Get Ready for the Global Wine Drought

Mother nature giveth, and she taketh away.

In the olden days when I was a child, comedians cracked wise about the socially inept among us who, desperate for something to discuss, settled on the most mundane and predictable topic of all: the weather. How times have changed.

These days, bringing up the weather – especially if you work in wine – is almost too stressful and controversial for polite conversation. Extreme weather events caused by climate change – spring frosts after bud break, wildfires, droughts, floods, searing heat and humidity, frogs falling from the sky (I may have made that one up) – have caused harvests to plummet in many bold-faced regions across the globe.

Almost all of the winegrowing regions in France have been affected; on average, harvests are supposed to be down 29 percent this year, compared with last, according to France’s agriculture ministry. In Champagne, that number is even higher: about 36 percent. Anecdotally, producers are reporting losses of up to 90 percent in Champagne, which could cost the country’s producers almost $2 billion in lost sales.

In Marlborough – which produces 75 percent of New Zealand’s wine – the harvest was off by about one-third. In Napa, yields are 25-40 percent below average, with the sought-after mountain vineyards getting hit hardest. In Italy, the harvest is down about 9 percent.

And that’s just the tip of the iceberg, the most obvious grab bag of regions where the economies rely on the steady production of wine to function. How should wine lovers and members of the $340bn wine market write large prepare to contend with what seems to be an inevitable wine shortage this year for whites, and in another few for reds? For insight and ideas, read on.

Foresight

Hindsight is 20/20, but that doesn’t pay the bills. Foresight, however, is a goldmine for both distributors and producers.

“When we saw the harvest declines of 30-25 percent in Marlborough we became very concerned,” says Brett Vankoski, co-founder and wine director of the global negociant Latitude Beverage Company and 90+ Cellars, which sells 500,000 cases of wine per year. “During their harvest time, which of course comes at a different time than ours, there were severe spring frosts across major winemaking regions in Europe.”

In a bid to do damage control in advance, Vankoski says they began “stocking up on existing, bottled vintages. We snapped up more Languedoc rosé, more Prosecco, more Argentinian reds, Sauvignon Blanc from New Zealand.”

He estimates that they increased buy-ins by about 20 percent, to “extend the current vintage, prevent a shortage in the Spring next year and prevent a serious price increase”.

At Cain Vineyard & Winery in Napa Valley’s Spring Mountain District, where the Glass Fire destroyed the winery, heritage barn, homes and many acres of land on the 500-acre property, winegrower Christopher Howell and director of sales Katie Lazar, – a married couple who lived there – are facing this latest crisis with the equanimity and confidence that comes with a long line of obstacles overcome behind them, and the knowledge that they are prepared to deal with this one.

“We had 90 acres of the 550-acre estate under vine before the fire,” Lazar says, explaining that in normal years they could expect to produce 10,000-12,000 cases. “We are still trying to figure out what we can salvage, because sometimes it takes a year or two for a vineyard to recover after a fire. This year, with the damage from the fire and the drought-induced low yields, we harvested about 40-50 tons.”

While they’ve begun replanting – almost 10 acres went in this year, with another 12 planned for next year and more the year after – it has to be done slowly because “baby vines need so much water. We are at the top of Howell Mountain, and our water for the vineyards comes from the sky.”

A normal year brings 60 inches; last year brought just shy of 30, and this year has been dry so far. But an Old World-style library program is keeping them afloat, after losing their harvest completely in 2019 and 2020, and dealing with a severe deficit this year.

© Brancott Estate
| Even the normally thronged vines of Marlborough offered up less fruit this year.

“Because of the financial crisis, between 2008 and 2010, no one in Napa was selling through their vintages,” Lazar says. “I decided to make a silk purse out of a sow’s ear, and create a library program. It made sense in other ways too, because mountain fruit needs time. Years in barrel and bottle before it is truly ready.”

Starting in 2009, Cain began saving about 25 percent of their vintage for the library.

“Now it looks like a great business strategy,” Lazar says. “And actually it’s really helping restaurants too, because as you know during Covid, so many sold through their cellars to keep afloat. Now I can sell four packs if 2009, 2010, 2011 and 2012 as a ‘restock your cellars’ program. Six-packs of 2006, 2007 and 2008 are also being scooped up, and this will give me 36 months to figure out how to solve the problem of shortage.”

Logistical challenges

Those who realize they are not in possession of the business-boosting gift of foresight, unfortunately, have more bad news coming.

“I’m already seeing significant price increases on some of the most sought-after wines,” says Matthew Green, national sales director at Europvin, a luxury-focused importer and distributor. “Just one example of this is that I got a call with an offer in the early spring for an estate-bottled Sancerre. In the three days it took me to return the phone call, the spring frosts hit, and the lot was sold for 25 percent more than they offered it to us for. Because of demand for wines in the Loire and Burgundy especially, we are going to see tremendous pricing pressure, and some regions may become unattainable for most people.”

Expect prices to increase in Burgundy and other desirable regions by as much as 15-25 percent, he says.

This latest tempest arrives on the heels of the (nixed-for-now) tariffs and Covid, both of which created incredible logistical challenges at every step of the production and supply chain.

“The undiscussed elephant in the room is the logistical challenges everyone in the industry is dealing with,” Green notes. “Another one-off example is when I recently discovered that there had been a 40 percent increase in the cost of a container ship on its way to us, while it was still on the water. The vendor said that the incredible demand for these container ships warranted the price increase, and I had no choice but to pay. But I’d already set prices with other partners that I couldn’t walk back.”

The costs of supplies – from gas, to labor to glass bottles – is also increasing across the board, in often unpredictable fashion when prices have already been set, causing unexpected hemorrhaging during an already economically challenging time for everyone in the business.

For retailers like Crystal Cameron-Schaad, owner and sommelier at Crystal Palate Wine & Gourmet in Norfolk, VA, sourcing staples like New Zealand Sauvignon Blanc “has been next to impossible this year. We are scheduled to receive our first shipment this week, which we typically have available for clients in late April.”

Keeping Champagne in stock has also been a struggle, she says. “Many of the large houses and well-known grower Champagnes have been sold out for months. We have made every attempt to stock up and offer an array of alternative sparkling options.”

Spotlight shift

While consumers “can expect to pay more for their favorite bottles next year”, Cameron-Schaad thinks “there is an opportunity for smaller retailers to drink outside of the box and focus on hyper-local wines and lesser-known wine regions. For example, with the shortage of New Zealand Sauvignon Blanc, we featured Verdejo from Reuda as an alternative and our clients fell in love with it!”

It’s not all bad news, Green agrees.

“Status Spanish wine hasn’t been performing as well in the industry as a whole recently, but our portfolio is bucking that trend,” Green says. “We will be 15-18 [percent ahead this year when compared to 2019, because 2020 doesn’t count.”

While he’ll still “take all the Burgundy” he can get, “even at a higher price”, Green plans to heavily promote Ribera Del Duero, Priorat, Rioja, and also consider looking at expanding Europvin’s portfolio to include other, lesser-known regions.

Despite seeing weather-related harvest declines of 20-25 percent in Rioja, Jose Navarro, US export manager at Grupo La Rioja Alta, with four brands Spain and 1 million bottles produced annually, also sees an opportunity for his company to gain a more significant foothold in the US.

“The grapes we have this year are of excellent quality, and at our winery in Rias Baixas we had excellent quantity too, actually higher than usual,” Navarro explains. “The Rias Baixas will be sold next year, and the Rioja will hit the market in 2026-2027. Wines across the board have been increasing in price because of tariffs and other problems, so in comparison, our wines – which are still considered to be in the luxury niche – are average in price, and we only plan to increase our prices by 2-5 percent this year. Our demand exceeds our supply at this point.”

Not a bad problem to have on the face of it.

Time will tell how consumers react to weather and logistics-linked price spikes that can’t be as easily explained away as, say, the tariffs, where an orange bogeyman could be blamed.

Will wine lovers pay premium-plus prices for Burgundy, Bordeaux, Champagne and Napa Cab? Will wine lovers turn to regions – such as Rioja and Ribera del Duero – with a pedigree that have fallen off the hot 100 wine list? Or will they start exploring the cheaper, more plentiful fringes – from Virginia and Pennsylvania to Lebanon and Uruguay?

While we wait and see, producers, distributors, importers and retailers would be smart to line up contingency plans, and then contingency plans for the contingency plans.

Is it happy hour yet?