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By October 31, 2017 0 Comments Read More →

Acquisitions Impact on North Coast Grape Growers Hard to Predict Due to Market “Hesitation”

Impacts from Fires Still Unknown but Believed to Be Minimal

By Elizabeth Hans McCrone

Glenn Proctor has been in the business of predicting market trends for the wine industry for thirty plus years, and he’s seen his share of ups and downs.

He’s a Partner at the Ciatti Company, one of the largest grape and wine brokerage firms in existence, with offices in eight different countries around the globe.

The Ciatti Company has specialized in brokerage services between wine and grape buyers and sellers since 1971. Its primary role is to advise clients on their supply positioning, while working closely with both growers and wineries to maximize marketing opportunities for their products as well.

As Proctor puts it, “our job is to see the deals, check the barometer, and read the tea leaves of activity for our clients.”

Given the breadth of that experience, you might think predicting future trends would be a snap, especially in a growth economy, with consumers eager to buy and drink wine and producers more than ready to supply their needs.

But according to Proctor, it isn’t that easy. Certainly, no one could have foreseen the unforgiving heat spikes at the beginning of this season and the California fires that swept through Napa, Sonoma, Yuba and Mendocino counties toward the end of the 2017 harvest.

“I look at the wine industry more cautiously today,” Proctor reflects. “Some people will say (based on the numbers) ‘this thing’s going to the moon.’ Most times when you predict that, it doesn’t. That’s just the way it works in our business.”

Proctor explains that the wine industry operates in a bit of an oxymoron; it’s a consistently dynamic environment. He says that in order to succeed, it’s critically important for both buyers and sellers to have current information to work with.

For instance, even though wine growth has been largely positive for the last several years, the market is experiencing what Proctor calls a “hesitation” at the moment, which has implications for longer-term, strategic planning.

“We’re not seeing the type of demand that we would expect,” Proctor confirms. “It (demand) has hesitated or pulled back. The rate of bulk wine sales has modulated. We’re trying to understand what that means. So, if you had a $30 Napa Cab that’s now at $45 or $50 … in order to maintain profit margins … there has to be consumer acceptance. People may need to look at supply with a sharper pencil than they did before.”

Logistically, if demand has “softened,” to use Proctor’s term, that could impact suppliers as well, and possibly reverse or slow an acquisitions trend that has been on an upward trajectory for the last several years.

“Acquisitions have been driven by an expanding premium wine market and a desire by wineries to take advantage of that market segment,” Proctor reports. “But the market has tightened for property and premium wine brands.”

“The long term effect will depend on where the market goes into the future,” he continues. “No market grows forever. There are always changes and unpredictable consumer and economic effects that tend to disrupt cycles.”

Proctor cautions against widespread fears that the 2017 fires have burned down vineyards, contaminated grapes and wines with smoke taint, and created a tightening market that will ultimately affect the availability and price of wine.

“We don’t know enough yet. There’s not a lot of good cause and effect with solid data,” Proctor attests. “No large acreage of vineyards has burned and grapes tend to be fairly resilient. People are taking steps to mitigate concerns about smoke effects and still have excellent wine this year.”

Proctor believes the most important thing for a healthy marketplace is continued confidence in a healthy industry.

“People need to come to Napa, Sonoma, Mendocino, and Lake counties and buy wine,” he declares. “The wine industry has really come together as a community. We all have the potential to put it back together better than it was before.”

Proctor will be sharing more of his insights and predictions during the upcoming 2017 WIN Expo Trade Show and Conference taking place at the Sonoma County Fairgrounds in Santa Rosa, CA on November 30, in a session called “Fires & Acquisition Impact on the North Coast Grape Market – What Will it Mean?

Proctor will moderate the session. His panel of speakers includes Neil Bernardi, VP of Winemaking at Duckhorn Winery who will discuss growth marketing trends over time, as well as supply and needs brands; Joe Ciatti, Principal at Zepponi & Co. who is an expert on merger and acquisition activity; and Dan Leese, President and CEO of V2 Wine Group who, according to Proctor has a “keen awareness of the marketplace; where it’s going and what’s successful.”

For more information and registration, go to wineindustryexpo.com.

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