Wine Notes: ‘Not all gloom and doom’ for wineries here

Go to www.pasowine.com for a complete list of the activities planned at more than 130 wineries. It’s not too late for tickets, and many of the events are free.

In the past, sales remained strong during economic slowdowns. But this year is different.

“For the first time since I opened my tasting room, my sales will be below the previous year,” says owner Gary Eberle.

“Apples to apples, if you went to last year’s prices, we’re probably off 8 percent,” Eberle says.

For the bottom line, this carries tremendous implications. Because

Eberle sells about half of his 26,000 case production direct to consumers through the tasting room, the balance now shifts to wholesale, where profit margins are slimmer.

“This year we will sell about 1,000 more cases wholesale, and 1,000 less from the tasting room,” Eberle explains. “That’s a

significant swing in margin.”

Most winery owners in the area are experiencing the same thing.

Jim Norman, a candidate for Paso Robles mayor, and owner of Norman Vineyards, also reports slower traffic through his tasting room.

“Case sales are definitely down,” Norman says. “Economically, people can’t afford to go out and buy a couple of cases at a time.”

Instead he sees more and more people purchasing just a few bottles at each visit.

The belt-tightening is also being felt by the wine clubs each winery uses to focus on their best customers.

“I’m seeing about a 15 percent reduction in members,” Norman says.

Eberle is also seeing a lot of people dropping out of the wine club shipments.

“Right now, for every 100 people we add, we lose 150,” Eberle explains.

The “trickle down” effect of the slowdown is being felt by other businesses in the county. Steven D. Pults AIA & Associates is the largest architectural firm serving the wine industry in the area, and has designed more than 20 major winery projects in the past 10 years.

“We’re still doing winery work, and we still have some in production right now,” Pults says, “but it’s not like it was.”

He sees many clients taking a “wait and see” attitude towards new projects, but also has current projects held up by tightened credit.

“We’ve got one client who’s trying to get a loan, and has been fighting with the bank for weeks to get the money released,” Pults explains.

In this case the loan was originally approved, but the bank then decided to audit the winemaker’s inventory, and forced him to sell a piece of property to provide more cash to the deal.

“He’s been going round and round with them for months,” Pults adds.

Wine events have also been affected by consumers’ tightened spending.

The Central Coast Wine Classic, which has seen proceeds of its auction consistently increase each year to a high of more than $1 million in 2007, reported results of just over $800,000 this year, a $200,000 decline.

But other events have shown strong results, a reflection of the strengthening attraction of Central Coast wines.

The annual Hospice du Rhone, held in Paso Robles, sold out once again this year with 1,100 Rhone aficionados from around the world crowding into the Paso Robles Event Center.

And this year’s Paso Robles Wine Festival would have sold out, says Jacob, if the day of the event had not been a scorching 100 degrees.

“Our numbers were lighter, but I truly believe it wasn’t because of the economic downturn, it was because of the heat (on) the day of the event,” Jacob explains.

The Annual Winemakers’ Cook-Off also sold out this year and was the largest ever, Eberle said, bringing in more than $68,000 in scholarship money — $20,000 more than last year.

There is also good news for the overall California wine market. Last year was the 15th consecutive annual gain for American wine consumption, rising 5 percent over the year before and ranking second only to France as the world’s largest wine market.

It is expected to rise again this year, and a recent survey of wine industry executives (Wine Industry Financial Symposium 2008) predict positive growth for 2008, along with increased profitability by 2010.

So although this looks like a tight year for local wineries, along with the businesses that support them, the long-term outlook is very strong.

With growing national recognition of Paso Robles and Central Coast wines from publications such as Wine Spectator and The New York Times, most here expect the strong economic engine of the wine industry, which contributed $1.8 billion in revenue to the county last year, to keep chugging along.