Month: April 2010

Saturday morning we were back in the winery with two tasks to do. First we had to rack and sulfur our 2009 Haut Tubee. This was the last of our red wines to go through this process. We left a little bit of the Haut Tubee in a 5 gallon glass carboy to give everyone an idea of the gunk that we’re racking off of when we do this.

I racked the carboy below leaving just the lees at the bottom of the bottle. The wine above was clear. This is the stuff that builds up in the bottom of each barrel.

Then it was on to the Chardonnay. Cold stabilization is the process of chilling down a white wine to remove any tartaric crystals in the wine. The crystals will bind to the side of the tank as we chill the wine. That will prevent them from forming in the bottle.

One step we have to do is wrap the tank in additional insulation so that it will get cold enough. We then turn on the chiller and cool the tank down. The wine is racked into the tank and off of the lees. I use an attachment on the hose so that we leave the gunk in the bottom of the barrel and just get clear wine. The wine will now stay in tank for about 3 weeks.

Stefania cleans out the barrels after we are done. Hot water and high pressure will get them clean. We will then let them dry and sulfur them to prevent infection.

Some of the lees and water coming out after a first rinse. The barrels will be rinsed until the water runs out clean.

Everything went very smoothly and we were out of the winery in time to join some friends for Afghan food that night.

continued…..

There has been some good news lately. Sales in the $25-$40 category, that’s 80% of our production, are projected to be up 12% in Q1 2010 from Q1 2009 across the industry. The speculation is that consumers are ‘trading up’ again. For the past two years the only sector that’s seen growth is the $6-$12 range, and experts think those people are now trading up to the $25-$40 range.

Personally I think that’s wrong. I think what we’re actually seeing is people reentering the market who had left, and they are reentering at a much lower price point. To me it seems that the people who were in the $75+ market simply stopped buying wine in 2009 and waited out the meltdown in that sector, only jumping in for extreme bargains.

Now they are reentering the market, but in the $25-$40 range. Points from a critic and price sticker prestige seem much less important to that group now. It’s more about finding wine they can enjoy and cellar that won’t break the bank. The practice of ‘flipping’ – buying rare wine and selling it right away for a profit – has largely disappeared. Now almost every wine can be had at the release price. That takes a lot of the glamour and value out of high priced wines.

I know a lot of people were happy to pay $250 a bottle each for 6 bottles of wine. It was a simple equation for them. Shell out $1500, then flip 3 bottles for $500 each, and walk away with the other three bottles for ‘free’. Now that’s just not possible and I think that’s the group now buying in the $25-$40 range.

Stefania has just closed out the books on our Q1. It was our best quarter ever. Our sales were up 43% over Q4 2009 and 49% over Q1 of 2009. I know there are some people reading this in the wine industry who just spit their coffee on their screen. That is four times better than the average in our sector.

We’ve been lucky though, we have a great group of loyal customers who we think of foremost as friends. They’ve held us through. Last year as our wholesale (restaurant and retail) sales fell 52%, they were there to pick up the slack. Direct sales were up 15% which netted us out at a 4% overall gain.

Maybe the most encouraging thing for us is that both direct and wholesale sales in Q1 were the highest we’ve ever had in a Q1. We are still going to be conservative though. I know that ‘tidal wave’ is out there and we will be fighting against it over the next few years. We are going to wait until we close out Q2 before we make any commitments on expanding our production in 2010. We’re also going to focus on reducing our L.O.C. and equipment loans so we have more liquidity to use against that ‘tidal wave’.

This is the unglamorous stuff. Stefania and I sitting at our computers at night pouring over numbers, working on budgets, sorting through invoices and doing all the things to keep a business running. It takes up a lot of our time. We easily spend as much time on this stuff as we do in the winery. We’re hopeful though now that we’re seeing a breakthrough. We’re also so grateful to all our supporters.

Tomorrow we get to go back into the winery and get our Chardonnay ready for bottling. It will be nice to be out of the office and worrying about the wine for a while.

There has been a lot of talk lately in the news and on wine boards about how hard it is in the wine industry right now. One article mentioned that as many as 20-25 wineries in Napa might fail or be sold in distress this year. Our friends at Eaglepoint Ranch have decided to stop making wine and just sell grapes. The hardest hit wines have been those over $75. Even wines that get 100 points from critics are not selling out now.

It’s been hard times. Most people in the wine business don’t want to talk about it. Everyone has been impacted. For us we’ve had two really big impacts. The first really had more to do with the low yield harvest in 2008. The low yields meant we had about $30,000 in expenses (mostly barrels) that we had already committed to and ended up not using. It also meant that we came up about $25,000 short in grapes we were selling.

That was a double whammy. One was supposed to pay for the other. All of a sudden we were in the hole $25,000 we were not expecting. That was all happening the very same month the stock market melted down, and yes 10% of our customers are in New York City. But we adjusted our budget, reduced plans for 2009 and cut back on all but the essentials to make wine. It’s been a long haul but as we enter Q2 2010, we have no outstanding invoices, just our regular monthly expenses. That’s the first time since the Fall of 2008.

The second was we allocated a fair amount of wine to be sold at restaurants and retail in 2008 and 2009. That sector has been hit the hardest. I could probably write a novel about the ‘middle tier’ in the wine business, but I’ll just say I feel let down, and I’m much more cautious now about allocating anything to distributors or brokers. We’ve managed to kick start those sales, but it’s turned out to be 100% our own effort and initiative.

That second item is really what the title of this posting is about. Most of the comments from wine lovers about the crisis have been that they hope their favorite wineries will make it through and offering reasons for hope. In response one winery owner said:

“I think that even if you survive the downturn, you are also going to be swimming against a tidal wave of accumulated inventory being liquidated by those that didn’t survive.”

Now that’s the thing I fear the most. I see it every day, wine being discounted 50% or more, 2 for 1 offers, anything to move inventory. People have a limited amount of money to spend on wine and this ‘tidal wave’ is going to be the hardest thing for us over the next two years.

This has gotten long, so I’ll do a ‘part two’ tomorrow. In the mean time here’s something lighter, a picture of my favorite flower the California Wild Poppy from a hike Stefania and I went on Sunday.