Will Napa Cabernet Become a Commodity?
Napa Cabernet Sauvignon is to California wine what Yosemite is to our national parks. The Oakville district alone produces more cases of 90-plus point wines than any other Cabernet Sauvignon region in the New World. It is something of a state treasure that begs to be preserved.
Napa’s Chardonnay and Cabernet Sauvignon wines were immortalized in the historic Judgment of Paris wine tasting in 1976. After that well-publicized event, many people thought that Napa Valley was “Burgundy in America.” They were mistaken. Though Napa was evolving to a luxury Chardonnay producer, it was an undifferentiated one that became a New World commodity.
Diffusion of intellectual property such as rootstocks, scion wood and techniques from Napa led to plantings across California, Australia, New Zealand and Chile. Globalization and overplanting creates an oversupply, resulting in a trend of lower prices that cannot be avoided without classification or regulation of the type found in Europe.
Price data supports the view that California Chardonnay became a commodity after the 2002 recession as a result of New World overplanting. California, Australia and New Zealand’s combined planted acres through 2008 were more than 200,000 acres.
The tipping point to commodity Chardonnay appears to be only 90,000 bearing acres in California. In 2000 Michael Quintus, then vice president of Kobrand, the seller of luxury white Burgundies, warned California winemakers at the Burgundy in America symposium sponsored by Enologix that 2000 figures of 93,000 bearing acres with 103,000 planted would shift the price down. In essence, Quintus predicted that California’s most famous luxury white wine would become the commodity we know today. Winemakers at the symposium were incredulous.
Chardonnay became less profitable to grow over time. The problem first emerged in 1999, when bearing acres exceeded 90,000 in California. Grape prices began to drop by the fall of 2001. By 2008 California Chardonnay growers’ prices (adjusted for inflation) were 45% lower than 1999. The Napa Valley price slide was 20% between 2001 and 2009. By 2008 the Australian Bureau of Statistics reported 74,000 acres of Chardonnay, compounding the problem.
Over one decade the number of 90-plus-point California wines dropped 50% in Wine Spectator. On March 4, 2009, The New York Times wine writer Eric Asimov wrote, “It’s hard to feel neutral about California Chardonnay. The wine’s almost effortless popularity as a mass-market white also brought it the mark of infamy.”
New luxury Napa Chardonnay wines seemed to disappear. By August 2010, only 12- 2008 Napa Chardonnays had scored 90 or more points from Wine Spectator, based on a search of winespectator.com reviews. The price of the 90-point 2008 Merryvale Chardonnay Napa Valley Starmont was $16 at Wine Access. The price of the Wine Spectator 88-point 2006 Robert Mondavi Napa Valley Chardonnay was $15 at K&L Wine Merchants. One Chardonnay, the 91-point 2007 Rombauer, appeared to be selling for a luxury price.
Cabernet can be saved
An economic underworld of oversupply may be shifting the price of Cabernet Sauvignon down in the future. Figures show Cabernet Sauvignon exhibiting early signs of commoditization. But it is not too late to save Napa Valley Cabernet Sauvignon.
USDA’s Grape Harvest Report shows that California Cabernet Sauvignon prices began falling after 1999. By 2007 they (adjusted for inflation) were 28% lower than 1999. In contrast, Napa prices increased 29% between 1999 and 2002. But even before the “Great Recession,” Napa prices, adjusted for inflation, were stagnant.
Today there are 75,000 acres of California Cabernet Sauvignon. Australia has 75,000 acres, and Chile an estimated 100,000 acres. As with Chardonnay, there is a path to commoditization for Napa Valley Cabernet Sauvignon. Diffusion of intellectual property creates a planting path that may pass through the same 90,000 bearing acres that commoditized Chardonnay.
Enologix warns winemakers to differentiate Napa from California by classifying the wines of Napa Valley. In lieu of a classification, Enologix advises that companies create a three-year trailing average 100-point score of 92-plus points to support prices above $50.
Leo McCloskey is president of Enologix, Sonoma, Calif., a company that offers quality metrics to wine producers. This article is © Copyright 2010 by Leo McCloskey and Enologix. All rights reserved. May not be used without the express written permission of Enologix, 461 Seventh Street West, Sonoma, CA 95476. To comment on this Viewpoint, e-mail firstname.lastname@example.org.