Sacramento, Calif. -- Was the wine business last year like a figure skater plunging through a hole in the ice? Or was it an exciting time when "new" varietals like Muscat and Malbec soared in sales and even good old Chardonnay went up nearly 4% in stores?

Both it seems, but more of the former for most in the California wine business. That was the view that emerged when four speakers with their fingers on the pulse of the wine industry shared their diagnosis of 2009 results and their prognosis for the future at the Unified Wine & Grape Symposium. If the diagnosis was dire in many respects, then the prognosis was more hopeful for three of the four.

Overall wine sales in United States stores tallied by The Nielsen Co. grew by 2.4% over the previous 12 months, yet much of that growth came from imports at the expense of domestic wine, and at the same time exports of California wine suffered. 

Industry analyst Jon Fredrikson of Gomberg, Fredrikson & Associates told the audience of hundreds of grapegrowers, winemakers and suppliers that it was the first time since 1993 that shipments of California wine fell -- by 1.4% -- while overall shipments to the U.S. market including imports rose by 2.1%, bringing the size of the market to 323 million cases.

For the general session on the State of the Industry, Fredrikson sized up sales and shipment trends, while Nat DiBuduo of the Allied Grape Growers and Glenn Proctor of Ciatti Co. wine brokers gave the view from their positions. Jim Anderson of SVB Analytics reviewed the macro economic picture, giving a particularly pessimistic view of the U.S. economy and its prospects for recovery.

DiBuduo, a grapegrower himself, focused on the current supply of California grapes by variety and gave cautious advice about what varieties might be worth planting more of. He predicted the 2009 crop would total about 3.5 million tons, which would make it the second-biggest crop in history, short of the giant 2005 harvest, which created an oversupply of bulk wine that lasted until about a year ago. The official state grape crush report has not yet been published.

DiBuduo said that while a large crop can be a good thing, there has not been enough demand for it. "What happened to the grape and wine buyers?" he asked. "I don't know where you guys disappeared to. We want you guys back."

He calculated that average production over recent years has been about 6.5 tons per acre planted statewide, and if adjusted to exclude newly planted and non-bearing acreage, the average actual yield was about 7 tons per acre.

By variety, DiBuduo said Chardonnay was in a mostly balanced situation of supply and demand, and that the immediate future looks promising for further planting if a grower can contract with winery buyers. Sauvignon Blanc looks weak to stable, and he advised growers not to plant more.

Cabernet Sauvignon did not increase in supply, and demand for the variety is still good, even if high-end Cabernet wines were weak in sales. The immediate outlook for selling Cabernet grapes is strong, DiBuduo said. "If you can't control your itch, plant Cabernet," but he cautioned not to do it without a contract.

On Merlot, grafting-over and pullouts of vines have been common recently, to match the weaker demand. Now the outlook is stable but not exciting for most Merlot growers. Pinot Noir demand is strong, as it has been for several years, but he expects the supply will continue to grow through 2012 based on recent plantings, and he didn't advise planting even more.

Syrah demand remains weak. Zinfandel acreage is decreasing due to lower demand for white Zinfandel. Don't plant Zinfandel, he advised, but don't pull out any old-vine Zinfandel, "because you just can't plant new old vines."

DiBuduo offered this take-home advice: "I don't think we are in an oversupply situation in winegrapes in the state of California, but we do need to work on increasing the demand." He said that value at all price points is the key. Plan for the future as if today's market is the new normal, he added, advising growers to educate themselves about the global market, consumer behavior and overall state of the economy.

Glenn Proctor called the state of the wine industry a "Brave New World." From his view as an international broker of grapes and bulk wine, he said the California wine industry always viewed itself as a "separate and individual area, better than the rest of the world. The truth is that we are part of the global wine industry," he said.

As Italy, France and Spain remain the world's largest wine producers, and with wine consumption going down in those countries, they want to sell more wine in the U.S., where consumption continues to rise. Nearly every other wine-producing country globally has also targeted the U.S., making it tougher for domestic producers.

Proctor noted that moving wine in bulk from one country to another to be bottled and sold there is easy and has cost advantages. So wine companies have become less committed to conventional regions, including their home regions, and instead focus on price points, margins and consumer acceptance, he said.

"We can no longer look at our supply in isolation," Proctor said, arguing that the "manic cycle" of supply and demand in California "sits in the past."  He quoted Albert Einstein: "In the middle of every difficulty lies opportunity," and said there is an opportunity for new premium wine production models that could increase tons per acre through mechanization, new winemaking techniques and so on.

The California wine industry's recovery will be slow, Proctor predicted, and in the premium end of the industry sales may be difficult for the next two years.

Jon Fredrikson described the state of the industry during 2009 as, "probably the worst year you've ever had," for many in the room, particularly the smaller operations. "It was just a brutal time, really ugly," especially because of the sharp drop in consumer demand for more expensive wines.

On the other hand Fredrikson said, it was the best of times for some businesses, including Trinchero Family Estates, which he singled out as his 2009 winery of the year for its impressive sales growth. With its sales of Sutter Home white Zinfandel down, the Sutter Home brand still bounced back, making a 10% increase in food store sales and reclaiming its lead as the largest selling brand in U.S. food stores.

Despite his vivid description of how bad business has been for many, Fredrikson said that wine companies have a good outlook for the long-term. "We're not like General Motors," he said. He expects consumer demand to gradually expand, and per-capita consumption to keep increasing, but not necessarily right away. "I am convinced you'll see much better times in 2011."