Andy Beckstoffler Administers a Dose of Salts to Napa Valley Grapegrowers

Napa Valley Grapegrowers continued its useful educational seminars Tuesday with a workshop on grape contracting, "Tools you can use," and grower Andy Berstoffler set the tone with his many concerns about the state of the business.

Moderated by Jim Verhey, a Grapegrower director and head of its educational committee, the session filled the equipment barn at Moulds Family Vineyards in Napa with growers anxious about their prospects in the depressed economy.

Setting the stage for the tutorial part of the workshop was Beckstoffer, who owns 1000 acres of prime Napa Valley vineyards. Verhey introduced him as one of the people who has done the most to promote the Napa "brand." He has been also been instrumental in furthering the idea of tying grape prices to bottle prices, specifically 100 times bottle price per ton. Though few growers and wineries have adopted this practice, it's served as a guideline and starting point for many discussions.

Beckstoffer offered up strong medicine. He first outlined the problems growers face: the economy that is slowing sale of expensive wines like those made in Napa, the impact of climate change, the prospect of massive replanting -- and issues peculiar to Napa as top dog in the American wine world.

He admonished attendees: "In my view, most small and medium-size wine companies -- those our size -- are not well managed. They don't understand and plan for wine cycles." He suggested that they instead sell for today, yet the products of their grapes won't be on the market for a few years. "They need to focus on the long and medium term, not today."

In particular, he accuses many Napa Valley growers of pricing their grapes as commodities, not valuable branded products. "They price on history, not the present and future."

Beckstoffer got rare laughs from the growers in attendance for quoting from a study famed Boston Consulting Group did for Constellation Brands: "They concluded that nobody could make money owning a vineyard. The land price is too high. The revenues are too low. The wineries can't raise prices so they have to reduce prices." That would push them to using cheaper grapes -- like those from the Central Coast.

He also seemed skeptical about organic growing, noting, "Sooner or later, you have to pay for the higher cost." He also warned of more bankruptcies and forced acquisitions to come.

He noted that a Silicon Valley Bank study said that Napa Valley vineyard property is typically worth $150,000 to $$250,000. If this were related to bottle prices, a vineyard costing $175,000 should produce wine to sell for $45. Yet Beckstoffer found many Napa Valley wines selling for less than $30. "Are we in a business or are we just growing little plants for our enjoyment?" he asked rhetorically.

Noting that some growers are already talking about discounting, he warns that frost season isn't over yet, and we won't have a good idea of the size of the crop until June. "There's no reason to reduce prices now. In any case, big wineries aren't buying now except at low prices."

One of Beckstoffer's big concerns is the value of the Napa brand. "It's the family's jewels. Both growers and wineries have to focus on it."

He notes that during boom years, some growers bought inferior land at good prices, and planted grapes there. "They produces poor quality Cabernet," he said, noting recent ads for discounted Napa Cab at $15.99 compared to $16.99 for Sonoma and even Lake County equivalents. "Maybe an entrepreneur can make a buck with bad wine at a low price, but it's a cancer to Napa Valley's name," he warned.

The long-time grower also expressed continuing concern about high-alcohol Cabernets. "I can understand the need for a new winery to get high scores," he said, "but we need ripe flavors with less alcohol. And that starts in the vineyard."

Another concern he shared is that Napa Valley seems to be ignoring younger Millennial drinkers. "We want the 'right' kind of tourists to visit, those with money who know about wine, but we need to find a way to accommodate these younger people who are the future without exacerbating the tourism problem."

And he threw in a plug for his pet project, recognition for historic vineyards. "Even if it doesn't mention your name, this helps everyone in Napa Valley."

Clearly not a skeptic about the reality of climate change, Beckstoffer thinks it could actually help Napa Valley. "Napa Valley is getting warmer, but it's because of warmer nights. Within limits, that might help flavor development more quickly without raising sugars."

His main concern, however, is that a warmer climate may introduce more pests. Even so, he notes that vineyards seem to have a 20 to 25 year productive life, and 95 percent of Napa Valley was replanted from 1989 to 1995. "That means we're going to be replanting for the next dozen years. We need to support research to make sure we plant the right clones on the right rootstocks and with the right trellis systems."
While listing the problems, and admonishing his audience of growers, Beckstoffer also reminded them, "Napa is still the best wine and the best known, the boomers are buying wine and the Millennials are starting to. There may be trouble in paradise, but we're in paradise nevertheless. We should focus on the positives."

In another session, Prof. Robert Yetman of UC Davis Business School disclosed preliminary results from the annual survey of wages and benefits at Napa Valley vineyards commissioned by Napa Valley Grapegrowers.

He noted that about half of their workers are seasonal, and wages were up 4 to 5 % between 2007 and 2008. That's about 50% higher than for the US as a whole, but lower than the previous year.

The average salary for basic vineyard workers ranged from $11.14 to $12.90 with wineries paying slightly higher than vineyards or vineyard management companies. The numbers for skilled workers like mechanics was $21.50 to $25, and of supervisors, $21 to $30.50.

He also noted that 61 % of respondents provided medical benefits to employees, and 64 % paid vacations. "That compares very favorably with ag workers elsewhere in California and the United States in general."

Results of the survey will be distributed to participating Grapegrower members next week.

Also, Brian Clements of Turrentine Wine Brokers presented detailed information about supply and demand of Napa Valley grapes. Negotiating a "Win-Win" contract was covered by John Mackie of law firm Carle Mackie Power & Ross and Jim Verhey, who also manages 2000 acres of vineyards for Silverado WineGrowers and his own 15-acre Sauvignon Blanc vineyard.