California producers: grape prices 'unsustainable'

Published: 14 February, 2011

Californian producers are facing a challenging year thanks to "unsustainable grape prices", according to Allied Grape Growers president.

Californian producers are facing a challenging year thanks to "unsustainable grape prices", according to Allied Grape Growers president.

Nat DiBuduo, who heads up the 600-member marketing co-operative, told Harpers Wine & Spirit that although grape prices strengthened in 2010 from 2009, 2010 was a "tough year".

He added many of the region's growers still face problems of below break-even point pricing, especially those with expired contracts or lower demand grapes.

"It's making it difficult for producers to hit a return on their investments. It doesn't mean everyone's going to go broke and I don't think prices will go back to 2009," said DiBuduo.

Rob McMillan, founder of the Silicon Valley Bank's wine division, said the common thread is too much debt, but doesn't expect many foreclosures in 2011. "What we've noticed is a resiliency of the small family wineries and growers in the face of economic hardship. They have cut expenses and looked for new capital."

He said recovery for the grower will probably not take place until 2012, despite sales gaining ground as the industry comes to grips with long term pricing resets.

Gladys Horiuchi, communications manager at the California Wine Institute, said: "It is an uneven marketplace with scenarios varying widely from business to business. There is quite a demand for value priced grapes. Estimates for 2010 sales has been forecast at being up 2.5% to 3.0% in volume case sales."

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