As the first quarter of 2021 draws to a close, we can say California’s bulk wine and grape markets continue to be active following the supply adjustment brought about by last summer’s wildfires and the shorter 2020 crop – last month’s grape crush report confirming, at 3.4 million tons, the smallest crop since 2011.
We have moved to a much more balanced supply-demand position in most regions of the state, with 2018 and 2019 vintage wines now hard to find and a very active 2021 grape market in the Central Valley. As this better supply-demand equilibrium has been caused by less supply than the industry expected in, say, the middle of last year, rather than a growth in overall sales, we see the market as being in a ‘tenuous’ balance: For example, how resilient is this balance if the 2021 crop looks like it is coming in average-sized or larger? Another question: Will the performance of consumer sales in the first few months of this year be strong enough that, if the 2021 crop looks like being another short one, the market will tighten further? Close attention is being paid both to early spring conditions in the vineyards and sales performance, projections of the latter particularly difficult to make with any sort of confidence right now.
On the first point, we see California having experienced a drier than average winter and Sierra Nevada snowpack – which provides one-third of the state’s water supply – at only 60% of the average at the start of March. This has raised fears in some areas, particularly in the mid to south Central Valley, about water reserves come summer should March and April not bring big rainfall. Forecasts for March through May are for a drier than average period, due to the influence of La Niña. We must wait some weeks to gauge bud break and fruit set.
On the sales point, Nielsen numbers suggest the strong off-premise performance seen in June to October last year – created by COVID-19 and SIP orders – has continued into the new year, with wine’s retail sales up 22% in value in January versus the same month of 2020; DTC sales were up 21%. The big unknown is what happens to this strong off-premise performance as life in the US – aided by vaccines – returns to some level of normality. Will there be post-pandemic confidence that re-grows on-premise sales and softens off-premise sales? Will post-pandemic economic insecurity harm all sales? Everyone’s trying to make the right decisions in a currently very uncertain world.
California has included “food/agriculture” workers among its priority groups to receive the COVID-19 vaccine and the rollout is now happening in a patchwork across the state, with some areas providing pop-up vaccination clinics at workplaces. We hope that, as the year progresses, increased immunity achieved through the vaccine will ensure vineyard and winery work can be carried out safely and straightforwardly for all. In the meantime, stay safe, and read on for deeper dives into the bulk wine and grape markets.