comnoreply@blogger.comtag:blogger.com,1999:blog-941731830705031230.post-11581026818970923102013-09-23T11:15:47.434-07:002013-09-23T11:15:47.434-07:00Thanks for logging in Pinotgraves and offering you...Thanks for logging in Pinotgraves and offering your thoughts. A few years ago there was a large sign on Highway 29 that said, "Grapes for Sale." It was a bummer to see that because I don't think it really expressed the true state of the business at the time, though the press seized on it and it was in the Napa Register. Yesterday I got a picture emailed me from someone in Glen Ellen showing a similar sign tagged up on a pole offering merot for sale. In fact if you look at the press, news from Ciatti and Turrentine, the above chart from Ciatti showing no upward bulk wine pressure, Wine Industry Classified, and Wine Business Daily to name several - there are consistent indications of excess grapes presently on the market looking for a home. Again, that doesn't answer the long term supply question and it doesn't speak to regions or varietals very well, but on the whole - its clear today we have enough winegrapes AND generally speaking there isn't an opportunity to increase prices through 3-tier.Rob McMillan rmcmillan@svb.comhttps://www.blogger.com/profile/12396624790174552807noreply@blogger.comtag:blogger.com,1999:blog-941731830705031230.post-89515254084872592492013-09-23T09:17:06.800-07:002013-09-23T09:17:06.800-07:00I love chart porn, and the bulk wine graph and cha...I love chart porn, and the bulk wine graph and chart show the reality of supply and demand very well. It appears the Sonoma/Napa volumes available are where they were after the 2009 harvest--when the impact of the financial crisis was resounding through the wine market. I have to believe some sellers have been holding out for offers they never got. We'll see what North Coast rain does to the 2013 supply.Pinotgraveshttps://www.blogger.com/profile/06123660758178090092noreply@blogger.comtag:blogger.com,1999:blog-941731830705031230.post-32020611795990827692013-09-23T09:08:00.256-07:002013-09-23T09:08:00.256-07:00Thanks Anon 8:31. Personally I don't QEx is do...Thanks Anon 8:31. Personally I don't QEx is doing much if anything for the economy and wished the Fed would have just matched market expectations and started the wind-down. The stock market loved it but what we really need is earnings in business to sustain the market and inprove job prospects. <br /><br />Sequestration wasn't as big a deal as the market thought at the begining of the year but it's just one more negative thing to focus on along with Obama Care - when we should be focusing on raising the job participation rate. Rob McMillan rmcmillan@svb.comhttps://www.blogger.com/profile/12396624790174552807noreply@blogger.comtag:blogger.com,1999:blog-941731830705031230.post-44239336604273409552013-09-23T08:31:28.924-07:002013-09-23T08:31:28.924-07:00I think it makes a lot of sense. Government expend...I think it makes a lot of sense. Government expenditures have also cut back, ie the sequestration and demands to cut more in Washington, and that lower stimulus is hurting the economic recovery. We are heading into stall mode and who knows when it will move forward, we could keep shrinking. Anonymousnoreply@blogger.com