Focus on California's North Coast

These are fairly desperate times for wineries on California’'s North Coast. In spite of a splendid 2007 vintage that would ordinarily have given most producers a major financial boost, the prices of too many “collectible” California wines today are simply out of whack with today’s economic realities, and consumers are going elsewhere to find vibrant wines at far more palatable prices. Although some of the bluest of blue chip wineries claim to be selling their mostly limited-production wines through to consumers, albeit more slowly than in the past, many more are anxiously watching their inventory pile up in distributors’ warehouses and in their cellars, and they’re anxious about their financial future.

At greatest risk are vineyard owners in Napa Valley who paid top dollar for their properties in the mid-’90s and then invested heavily in vineyard development and winery construction under the assumption that they’d have no problem getting top dollar for their wines. The most heavily leveraged players are in dire financial trouble, and it will take a miracle to save them. The current deflationary environment will continue to place downward pressure on prices, as wineries increasingly will have to cut prices to move stock, whether by lowering their official retail prices or by providing special incentives to wholesalers and retailers. And in the event of the foreclosures that are being widely predicted by insiders, banks will have no choice but to dump inventory in an attempt to recoup even small portions of their investments. This development will in turn exert pricing pressure even on wineries that today are continuing to sell very good wines at fair prices.

Meanwhile, many smaller producers, especially talented winemakers outside Napa Valley who work entirely with purchased fruit, continue to make their wines without compromise yet manage to hold prices to more reasonable levels. Many of the wines from Sonoma-based producers reviewed in this issue by Josh Raynolds look like steals next to the pricier bottles of Napa Valley. But make no mistake about it: even the best of these smaller producers are working a lot harder today to sell their limited-production wines, but they are benefiting from greater customer loyalty because their prices have always been rooted in reality. As Ted Lemon of Littorai, who is well into his third decade of making wine on California’s North Coast, pointed out to me, “consumers should be aware that every bottle they buy is a vote for who will survive.”

The difficulty of selling wine above $30 today, let alone above $75 or $100, has also placed many wineries in a rut. Too many producers still believe—perhaps with justification—that the only way to impress the market is with sheer size. Put another way, if you’re a new producer of cabernet sauvignon in Napa Valley and you think you can get $100 for your first release, the odds are low that you’re going to try to woo critics and consumers with subtlety. This is not constructive for the future of California wine, as a new generation of wine drinkers, and the younger sommeliers who cater to them, are gravitating toward livelier, more graceful wines that are enjoyable with food.