California is drowning in Cabernet, as growers swap diversity for big returns.
When I met Seattle-based economist Mike Veseth at a wine conference in Idaho last February, he shared his take that the “Queen of Red Grapes” might be overprized – and overplanted – in California. With a statewide rise in Cabernet plants – both for its popularity and higher sales prices per ton – more of it is going into both single-varietal wines and blends.
This represents a marked increase in plantings over the past decade. The previous year, in 2016, Cabernet Sauvignon accounted for 30.5 percent of total grape varietal plantings, according to the AGG, and looking back to 2009 Cabernet Sauvignon only made up for only 13 percent of the grape pie. With the exception of a drop in plantings between 2011 and 2012 – which Bitter adds could be attributable to the fact it was not so popular in the Central Valley at the time – the amount of Cabernet Sauvignon as a percentage of varietals planted has been steadily and quickly on the rise for a decade.More than one third – or 37.4 percent – of the grape nursery stock in California last year was comprised by Cabernet Sauvignon, according to the Fresno, Californiap-based Allied Grape Growers (AGG) report, which was presented at the annual Unified Wine & Grape Symposium in Sacramento by AGG vice president of operations Jeff Bitter this past January.
More Cabernet Sauvignon is being planted all over California, not just in the Napa Valley, where it brings in the highest revenues. It has grown in popularity in other California regions, according to the AGG report, including the vast Central Valley, which includes El Dorado and Sacramento Counties.
Cabernet Sauvignon “has been the most actively planted [grape] in the past few years”, confirms Steve Fredricks, president of the Bay Area-based Turrentine Brokerage, which brokers California grape sales. He adds that this is probably no coincidence as the most iconic and best-known wines around the world tend to be made from it. He admits that while Pinot Noir, in both Burgundy and California, gets quite a lot of respect and interest, but it’s not quite on the same volume and interest level as Cabernet.
“Consumer sales of Cabernet Sauvignon are growing and we need more acres of grapes,” adds Fredricks. As a result its cost per ton is also going up. According to the National Agricultural Statistics Service of the USDA, the price of Cabernet Sauvignon grapes by ton increased by 9.6 percent from 2016 to 2017. The price per ton in district four, Napa County, was $6837.90 compared to $7497.59 in 2017.
The AGG study also noted that of the 19 million wine grape vines sold by California nurseries in 2017, there was a huge preference for red grapes over white, which would seem to be a natural extension of the consumer passion for Cabernet Sauvignon. A specific interest in Cabernet Sauvignon-based wines is likely to have fueled a growth interest in red wines over white.
The increment of consumer interest in red wines – perhaps attributable to their reported health benefits – might also long have been a harbinger of increasing consumer interest in both red wines and especially Cabernet Sauvignon. The ratio was 72 percent to 28 percent red to white, according to the AGG study.
At the same time supply, according to the study, has been stable and was slightly down in 2017 from the previous year. Although, according to the AGG study, supply is likely to increase slightly this year to 7.2 tons an acre and stay steady at that production level for the next three.
The bigger question, which has yet to be answered, is if greater plantings of the grape might eventually cause it to decrease in value. While most authorities say that is unlikely, particularly at the higher-end of the wine-production scale, it may be a trend worth watching.
An abundant supply
“A lot of Cabernet Sauvignon is going to be available down the road,” confirms Veseth, who – at the same time – also questions who may be drinking it in the years to come on both the high and low ends of the market. Napa producers, he notes, need to get at least $75 a bottle retail of wine to justify these prices, which they don’t seem to have had trouble doing recently.
“The math on ROI on Cabernet Sauvignon planting, particularly in Napa, is easy to analyze,” adds a consultant who declined to be identified, citing it as a clear explanation of the drive to expand its planting, even if it could eventually drive prices down.
Wine industry attorney John Hinman, a partner in the San Francisco-based firm of Hinman & Carmichael, says that planting more Cabernet is logical as it is more expensive to produce and is hence a higher revenue earner. However, he questions,: “Is the profit in the market being saturated?”
Veseth also shares, along with the opinion of another handful of experts, that in all likelihood some of these newer plantings are likely to go into box – and other less-expensive – wines. However it is questionable if any of these products would affect the grape’s popularity in consumers’ eyes. Hinman agrees that the top Cabernet brand names, and price points, are not likely to be affected by wider-spread plantings of Cabernet Sauvignon.
How much is too much
If the current trend in the up tick in Cabernet Sauvignon planting holds, according to Veseth, there could be an overabundance of the grape on the horizon. He estimates that it would likely be three to five years out.
If too much Cabernet is eventually planted, and the market is oversaturated, the US wine market will be looking at a handful of scenarios. They include using it in lower-prices wines; adding it to blends; or a reduction in price of single-varietal Cabernet Sauvignon-based wines from less popular areas. “If there is over planting then the price will go down,” confirms Veseth.
While there may be lower prices in store for Cabernet Sauvignon, he notes, they are not likely to be seen on the immediate frontier. “For the next year or two Cabernet Sauvignon prices will stabilize.”
However, as planting trends remain firm in much of California some of the mid-range – prestigious value brands, often called “Masstige”, as the word combines both the terms “mass” and “prestige” brands by large marketers, may suffer according to experts. Another possibility is that Cabernet Sauvignon quality might just remain solid for years, according to Hinman, but prices could go down. So there’s – ironically – a potential for the Cabernet Sauvignon wine market to actually over-provide in terms of price to quality ratio.
Author: Liza B. Zimmerman