THESE are stormy times for California vintners. A rain-plagued harvest last fall. One of the wettest winters on record. But more than unsettled weather besets America's leading wine-producing region. A sunny future of exploding sales, burgeoning vineyards and an annual parade of new wineries has been clouded by events both within and beyond the borders of the Golden State.
After nearly a decade of 10 percent annual growth, shipments of California wine in 1982 increased by less than one percent. Retail sales have been flat for nearly 18 months and reports abound of wine dumping and deep discountings, particularly of varieties currently out of favor such as gewurtztraminer, riesling and zinfandel. Although the softening of the market (for both jug wines and premium varietals) is largely attributable to the general recession, there is also evidence of growing consumer resistance to $15 to $25 bottles of chardonnay and cabernet sauvignon, the two crown jewels of California's wine kingdom. "Good value" is the battle cry of the 1980s.
Indeed, certain boutique wineries--especially recent entrants who paid up to $10,000 per acre for choice vineyards and who face high interest obligations--are scrambling just to survive. (Even one large, venerable Napa Valley winery is reportedly floundering.)
Moreover, the problem of sluggish sales is compounded by an ill-timed abundance of grapes. Many younger vineyards, planted in the halcyon days of the mid-to-late 1970's, are now coming into production. Last year's harvest, a record crop despite poor weather, witnessed a significant reduction in grape prices when Gallo, the industry giant, unilaterally announced that it would pay several hundred dollars a ton less for premium grapes than it had in 1981. Further reductions are forecast this year for all but a small percentage of exceptionally high-quality grapes from the most prestigious vineyards.
It is in this already cloudy environment that the Californians--and other American wine producers--have been sent heading for shelter from a flood of increasingly cheaper imported wine. Prompted by increased production (as well as declining wine consumption in some European countries) and stimulated by devalued foreign currencies, wine imports--principally from Italy and France--skyrocketed to 110 million gallons last year--nearly half the total of California wine shipped in 1982.
Galvanized by this foreign invasion and currently powerless to reorder international currency relationships or to trim domestic production costs to European, Chilean or Australian levels, the Californians have looked beyond the American borders and concluded that a strong offense is the best defense. Frustration over what they see as "double standards" in the myriad of both tariff and nontariff barriers to the export of American wines to other wine-producing nations, has led the Californians--through their trade association, the Wine Institute--to launch a campaign this month to obtain "comparability."
Reversing Horace Greeley's 19th-century exhortation, young legions of California winemakers--joined by the Wine Institute's executive committee--have "gone East" to seek fame and fortune in Washington, D.C. The fame they seek is public discussion of international trade issues; their sought-after fortune is enactment of "The Wine Equity Act of 1983."
"What we seek is nothing more than to be allowed to compete with the wines of the world on an equal basis throughout the world," says John A. DeLuca, president of the Wine Institute. "That is why we are proposing legislation which we hope will give us equity in the international marketplace."
The Institute was advised by sympathetic allies in the auto and steel industries against referring to the proposed bill as advocating "reciprocity" in international wine trade; still, the act as presently drafted, would permit U.S. officials to establish comparable barriers to the importation of foreign wine into this country from any other country that declined to reduce existing barriers to American wines within a stated period of time. Although the bill would have the effect of raising trade barriers in this country if other wine-producing nations fail to lower allegedly unfair barriers to American imports, sponsors of the legislation insist that they are not advocating protectionism.
"We want a free market," says Morris H. Katz, president of Paul Masson Vineyards, "but it should work both ways."
"We're not asking for quotas or higher duties," says California champagne producer Jack Davies of Schramsberg Vineyards. Davies traveled to Washington to explain to members of Congress and government officials the byzantine patchwork of tariffs, pervasive regulations and burdensome paperwork imposed by more than 35 countries that, conversely, ship wine into the United States with "only minimal paperwork and a duty of only 37 1/2 cents per gallon--the lowest in the world."
While French and Italian wine representatives have declined to comment on the proposed legislation at this early stage, they dispute the allegation that the regulations of the European Economic Community or their own individual countries are "anti-American." "We do not seek to discourage competition from the United States," says Pierre Colmant, commercial minister at the French embassy in Washington. "Our regulations are simply to protect our own consumers," he adds. The French have complaints of their own against American vintners' longstanding practice of using certain French appellation of origin terms (chablis, burgundy, champagne, etc.) in labeling some U.S. generic wines. That issue, fermenting for many years, is expected to be uncorked once again in reponse to the proposed bill.
It is unclear how the Wine Equity Act of 1983 would reduce import barriers in non-exporting countries where restrictions often are the most extensive. It apparently would have been of little assistance to Robert Mondavi Winery, for example, which recently undertook to export 13 cases of Napa Valley wine to Cairo in conjunction with an ambitious campaign by Hilton International to promote California wines abroad. After Egyptian officials informed the Americans that import duties would total $9,200, more than twice the value of the wine itself, it took considerable "shuttle diplomacy" for the 13 cases to clear customs.
Although more than 100 wineries are active exporters and even though U.S. wine exports in 1982 were 10 times the 1975 level of 1.7 million gallons, they amount to only a trickle of the total domestic production. "It is not going to amount to a lot for a long time," concedes veteran Napa Valley vintner Louis M. Martini. "But it could eventually be significant--even 10 percent," he said. "And it's worth pursuing because the broader you spread your base, the better you are." Martini, who compared today's questions about expansion internationally to the skepticism 20 years ago regarding his winery's nationwide expansion, adds sardonically, "and it doesn't hurt your image domestically to be able to sell your product throughout the world."
The Wine Institute's DeLuca concedes that the fight for international equity is principally important in winning the hearts and palates of Americans. Noting that less than 10 percent of the American population consumes 60 percent of the wine sold, DeLuca asserts that the United States is now the key battleground for the international wine trade. "The U.S. is the big market to be developed in the future, and it is important for consumers here to see American wines as important internationally."
DeLuca, a former Deputy Mayor of San Francisco who earlier worked both ends of Pennsylvania Avenue in Washington, is guardedly optimistic that his executive committee's four-day foray to Washington this month has yielded significant support from both members of Congress and an administration already friendly to the California wine industry. The bill has since been redrafted, however, to eliminate any reference to foreign government subsidies that allegedly result in artificially lower grape prices. This issue of wine subsidies is difficult for certain agriculturally sensitive congressmen to swallow.
The Californians also, during their Potomac pilgrimage, won the support of industry representatives from other wine-producing states, including New York, Washington, Virginia and Texas. Nathan Stackhouse Jr., president of the Association of American Vintners, endorsed the proposed legislation and called on growers in his members' 27 states to support the bill.
Prospects for passage of the wine legislation, especially in this year's crowded legislative environment, appear uncertain. Industry analyst Marvin Shanken believes that the act as proposed has little chance of enactment. "However, it is a bold step for the California industry," he says, "and will bring into sharp focus inside the Washington political arena the problems and inequities that American wine producers face."