U.S. wine industry reeled in 2009, wary of 2010

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SACRAMENTO, Calif. - Rocked by tight consumer spending and import competition, the nation's wine industry reeled in 2009 and faces uncertain prospects this year.

Last year was "brutal," said John Fredrikson, a wine-business consultant with San Francisco Bay Area-based Gomberg, Fredrikson and Associates.

"Usually, we're raving about how great the year was," he told a recent gathering of winery professionals and grape growers at the Unified Wine and Grape Symposium in Sacramento, Calif. "But this was probably the worst year you ever had."

Despite the nation's continued slump, "we're beginning to see slight improvement in some areas" of the wine industry, Frederikson said, particularly among the lowest-priced brands. "It's going to take a while, but we'll come back."

For the first 11 months of 2009, California wine shipments were down an estimated 4 million cases, a drop of nearly 4 percent from 2008. For the entire domestic wine market, shipments were down by 3 million cases.

Wine sales also fell an estimated 6 percent to 10 percent at restaurants nationwide as consumers tightened their budgets in a slumping economy and avoided dining out.

For consumers who did buy wine in 2009, a low price point was more important than ever.

"As we basically had a financial heart attack, people just reined in their spending and were very cautious," Fredrikson said. "They moved dramatically down to lower price points, below $5 and $7. Small wineries in the North Coast that sell bottles from $25 to $100 were basically shut out. Inventories backed up, and that just made it an ugly year."

Global import competition is also on the rise. Some countries, such as Spain, are planting popular varietals to take on the U.S. industry. Chile, in particular, has focused aggressively on the U.S. market, producing affordable and well-crafted cabernet sauvignon that are favored by American palates.

"We are the target," said Glenn Proctor, a grape and wine broker with Joseph Ciatti Co. of San Rafael, Calif. "Other areas are saying, 'How can I sell them wine?' "

Not all was doom-and-gloom in 2009, especially for large commercial producers that focus on value wines. California's top seven wine producers, including E. and J. Gallo and Constellation, enjoyed overall growth of 6.9 million cases.

Trinchero Family Estates, which oversees such popular budget brands as Sutter Home and Menage a Trois, saw its shipments rise 16 percent in 2009. Trinchero was awarded "2009 Winery of the Year" at the symposium because of its strong financial performance.

(E-mail reporter Chris Macias at cmacias(at)sacbee.com.)

(Distributed by Scripps Howard News Service, www.scrippsnews.com.)

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