California wine sales fall for first time in 16 years

FRESNO, Calif. — The wine industry received sobering news this week: California shipments dropped in 2009 for the first time in 16 years.

Sales figures show that wine consumption is up 2.1 percent nationally, but consumers are turning to cheaper imports from Chile, Argentina and Australia to tantalize their palates as global production exceeds demand.

“The good news is that people are still drinking wine,” said Gladys Horiuchi of the Wine Institute, which represents more than 1,000 of the state’s wineries and related businesses.

The numbers announced this week by longtime analyst Jon Fredrikson at the western hemisphere’s largest symposium in Sacramento were not unexpected. They follow a two-year trend of slumping sales for premium wines as strapped consumers eat out less and make more frugal purchases.

The biggest drop in wine sales is for bottles that retail for more than $20. Sales were off between 20 and 30 percent in 2009, according to Steve Rannekleiv, an analyst for Rabobank. During the same time, sales for wines that cost less than $6 a bottle rose 5 percent.

As consumers have tightened their pursestrings, bulk wine imports from countries with lower production and land costs have climbed. Between 2007 and 2009, imports more than doubled to 13 million cases to capture 32 percent of the U.S. market.

“Argentina is the sleeping giant,” Rannekleiv said at a recent meeting of grape growers in the San Joaquin Valley, the source of most lower-cost grapes in wines from California.

Argentina has 510,000 acres planted in grapes, compared with 480,000 in California, which produces 90 percent of the wine made in the U.S.

California wines lost ground as sales fell 1.6 percent to 236 million cases, a drop of 4 million cases. However, some large California wineries import and sell bulk wine, so Horiuchi said some of the state’s wineries are profiting from the increased sales.

“It could be the best of times or the worst of times. Those with lower price points did well,” she said.

The sales drop estimates are preliminary, with final numbers due by the end of February. Horiuchi said late-2009 figures will show a slight uptick in sales, an encouraging industry sign.