Trends Shaping the Future of California Wine Revealed in "Grape Crush Report," Experts Explain

NOVATO, CA--(Marketwire - February 8, 2008) - Pinot Noir, the hottest variety in California, dropped a staggering 16% in 2007 compared to 2006 which is a decrease of 2.9 million gallons or over 14.5 million bottles. The 2006 harvest was well below demand and the short 2007 harvest further aggravates the shortage. The shortfall was most acute in the most desirable appellations such as Sonoma County, down nearly 24%, and Santa Barbara County which was down over 15%.

"Despite grower's efforts to increase supply by planting new acres of Pinot Noir, Mother Nature delivered us a smaller harvest of what we wanted most. The silver lining is that what she gave us tastes exceptionally good," said Brian Clements, Senior Partner, Turrentine Brokerage.

As predicted by "The Turrentine Outlook" and now confirmed by the "Grape Crush Report," the 2007 grape crop in Coastal areas declined. The crop in the Central Valley rose over 2006 but was still less than the record 2005 harvest. In the meantime, wine sales continued to grow, especially sales for premium varietals. The changing supply / demand balance was particularly evident in the "Grape Crush Report's" numbers for Coastal Chardonnay, which dropped by 3.6 million gallons, or over 18 million bottles in 2007 compared to 2006. In contrast, the Interior Regions were up 52 million bottles.

"Demand is now well ahead of supply for Chardonnay from Santa Barbara County, Russian River Valley and the Carneros district of Napa and Sonoma. The supply of Chardonnay from other regions in the state -- and from around the world -- has also tightened up. Chardonnay has emerged from many dark years of excess into the sunlight of abundant demand. The demand for California Chardonnay is the strongest it has been in at least eight years," said Steve Fredricks, Managing Partner, Turrentine Brokerage.

Cabernet Sauvignon production was flat in the state as a whole. Cabernet did enjoy a small increase in Napa and a somewhat larger increase in Sonoma. Mother Nature gave them an additional 700,000 bottles and 2.3 million bottles respectively.

"Cabernet Sauvignon is perhaps the most respected red wine variety grown in California and around the world. But, respected or not, both California and the rest of the world developed a big excess of Cabernet Sauvignon. The combination of high quality and average yields in California's 2007 harvest is going a long way to bring Cabernet Sauvignon supply back into balance with demand. Supplies will most likely continue to tighten over the next several years because sales are growing rapidly, but there have been very few new plantings to keep up with increasing demand," said Steve Fredricks, Managing Partner, Turrentine Brokerage.

According to the "Grape Crush Report," Merlot fell 9%, the equivalent of 5.1 million gallons or 25.5 million bottles of wine. Sauvignon Blanc was down 4%, which equals over 750,000 gallons or 3.8 million bottles of wine.

"Some wine critics are rough on Merlot, but American consumers love it because it is generally a softer red wine, flavorful and easy to drink. Sales have been growing at about 5% per year but winery inventories swelled after a massive crop in 2005 and an above average crop in 2006. The 2007 harvest delivered the best possible combination: high quality, which stimulates demand, and lower yields, which trim swollen inventories. The Merlot excess could turn into a shortage over the next 12 to 24 months," said Bill Turrentine, President, Turrentine Brokerage.

Fortunately, while the tonnage produced was down for many varieties, newly planted vineyards boosted production for Pinot Grigio which is the fastest growing white variety in the United States.

"In good news for consumers, Pinot Grigio, an Italian varietal that does exceptionally well in California, increased production in 2007. Pinot Grigio increased by 3%, equal to over 400,000 gallons or over 2 million bottles of wine," said Erica Moyer, Broker, Turrentine Brokerage.

Balancing supply and demand is always difficult in the wine business. Consumer demand can change quickly, but vineyards change very slowly, with a period of about four years from planting to first production. Mother Nature also likes to keep things interesting by producing an unpredictable sequence of huge harvests (like 2005) and lighter harvests (like 2004). For the most part, the wine business was glad to see a moderate and high quality crop in 2007. Consumer thirst for California wine, especially premium wine, is very strong and California could soon move from the problems of excess to the challenges of shortage.

While supplies are also starting to tighten up in the Interior regions of California, average prices declined for several key varieties.

"Prices reported in the 'Grape Crush Report' declined for Chardonnay, Cabernet Sauvignon, Merlot, and Zinfandel in the Northern Interior as older, high-priced contracts ended and the grapes were resold at lower prices. So far, however, demand for 2008 grapes is strong and prices are inching upwards again. Competitive international supplies have tightened but everyone is also keeping an eye on the economy and the weather," said Erica Moyer, Grape Broker, Turrentine Brokerage.

About Turrentine Brokerage

Turrentine Brokerage (www.turrentinebrokerage.com), founded in 1973, specializes in the strategic sourcing of wine grapes and bulk wine from the major growing areas across the globe. Working with thousands of wineries worldwide, and with over 1,500 growers, this experienced team has negotiated transactions between buyers and sellers valued at more than $1 billion over the past decade.

Contact Information: Contact: Brian Clements: (707) 495-8151 specialty -- grapes from all of California, especially Napa, Sonoma, Mendocino & Lake Co. Steve Fredricks: (415) 847-0603 specialty -- grapes and bulk wine from all of California and around the world Bill Turrentine: (415) 999-9490 specialty -- grapes and bulk wine from all of California and economic analysis Erica Moyer: (209) 988-7334 specialty -- grapes from the San Joaquin and Sacramento Valleys and the Central Coast Matt Turrentine: 805-312-1828 specialty -- grapes from the Central Coast