In the wine industry, it is difficult to plant to demand. At the time of this recording in December 2024, the industry finds itself in a state of oversupply. Audra Cooper Director of Grape Brokerage and Eddie Urman, Central Coast Grape Broker at Turrentine Brokerage discuss the challenges ag faces from a lighter crop to regulatory restrictions to inflation. To remain viable, they stress the importance of farming a quality product that can be made into good wine and sold profitably to continue to support all aspects of the industry.

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[00:00:00] Beth Vukmanic: In the wine industry, it is difficult to plant to consumer demand. At the time of this recording, in December 2024, the industry finds itself in a state of oversupply. Welcome to Sustainable Wine Growing with the Vineyard Team, where we bring you the latest in science and research for the wine industry.

[00:00:23] I'm Beth Vukmanic, Executive Director at Vineyard Team. And in today's podcast, Craig Macmillan, Critical Resource Manager at Niner Wine Estates, with longtime SIP certified Vineyard and the first ever SIP certified winery, speaks with Audra Cooper, Director of Grape Brokerage, and Eddie Urman, Central Coast Grape Broker. At Turrentine Brokerage,

[00:00:45] They discuss the challenges ag faced in 2024 from a lighter crop to regulatory restrictions, to inflation, to remain viable. They stress the importance of farming a quality product that could be made into good wine and sold profitably to continue to support all aspects of the industry.

[00:01:04] Do you want to be more connected with the viticulture industry, but don't know where to start? Become a Vineyard Team member. Get access to the latest science based practices, experts, growers, and wine industry tools through both infield and online education so that you can grow your business. Visit vineyardteam.org To become a member today.

[00:01:25] Now let's listen in.

[00:01:31] Craig Macmillan: Our guests today are Audra Cooper and Eddie Urman. Audra is director of grape brokerage with Turrentine brokerage. And Eddie is a grape broker for the central coast, also with Turrentine. Thanks for being on the podcast.

[00:01:42] Audra Cooper: Thank you for having us. We're excited.

[00:01:44] Eddie Urman: yeah, thanks for having us, Craig.

[00:01:46] Craig Macmillan: What exactly is a wine and grape brokerage?

[00:01:49] Audra Cooper: It's a really fancy term for matchmaking and finding homes for supply. Whether that's through growers having fruit available and needing to sell in a specific year or finding multi year contracts, or that's bulk wine that has been made in excess or maybe a call for a winery needing to find a way of A pressure release valve.

[00:02:11] Craig Macmillan: And so you match buyers with sellers, basically.

[00:02:13] Audra Cooper: Exactly.

[00:02:14] Craig Macmillan: On both sides of the fence. Both the wine and the grape side. Do you have specialists for the grape side? Specialists for the wine side?

[00:02:21] Audra Cooper: We do. , you're talking to our newest hire on the grape side, Eddie, who's going to be focused on the Central Coast. We also have Mike Needham in the Central Valley on grapes. Christian Clare in the North Coast specializing in Napa, Sonoma, Lake, and Mendocino on grapes. And then we have three bulk wine brokers, Mark Cuneo, William Goebel, and Steve Robertson.

[00:02:40] Craig Macmillan: Your world is very dependent on the marketplace. Obviously, that's what you do. You're brokers. The simple model of quote unquote the market. I think for most people is that you have a consumer who buys wine, wineries make wine, and they sell it to those people who buy it. Vineyards grow grapes up to wineries.

[00:02:57] So if there's more demand from consumers, that means there's , more grapes in demand, there's more wine in demand, and there should be higher prices. Or the opposite. That's probably really oversimplified given the unique nature of the wine industry, because , it's not a widget, you know, I don't make a widget, sell it, then go, Ooh, I can make more widgets.

[00:03:16] So because of the nature of the business things are on much larger timeframes, right? Audra,

[00:03:23] Audra Cooper: They are. I mean, agriculture by nature is, a little bit more of a, what we call an on ramp and off ramp. There's kind of that distance from the time that something is needed versus the time it can be produced. And in the wine industry, it's really difficult to plant to demand. And oftentimes we miss the boat regards to meeting demand with our current supply needs.

[00:03:44] So it's really difficult to not only predict, but figure out where consumption is going. And you talked about kind of the simplicity of it and it is true. You can kind of look at the macro market in a very simplistic way, but the reality is in particularly with California, it's very segmented. From value tier up to premium to ultra premium to luxury, and all of those different tiers have different timelines, and some of them converge at moments, depending upon whether there were oversupplied or undersupplied, . So yeah, it can get really complicated and very, very multifaceted.

[00:04:18] Craig Macmillan: What's your comment on that, Eddie?

[00:04:21] Eddie Urman: Well, I think Audra summed it up pretty well, but yeah, it's a very complex integration of all these things, and planting grapes oftentimes, like Audra said, we tend to overdo it. And we then tend to overdo pushing them out. And it's just kind of a cyclical thing through history where we go from undersupply to oversupply. And right now we're obviously in a pretty large state of oversupply.

[00:04:44] Craig Macmillan: Over supply in terms of grapes?

[00:04:46] Eddie Urman: Correct

[00:04:47] Audra Cooper: and bulk wine.

[00:04:48] Craig Macmillan: And bulk wine

[00:04:49] what are the kinds of things that are going to lead to a market correction there? Are people going to have to pull out vines? Are they going to have to say, Well, I was planning to sell this wine for 20 bucks a gallon, now I'm going to sell it for 10.

[00:05:00] What are some of the dynamics that are going to happen during this time?

[00:05:04] Eddie Urman: Well, I think the third rung is consumption, right? Unfortunately the trend over the last two years is consumption is going down in general. And we don't see any signs of it at this time. That's showing it's necessarily going up. We're optimistic and hopeful that it will. And we look forward to seeing the data after the holiday season, but that rung is going to be really important.

[00:05:25] The other part is still supply. So pushing vineyards. And we are seeing a lot of people push vineyards. There's no clear number yet of what's been pushed or what will be pushed, but it does seem like there's a lot of parties that will be either ceasing to farm or will be removing vineyards.

[00:05:41] Craig Macmillan: This is for either of you to pick up. Are there particular segments where we're seeing this more than in others? Premium versus luxury example.

[00:05:48] Audra Cooper: The removal seemed to be really heavily weighted towards the Valley specifically, more of the value tier, because that's our largest volume by far. So we see a lot of removals, particularly in the South Valley that really started to occur even before we felt really oversupplied, and then it started to move north from there, pushed into the Central Coast and even to some degree the North Coast as well.

[00:06:10] So you're seeing removals throughout the state of California, and you could even argue that you've seen removals in the Pacific Northwest as well, there's been an oversupply position there, particularly in Washington, and the only two areas that we don't see that dynamic is perhaps Texas to a degree, as well as Oregon.

[00:06:27] But there again, they're starting to feel oversupplied as well. They're kind of on the back end of this

[00:06:31] the Central Valley is the furthest ahead. And so we may actually see a little bit of a slowdown in removals. They're coming up after the 26th vintage. However, it remains to be seen. I mean, water , constrictions and regulations are going to play a huge factor in that as well, as it will be in the central coast in the near future.

[00:06:48] Craig Macmillan: Are there alternate or other crops that may go in, into place instead of grapes?

[00:06:53] Audra Cooper: Unfortunately, right now, there's not a good answer for that. In the past, you'd say yes. And there were several alternative crops, particularly in the valley and the central coast, especially when you think of Santa Barbara and Monterey County. Paso Robles is in a little bit of a different position without, you know, a true crop to turn over to. But all of agriculture in California is struggling and has been really affected in the last 24 months,

[00:07:16] Craig Macmillan: why the last 24 months, do you think?

[00:07:18] Audra Cooper: you know, that's a good question. Part of it is kind of weather patterns in regards to some larger crops and oversupply consumers have certainly had some. Tighter budgets in a lot of respects to the economy. Inflation has played a huge role in that. When we talk about the wine industry, the wine industry is not a necessity as far as the goods. There is certainly a movement towards, you know, what they call no amount of alcohol is healthy for any individual of drinking age. So that certainly has affected our industry, but it's also affected other crops as well and other, other beverages, specifically alcohol.

[00:07:53] Craig Macmillan: Eddie, in the Central Coast, what, what have you been seeing?

[00:07:56] Eddie Urman: As far as vendor removals or as

[00:07:57] Craig Macmillan: Yeah, as far as vineyard removals, things like that.

[00:08:01] Eddie Urman: I mean, there are a large number of vineyards that are being pushed out. It's substantial both in Monterey County in Paso Robles, there's parties we're talking to that are also talking about pushing. This upcoming year and not replanting for a year or two. Some are potentially considering alternate other options where they can. But to segue on that, unfortunately it is exceedingly difficult right now to go to any other crop. Cause none of them are necessarily performing super well.

[00:08:28] Craig Macmillan: Right. One thing that I'm kind of surprised by based on what you said, Audra, was that we're having the most removal in that value segment where we have the most supply. It would seem to me that if demand out there in the marketplace and folks don't have a lot of money, it seems like there'd be more demand for those value products.

[00:08:48] Like, I would think that the contraction would be at the higher level, the expensive level, as opposed to the lower price level. Is there a mechanism there that I'm missing?

[00:08:56] Audra Cooper: I think there's not necessarily a mechanism per se. I think there's a layer of complication there that doesn't make it a simple apples to apples position in regards to where consumers are spending their money. A lot of consumers who are brought by, you know, ultra premium to luxury, they may have not been as affected in a relative sense by the economy and inflation is someone who is perhaps playing in more of that value tier.

[00:09:21] Okay. Whether it was bag in a box, larger liter, whatever it may have been, you know, that tier that's 12.99 and below had already started to see some impacts during pre immunization. And that was from 2012 until about 2020. And then it's just been really wonky since 2020 in our industry and really difficult to read the tea leaves and as far as where things were going. And I think a lot of the new plantings that we did, In 2011 through 2016 really came online in the central valley as well. So it just, it was almost a perfect storm, unfortunately, for the value tier. But that's not to say that these other tiers haven't been impacted as well, just to a lesser degree.

[00:10:01] Craig Macmillan: Right, exactly. Is this also true on the bulk wine side, Audra?

[00:10:04] Audra Cooper: Oh, certainly. I think anytime that you look at our industry, the bulk wine market actually leads the trend in regards to the direction we're going. So anytime we start to see multiple vintages, Or one vintage really start to increase in volume and availability in all likelihood. We're about 12 months, maybe eight behind the market with grapes.

[00:10:25] So bulk will start to kind of slow down, stack up on inventory. Prices will start to drop. We'll still be doing just fine on grapes. We'll get multi year contracts. Prices are at least sustainable, if not profitable. And then suddenly we'll start to see the same trend on grapes.

[00:10:39] Craig Macmillan: How many, or, and Eddie might be able to answer this for the Central Coast. How many folks on the grape side are having wines made from their grapes? Like under contract strictly for bulk. I've got a hundred tons of Sauvignon Blanc unsold. That's a lot, but unsold. I'm going to go ahead and take my chances on the bulk market.

[00:11:00] Eddie Urman: you're saying Specking it.

[00:11:01] So yeah, crushing it and specking it on the bulk market. Surely there are parties that did that, but I would say there is definitely a lot less parties that did that this year. In 2024 specifically. multiple reasons. One, specifically in Paso Robles, the crop was quite light which increased some late demand for some Cabernet specifically.

[00:11:22] Sauvignon Blanc was one of the other varieties that was , in demand because of how light it was. Monterey in Santa Barbara County, it seems like there were parties that decided to just leave grapes on the vine. even in internal vineyards for companies that produce their own wine rather than turn it into bulk. And Audra, please add anything if you feel.

[00:11:43] Audra Cooper: I think from a specific standpoint, you know, that was a great way of answering that. I think one of the things to keep in mind is I, I know that we should definitely be mindful of educating and being informative in a general sense, right? The rule of thumb when you're a grape grower and you're trying to sell fruit is if it is difficult to sell as grapes, It will typically be exponentially more difficult to sell as bulk wine.

[00:12:07] And so taking that position as a way of bringing profit back , to your vineyard, nine times out of 10 is not going to work out. And that one time is technically a lightning strike and it's extraordinarily difficult to predict that

[00:12:20] Craig Macmillan: So not a lot of folks wouldn't be wise to do that for a lot of folks.

[00:12:23] Audra Cooper: generally. No, I mean, I think most growers, particularly independent growers do not have the wherewithal or the risk adversity to be able to play the bulk market in any significant way. Okay. Mm

[00:12:37] Craig Macmillan: Well, let's talk about wineries playing the bulk market. I've got extra stuff. Now, if it's all internal, if I'm growing my own grapes and turning them into my products, it sounds like I would want to maybe leave things on the vine, or just simply not put my investment into producing those wines. Where do bulk wines come from if they're not coming from spec grower spec operations, if they're coming from wineries in particular?

[00:13:01] Things that are cut out for quality, things that are cut out for volume

[00:13:04] Audra Cooper: Yeah, a multitude of reasons. I mean, the wineries typically use the bulk wine market as what I had alluded to earlier, which is a pressure release valve, right? When they are short or they are long, they're looking to the bulk market, whether that's to buy or sell. Now, that's certainly not every single winery that does that. Particularly some boutique operations, or even a lot of the DTCs would prefer not to play on the bulk wine market, but at times dabble in it.

[00:13:27] Another reason to go to the bulk wine market as a buyer is to start a program. If you've gotten, you know, interest from a retailer, for example, for, you know, a control label that's an easy way to research whether or not it is an economic profitable project for your winery, as well as whether or not you can actually find the varietal. And the volume needed for that project.

[00:13:49] So there is a multitude of reasons for the bulk wine market to essentially exist and be utilized. But the traditional model is to sell excess on the bulk wine market to someone else who actually needs it. The challenge right now is, we hit about 29 million gallons of actively listed bulk wine for California back in April or June, and that number really didn't decrease until recently. It's the highest inventory that we'd ever seen going into harvest, and when we have those dynamics, that bulk wine market's utilization becomes a little bit, shall I say, sludgy, in the sense of, Most everyone's trying to sell they're not trying to buy.

[00:14:29] Craig Macmillan: Eddie, do you have anything to add?

[00:14:30] Eddie Urman: no, I think Audra summed it up pretty good. I mean, you asked, how does it end up on the bulk market? I don't think at this point, there's a ton of players that are planning to put it on the bulk market per Audra's point, but wineries are in their best faith trying to secure the amount of fruit they need to then make wine. That they have a home for IE sale, you know, some sort of sales, but as we've seen contraction in sales, unfortunately for some parties, they're forced to make decisions to put it on the bulk market. That'd be correct. Audra.

[00:14:59] Audra Cooper: be a correct way of saying it. And also to have to remember, we're essentially making wine for the future when we're harvesting fruit, right and putting it in tank. And so it's really difficult to predict exactly how much 2024 someone's actually going to be able to put out on the shelf and ship. So I think that's the other element to is, by their model , what they purchased and what they received now, of course, 24 is going to be a poor example of that with how light the crop was, but in general, they're buying for what they predict to be their demand and needs

[00:15:30] and in all reality, when it's bottled. Packaged and shipped out, those numbers may look dramatically different. Hence the reason why it's going to end up on the bulk market. If it in fact is already in excess. There are some negotiants that may actually in some years where they think the market's pretty good and they can be profitable, we'll go out and spec, but that kind of business model is few and far between compared to say 15 years ago,

[00:15:54] Craig Macmillan: Interesting and that kind of leads us to where we are now. You've already touched on it a little bit. We just finished, this is November of 2024, we're just wrapping up the harvest in California. Obviously it's a crystal ball thing, but basically, at the moment, how are we looking? It sounds like we had a light harvest. I'm going to ask you about that. A light harvest. And it sounds like that was pretty much true throughout the coast of California. Is that right?

[00:16:20] Audra Cooper: generally, yes, there were regions and AVAs that did better than others. For example, parts of the North Coast with the exception of Sonoma and Napa, so Mendocino Lake and Sassoon, they were not as light as, say, Paso Robles on Paso Robles Cabernet or Sauvignon Blanc, but they were still below expectations in most cases. There's just certain areas that were impacted further. far more and may actually be at historical low yields. And I'll let Eddie touch upon kind of his experience specifically in Paso, because I think it's one of the more impacted regions in California.

[00:16:55] Craig Macmillan: Yeah, yeah. Go ahead, Eddie.

[00:16:56] Eddie Urman: Yeah. I think kind of extrapolate on what Audra was speaking to. Paso Robles was exceptionally light last year. I think, you know, our numbers are fluctuating and we'll, we'll see what was actually processed, but potentially 50 percent down from the five year average on Paso cab. And potentially one of the lightest crops we've seen in, potentially 20 years, or at least for sure in my career. Luckily 2024 for Paso was light. And because of that, there were people trying to secure extra cab and South Blanc towards the end of harvest. Unfortunately to, to Audra's point, the rest of the state wasn't as light in other areas. It's going to be pretty interesting to see how it all unfolds because it's probably more regional.

[00:17:39] Craig Macmillan: And so we're saying fortunately light because the longterm impact would be that we will have less wine going into an already crowded marketplace.

[00:17:50] Eddie Urman: But we also came off 2023, which was probably historically one of the largest crops we've ever seen in the state. So if we would have had a crop like that back to back, that would have been devastating.

[00:18:01] Audra Cooper: Yeah, man, that's, that's so very true. And I think it's really important too, to hit upon, you know, the late season purchasing and the run that we saw on grapes. specifically in Paso for Cabernet and to some degree Sauvignon Blanc as well. But I'm going to really kind of lean towards Cab and even some of the red blenders. A lot of that was replacement demand. So it was demand that had been met by a current contract, but because the crop was so extraordinarily light, It had to be made up for somewhere. So there was a need for the fruit that was contracted, but if we didn't have that dynamic with available grapes, we probably would have had grapes left on the vine.

[00:18:38] And we did to some degree, but just far less than what was predicted in 2024.

[00:18:44] Craig Macmillan: This reminds me also of the, the concept of volatility. How volatile is the bulk wine grape grape market? We talked about these long time frames, which means your price changes you would think would be slow. Is, is there a lot of jumping around just in the course of a calendar year?

[00:18:59] Audra Cooper: Yes and no. It really depends on the year. I would certainly say that in very light years we will see more volatility on price. Then in years where it's way oversupplied, or we have a large crop that creates more stability, good or bad, with a heavier crop. But it's not as volatile as maybe some other markets that people are trying to, you know, short on, for example, with the Wall Street guys. It's not quite like that either. So there is a little bit more stability built into it.

[00:19:27] I think the challenge Happens often is a lot of people build their business models off of the district averages and the district averages don't show as much volatility as the, you know, yearly spot market does.

[00:19:40] And unfortunately, it used to be a rule of thumb that about 10 percent of California supply was on the spot market every single year. Now I think that's closer to probably 30 something percent. I mean, it's really jumped in the last few years.

[00:19:54] We have to remember our industry has been in a really interesting and an unfortunate position of retracting over the last couple of years with consumer demand declining, with the economic impacts with inflation, with lack of, you know, operating loans being readily available like they were.

[00:20:10] I mean, things have changed pretty dramatically. I have a strong belief. I won't even say hope because hope's not a strategy. I have a strong belief that, you know, as we go through some of these challenges, We'll essentially build back and we'll get to a healthier position. And I do think that some of the worst things are some of the bigger pain points we either, recently have gone through and are over with or that we're in currently. So I don't think it's going to get much worse, but it remains to be seen. That one's a hard one to kind of figure out. But my, my thought is that with the lighter crop, it's certainly going to help the bulk wine market, not stack up, you know, a large fifth vintage, cause we have currently five vintages stacked. Stacked on top of each other in bulk wine market, which again, is the most amount of vintages I've seen in the 18 years I've been doing this. And that does show, you know, we met with a client yesterday and they said, our industry is sick. And I think that's actually a really great way of putting it. We're we're kind of in a sick position and we just need to figure out how to get to a healthier spot.

[00:21:10] Craig Macmillan: five vintages stacked up that, so we're talking, there's like 2019 that are still in the market. Then

[00:21:16] Audra Cooper: There is a little tiny bit of 2019, there's a tiny bit of 2020, and then you get into 21, 22, 23, and then the 24s are starting to come on.

[00:21:25] Craig Macmillan: is there a home for something that's that old, even

[00:21:30] 2020,

[00:21:31] Audra Cooper: I mean, 2022 is about the oldest vintage back that I would say, in all likelihood, there's a reasonable wine based home, and even that's starting to get a little bit long in the tooth when we talk about 21 and 2020. Forget about 2019, that should have gone somewhere at some point long ago. Those vintages in all likelihood, again, they're smaller amounts, I think they're less than 100, 000 gallons each.

[00:21:57] They're gonna have to go somewhere, whether it's destroyed or they go to DM.

[00:22:01] Craig Macmillan: right? What's DM.

[00:22:03] Audra Cooper: Distilled materials.

[00:22:04] Craig Macmillan: There we go. Perfect.

[00:22:06] Eddie, if you were advising a grape growing, what is your view? Looking ahead, what's your crystal ball say as far as removals, planting, varietal changes, clone changes, rootstock changes, anything like that?

[00:22:20] Eddie Urman: Yeah, well we get that question a lot and it's pretty difficult to answer. At this point, you know, growers should really be considering which blocks they should be farming. They should be strongly considering pushing out blocks that are older or have no chance at receiving a price sustainably farm it. economically. And as far as planting goes right now, it's all over the board. It depends on the region, you know, where you're at within the central coast. That's which is my region specifically. And even then it's pretty hard to justify to somebody right now. It's a good time to plant.

[00:22:56] That's

[00:22:57] Craig Macmillan: that does make sense, I am thinking about other interviews that I've done with, with plant, plant pathology. Where it seems like everything is going to someplace bad in a hand basket because vines are dying. Do I replant that? You would think that diseases, like trunk disease, for instance, would alleviate some of this.

[00:23:15] Vines would need to come out of production. Do you see that kind of thing happening? Do you think people are picking not just older, but maybe damaged or diseased or infested vineyards, taking those out of production and then not replanting those?

[00:23:27] Eddie Urman: Yeah, they definitely are. The, difficult thing with vineyards compared to certain other crops is the fixed costs that go into installing a vineyard, which has gone up drastically in the last 15 years. So it's really difficult for a grower to push a vineyard you know, spend $2,000 an acre to push a vineyard or whatever it may be, and then decide, okay, we're just going to replant next year and spend 45, 000 or 40, 000. On reinstalling a vineyard. It's, it's a lot of money. Especially if it's on spec and, and honestly, sometimes it can't even get financing to do it.

[00:23:59] So unfortunately, a lot of these players will need to say, we'll try to stick it out and say, okay, what if we just weather the storm one more year, the eternal optimist, the eternal optimist. View. I think we're finally starting to see that some people are, are making some tough decisions and it's, it's sad to see, but it's what needs to happen as far as pushing some of these vineyards that are diseased or too old to be productive.

[00:24:20] Audra Cooper: I think he did a, you know, a service to everyone by talking about that, because the older plantings for as long as people had to hold on to them you know, we, talk a lot about, you know, oh, the 1990s plantings and they need to go away. Well, that's really easy to say it's a little more difficult to do, particularly again, if you're an independent grower. Relatively small, maybe your 20 acres, you know, the likelihood of you being able to get a planting contract and or getting financing to redevelop is slim to none. So you're going to hold on as long as you can. And that really has kind of added to the bottom line of supply as well. We have a lot of acreage that is finally starting to get removed that should have been removed years ago.

[00:25:01] Craig Macmillan: And again, thinking in like classical high school economic terms It seems like grape prices have been going up, at least on Paso and some of those kind of more luxury areas. Is that true? Or is there a real cap on price compared to what it could have been? Or are we in decline? What, what's, what's happening right now?

[00:25:24] Ha

[00:25:24] Audra Cooper: I think that's actually a very loaded question in some respects because

[00:25:30] Craig Macmillan: yeah, it

[00:25:31] Audra Cooper: It's highly dependent on what we're talking about, right? If we're talking about Westside and we're talking about some of the Rhone Whites that are now in vogue, yeah, their pricing has started to increase even in spite of the market, right? Because they are in demand, but they're more of a niche market as well. They're not part of the macro market. Whereas you look at Paso Cab, The district average was starting to kind of climb back up again, but if you look at the spot market, it has declined dramatically over the last two years. And I think we're in our third decline now, as far as per year per vintage you look at, for example, Monterey County, Pinot, and I think you can easily make the argument prices dramatically decreased over the last several years. You know, it had a great run post sideways and unfortunately we way over planted and we planted it in a time where there was a lot of virus material that unfortunately got put into the ground and then we oversaturated the market on the shelves as well from a national distribution standpoint, if you want to talk about maybe some cool climate, Sarah, yeah, pricing continues to go up, but they're again, very nichey. So I guess the long winded thing is macro sense. Prices have been on the decline. Niche, it depends on what it is and where it is.

[00:26:46] Craig Macmillan: And I, I got this from you, Audra, from another interview you did. What is the difference between a light harvest and a short harvest? And the reason I ask this is because it, on the wine side, talking to people, it's like, Oh, it's going to be a short harvest, coming up short. As in, I don't have enough.

[00:27:02] I'm coming up short. It's like, I don't have dollar bills in my pocket. That's totally different than having not a lot of grapes.

[00:27:09] Audra Cooper: Yeah, I mean, from a market perspective in which we operate, those two words have very different definitions. Light to me is regarding your yield per acre, your production. It's a light year. We're below average thresholds. Short on the other hand is more of an economic demand supply term that we utilize when The actual crop being delivered falls short of the actual demand. And that's a little bit tricky this year because a lot of people were saying the crop is short. Well, it was in only some cases. For example, Sauvignon Blanc, specifically in Paso, it was short. There's, I don't think there's really any arguing that. Paso Cab, I think it depends on what winery and which grower you are. There were growers who were sold out and fully contracted that were not able to meet their contracts and their wineries would have taken every single time they could have delivered. That's a short situation. Now, on the other hand, I've got some other stuff that say is like a 1997 planting that, you know, didn't have a whole lot of demand. They were light in their crop yield, but they were not short in their supply.

[00:28:18] Craig Macmillan: What are things that growers in particular can do to set themselves apart in the marketplace? You mentioned niche, we've mentioned county average pricing, wherever you would like to be selling their grapes for more than that. And they do. What are things that people can do to kind of set themselves apart? Eddie.

[00:28:35] Eddie Urman: That's a great question. It's a very difficult question. I think I'll start on the other end of the spectrum. You hear somewhat frequently people talk about minimal farming, or can they do just to get you by this year, get you into the next year what we've discussed with multiple people and what my belief is, unfortunately, if you decide to minimally farm or do the absolute bare minimum, you're boxing yourself into a area of the market. Where there's no chance you're gonna get a price that's really gonna even break even. I think most parties would agree to that. The best thing for our industry, and specifically Paso Robles, the Central Coast, is we need to continue to deliver quality products that, you know, a winery can make into good wine and sell at a good price. Right. So we need to continue to improve on our farming techniques, improve on our utilization of the resources we have to provide that product and reach a sustainable point of price to where vineyards can sustain, growers can continue to stay in business, and wineries can then take that product and sell it in a bottle profitably at a store or restaurant or whatever it may be.

[00:29:45] So I kind of danced around your question, but my personal opinion is, if you want to be in this business and you want to create a product, you know, create a grape that people want to buy, you have to put the money into it to farm it. It sounds easy to say it's extremely difficult for the people making these decisions right now.

[00:30:03] Craig Macmillan: You may have to spend a little money.

[00:30:05] Audra Cooper: you definitely do. I mean, I think, Anytime that you slow down on what you spend, unfortunately you start to decrease your marketability. And that is so difficult in years like this, where as a broker, you watch someone cut their budget and their spending in half and you immediately notice, I can't sell your fruit. And that's a difficult thing because you can't necessarily guarantee that you can sell their fruit either. So how do you justify someone spending, you know, their normal budget?

[00:30:37] One of the things that growers specifically can do is they can identify their value proposition. And for many, it's going to be unique, and some of them are going to have similarities. Part of that is, and I'm probably going to get myself in trouble a little bit here, the old kind of lead with, you know, I've gotten these gold medals for the wine that I produced off of my vineyard at these, you know, county fairs or this competition. Unfortunately, they just don't count anymore with marketing winemakers that are, you know, new on the scene, or perhaps with a new corporation, or, Somebody who's been through kind of the ropes, these things don't have any weight anymore.

[00:31:17] But what does have weight is understanding what your buyer's needs are and how your vineyard actually fits those needs. So really understanding, where you fit into the market. Not everyone's going to have the best grapes in the region. And that's okay because maybe that is already oversaturated.

[00:31:34] Maybe you need to hit a middle tier winery that's selling at 15. 99 and you know that you can be sustainable at $1,500 because this is your budget XYZ and it fits. You know, you don't necessarily have to be the 3, 000 or 4, 000 guy on the west side in Adelaide or Willow Creek. That's not going to be for everybody.

[00:31:54] So really finding your position is really important and also what you provide to that buyer. And it's really simple, and I know it's actually probably very elementary to say, but what can you do to help make the people you work with at that winery make them look good? Because they'll also do that for you in return.

[00:32:11] Craig Macmillan: and specifically in your experience, especially to start with you Eddie are there particular practices management styles, management philosophies that seem to be attractive to wineries that they're more likely to maybe buy from that grower?

[00:32:25] Eddie Urman: Yeah, I'll just probably give a little more detail here, but my experience comes mostly from larger scale farming. At the end of the day, I think the more you put into farming it appropriately, IE you know, good pruning techniques good cultural practices, whether they be shoot thinning leafing, depending on your trellis style wire moves second crop drop or, or green drop. Those are all things that, you know, wineries are going to think are a positive thing.

[00:32:54] Now, is it going to match every single program to Audra's point? And you don't always have to be the person selling $3,000 per ton cabernet. Some people can make just fine in those middle tiers.

[00:33:03] And we need those people too, because there's bottles that need to go on the shelves there. So if you can have an open, reasonable discussion with your winery and what their expectations are and what you can actually provide at a certain price point and yield I think that's really important place to start.

[00:33:18] Craig Macmillan: Audra?

[00:33:18] Audra Cooper: Yeah, I think there's a couple things. Again, this is very elementary, but say what you do and do what you say. Following through with your word and what your plan is, is very, very important and being very consistent with your practices and the end product that you try to provide. I mean, consistency in agriculture, particularly in growing wine grapes, is very difficult, but those who achieve it are the ones that typically don't have as much volatility in their ability to sell fruit. on, you know, a term contract, typically.

[00:33:46] I think the other thing, too, keeping in mind is managing personalities, too, and understanding, you know, who's the right fit for each other. I think that's really important, I think, from a practice's standpoint and I think this is becoming more and more commonly acceptable, but shoot thinning, when I first arrived in Paso even Monterey County, for that matter, is, was not very common.

[00:34:10] It's becoming more and more common, and I think it's actually very important. And Eddie has kind of reaffirmed and reassured me since he started with Turrentine Brokerage, and I kind of failed to remember my basics. Pruning is everything. And I think sometimes often more than not, you know, pruning actually kind of gets It's in my mind kind of degraded and, you know, people try to make up for things later on and we start with the right foundation, usually have some consistency.

[00:34:36] Craig Macmillan: So that's somewhere you may want to pay more attention and spend some more of your money there than in some other things.

[00:34:42] Audra Cooper: Well, and your plan starts there, right?

[00:34:43] So whatever you start with at pruning, that's your beginning plan. In all likelihood, you need to write that out.

[00:34:49] Eddie Urman: , be intentional with your pruning plan. From the time you start the season, you should have a plan. Okay. This is what we're going to target this year and you got to stick to it. .

[00:34:57] Craig Macmillan: What about, , certifications? There was a time not that long ago when going for whether it's SIP or organic we've got regenerative now a lot of folks looked at that and said, hey, this is going to help set me apart. This is going to help and with buyers, buyers are going to be interested in wanting these types of products.

[00:35:18] Have you seen that take place?

[00:35:20] Audra Cooper: Yeah, I have a really, really strong opinion on sustainable certification. And I'm sure a lot of our clientele is probably tired of me hitting this drum too loudly, but the reality is at one point, sustainable certification, regardless of which it is. Was a nice to have and the occasional request now. It's a it's a need to have must have

[00:35:39] if you are not sustainably certified you are cutting your marketability I wouldn't say in half but pretty close now a lot of our buyers are requiring it and even if they don't require it suddenly asking at the end of harvest Oh, did they have a certification? and then the answer is no well now you may be on the chopping block of we may not re sign that fruit because Our retailers are asking us, what are we doing in regards to, you know, our kind of our social impacts in our economic and our environmental impacts? And it may not be on the bottle per se, but it's in the conversation. And so to be able to provide that information to the end user is really important

[00:36:19] when it comes to the other certifications. Certainly organic is trending. It is trended off and on in our industry. Unfortunately, we don't see a big premium being paid for, for grapes that are organically certified with some exceptions.

[00:36:33] And so that's really hard, I think, from an industry to, to really grow in that manner. Regenerative is certainly another trend. I think we're on the beginning cusp of it, so I don't see it as, you know, impactful as sustainably certified on macro level. As I do sustainable. So it'll be interesting to see where that goes.

[00:36:53] I think organic those probably going to trend a little bit more in 26 and 27 just based on the players that are currently asking about it.

[00:37:01] Craig Macmillan: What do you have to add, Eddie?

[00:37:02] Eddie Urman: Yeah, I think Audra's absolutely right. We are in a state of excess or oversupply. So wineries are more intensely looking at. How can we differentiate one vineyard or one grower versus the next? And sustainability comes up in most conversations regarding that. So it's turning more from an option to more of a necessity.

[00:37:24] I think one thing that there's a trend for unfortunately too, or it can be unfortunately for some people, is they're herbicide free. So there are some people that are interested in herbicide free. It's not a certification,

[00:37:34] Craig Macmillan: Yeah, just simply as a practice. Yeah, I, agree with you. I'm hearing more and more about that all the time. And that's a, that's a big shift for a lot of growers. That's a very costly change to make. But you're absolutely right. That is a topic of conversation. That is definitely something that people are talking about in, in the broader world. There's a lot of news attention to that, especially around places like France and stuff, or that's going to be kind of a requirement probably in the future.

[00:38:01] Audra Cooper: I just want to add really quick. One of the challenges that we see is Oftentimes wineries will come to the market requesting these differentiation points, right, in regards to practices, and it's really difficult because when they come to the market, a lot of these processes and procedures needed to have already been put into place, right? They would have already had to be intended or implemented in the field. And so we're, again, almost a bridge behind in regards to what demand currently is and, and this particular trend. Especially when we talk about organic herbicide free. These are very intentional, time intensive planning processes that we've got to get ahead of.

[00:38:43] And I don't have a great answer because the market doesn't support a higher price per ton right now. And the reality is there are capital intensive changes in farming, but we're going to need to find a solution here soon because I do see this as a challenge in the market moving forward.

[00:38:59] Craig Macmillan: and I think there's some research that kind of bears that out even at the consumer level where if I'm presented with two products that are the same price and one has a desirable quality, whether it's a practice or certification or something like that, you would say, you know, Which one would you like?

[00:39:14] You say, well, I want the sustainable one. And then you ask the consumer, well, how much would you pay? And there's very little willingness to pay difference in some of these studies. In others, they show a meaningful amount, but a lot of them, a lot of the studies don't. And so I think we're kind of moving towards a standard operating procedure that's gonna be around these things and that's gonna raise costs and that's gonna be a real financial challenge for people, I agree.

[00:39:38] Eddie, what is one thing you would tell growers around this topic of the market and everything else?

[00:39:43] Eddie Urman: I think it was , the statement I made earlier is be intentional, like have a plan going into this year. We farmers tend to be optimistic and we tend to just think, okay, well, this year it's going to turn, you know, we've had a couple of bad years. It's going to get better this year. There's no guarantee that's going to take place this year. And we'd love to sit here and say it will. So make sure you have a plan that makes sense. And has a reasonable chance at having a positive outcome. If it's farming your 30 year old vineyard, 35 year old vineyard, that's for sure, only going to get three tons an acre or less on a best case scenario, no weather influences, no outside factors, no heat spells, and it's going to cost you 5, 000 an acre to farm it. You're not going to make your money back in most instances, unfortunately, not even break even.

[00:40:29] Craig Macmillan: Audra, what is one thing you would tell growers?

[00:40:31] Audra Cooper: That's a good question. And I think it's highly dependent on the grower and the clientele and where they are and what they have. I think that planning for your future is critical right now, not taking it year by year. And making changes in advance of needing to make changes is a huge one. Honestly, it's really getting sharp with your business pencil and in your business intention, your business plan. It's not just farming right now. I think you have to plan on how do you survive the current marketplace and how do you get to the other side? And unfortunately, it's not a cookie cutter plan for everyone. It's very customized and it's very specific.

[00:41:11] And the other thing that I mentioned earlier, really understanding your value proposition in the market. That is critical because I can't tell you the number of times I've had people And very wonderful, good growers who are very intelligent, but they were very misguided by whether it was, you know, a real estate agent or a consultant or just people surrounding who also had good intentions, but they weren't knowledgeable about the marketplace. And, you know, those growers either planted wrong, entered the market wrong, had to have high expectations built into their budget on the price per ton long term, all these things matter. And all these things really matter for success.

[00:41:48] Craig Macmillan: Where can people find out more about you two? Audra.

[00:41:51] Audra Cooper: Yeah you can go to our website, www. TurrentineBrokerage. You can of course call myself or Eddie or email us. You'll often see us up on, you know, a stage or in a room speaking on behalf of the marketplace. I've got something coming up soon in February as well. Yeah, there's, there's a multitude of ways of getting a hold of us.

[00:42:10] Probably our website's the easiest because it has all the information.

[00:42:13] Craig Macmillan: Fantastic. Well, thank you both for being on the podcast. Really interesting conversation. lot to think about. A lot to think about. Intentional farming, I think that's one of the key things we're taking away here is what's your intention. And that's not always such an easy thing to decide upon. You know, it's tough.

[00:42:31] Audra Cooper: It is tough. We thank you and we appreciate it. It was a pleasure talking with you as well.

[00:42:36] Eddie Urman: yeah, thank you very much, Craig.

[00:42:37] Craig Macmillan: You bet. So our guest today, Audra Cooper, she is director of grape brokerage and Eddie Urman, who is central coast grape broker for Turentine brokerage. Thank you both for coming out and to our listeners, keep downloading those episodes. There's lots of great information there. Check the show page or there's lots of resources and look for other podcasts.

[00:42:55] We have tons and tons of episodes on all kinds of topics and please keep coming back and thank you.

[00:43:01] Audra Cooper: Thank you.

[00:43:02] Beth Vukmanic: Thank you for listening. Make sure you check out the show notes for links to Turrentine brokerage crush reports, and sustainable wine growing podcast episodes, 185, why you need to talk about sustainability. And 221 future proof your wine business with Omnichannel communication.

[00:43:27] If you liked this show, do us a big favor by sharing it with a friend, subscribing and leaving us a review. You can find all of the podcasts at vineyardteam.org/podcast. And you can reach us at podcast at vineyardteam.org.

[00:43:40] Until next time, this is sustainable wine growing with the vineyard team.

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259: Winegrape Market Trends of 2024

Sustainable Winegrowing