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Vineyard Economics Symposium Forecasts

July 2007
 
by Jane Firstenfeld
 
 
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Attorney Brandon Blevans, Dickenson, Peatman & Fogarty, addressed immigration reform and stepped up requirements for worker status. "Currently, we play a little game," he said. New regulations may be implemented at any time, he said, wishing his audience, "Good Luck."
 
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Robert Fanucci, grapegrower and partner at Gagen, McCoy, moderated "A Conversation with California Grape Growers & Buyers," that included grape buyers Bill Wilden, Constellation Wines U.S. and Mike Insley, Beam Wine Estates; Nat DiBuduo, Allied Grape Growers, Jeff Frey, Frey Farming; and Tom Murphy, Murphy Companies.
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Attorney Wyman Smith, Gaw Van Male, spoke on "Grape Contract Strategies," outlining considerations for both sides of the bargaining table. In deciding among pricing mechanisms, he stressed that growers "must have a mechanism to allow pricing to move with the market."
 
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Mike Insley, VP vineyard operations and grower relations for Beam Wine Estates, commented that he was "staggered to see how much imported wine was out there" when he arrived in the United States from New Zealand.
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Steve Fredricks of Turrentine Brokerage said, "The trend of excess is hard for people to get away from," suggesting that the industry has been "making battle plans for the future based on looking in the rearview mirror."
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Accountant Mike Ricioli, Moss Adams, LLP, explained the differences between "Generally Accepted Accounting Procedures and Tax Reporting," and when each is appropriate, with his colleague Sandy O'Shea.
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Jeff Frey, owner of Frey Farming, sounded the call for socially resposible, sustainable practices.

If we don't do something…we will be back here next year to talk about a shortage," David Freed warned growers and financial folk at the 2007 Vineyard Economics Seminar in Napa on May 15. Freed, chairman of UCC Vineyards Group, reviewed results of the 2007 Vineyard Economics Survey conducted by winebusiness.com. Grapegrowers, wineries and allied parties around the United States responded to the survey, addressing wine sales trends, factors that drive and constrain them, consumer attitudes toward wine, changing wine preferences, grape price trends and supplies.

Most respondents felt Pinot Noir, Pinot Grigio, red Zinfandel and Sauvignon Blanc would be in short supply over the next three years; Chardonnay, Cabernet Sauvignon, Syrah, White Zinfandel and Merlot were predicted to produce oversupplies. Only 15% of California respondents planned to acquire new vineyards. Freed suggested that land prices in California growing areas are to blame for that figure.

Although much of the state's record 2005 crop and sizeable 2006 crop is still available on the bulk market, and clearing it out will be a challenge, new buyers are in the market this year, according to Brian Clements from Turrentine Brokerage, and reluctance to plant new acreage almost guarantees a shortfall in the near future. With almost no new plantings of Cabernet Sauvignon, for instance, all but 6% of Cabernet vineyards are now bearing fruit. "Six percent is below replacement level," Clements said, predicting shortages.

In "Grape Prices to Winery Profitability," Rob McMillan, Silicon Valley Bank, also addressed financial barriers to planting new California vineyards, noting that total nonbearing acres in California's premium wine regions are at 3.5%, a historic low that defies the normal nine-year planting cycle and portends shortages.

Deborah Steinthal, founding partner of Scion Advisors, outlined steps required for successful transition from one generation to the next, in "Grape Growers Who Live Poor--Die Rich," including a family continuity plan, a strategic business plan and a succession roadmap. Overlooking these has meant the demise of many a family business, she said.

The 2007 Vineyard Economic Seminar was organized by the Wine Industry Symposium Group. For a more detailed report, visit winesandvines.com Headlines, May 16, 2007.
 
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