Source: Turrentine Brokerage

Novato, Calif.—Each year, Turrentine Brokerage publishes the Turrentine Outlook, an exhaustive survey of the market and supply of wine grapes and bulk wine with follow-up updates.

The document was sent to customers and subscribers this morning, and Steve Fredricks, president of the brokerage, provided Wines & Vines a peek at rare information: The data for the parts of the North Coast AVA that aren’t in widely discussed Napa, Sonoma or Marin counties.

This data includes Mendocino and Lake counties and the Suisun Valley AVA in Solano County. Information excerpted from the report is important both to those who grow grapes in these regions and to winery customers seeking less expensive grapes to augment their Napa and Sonoma supply—or to offer less pricy wines.

Though more acres are still planted to Chardonnay in the regions, Cabernet is more valuable. Most wineries that market Cabernet Sauvignon with a North Coast appellation on the label source at least a majority of the blend from Lake County and/or Mendocino County.

When wineries that use a Napa Valley or Sonoma County appellation cannot obtain all of the fruit they need from those areas—especially at the right price—they often turn to Lake and Mendocino counties for the 15% out-of-appellation permitted to viticultural appellations or the 25% permitted to political appellations.

This move helps Lake and Mendocino county growers when grapes are tight, but when supply is plentiful, the Napa and Sonoma County wineries often reduce their use of out-of-appellation grapes.

That’s the case at present. After three above-average harvests in the North Coast, the market in Mendocino and Lake counties as well as parts of Suisun Valley in the North Coast appellation has softened, according to the Turrentine report.

Consumer sales of Cabernet Sauvignon between $15 and $20 are still growing at 10%, according to Nielsen scan data. Competition, however, is also heating up, including wine from Paso Robles, Lodi, Washington, Chile and the Languedoc region of southern France.

Some historical observations: Consumption of Cabernet Sauvignon grew during the recession of 2008 through 2010, but consumers traded down in price: Brands retailing for less than $9, and especially less than $6, enjoyed strong growth.

This created a difficult market for Cabernet Sauvignon grapes and bulk wines from Mendocino County, Lake County and Suisun Valley, which are typically priced higher than those retail prices will support.

More recently, however, the slow economic recovery combined with increasing consumer confidence led consumers to trade up again. This has resulted in increasing demand for North Coast grapes and wines in bulk for the past two years.

This situation makes for severe swings in value as the wine business moves through shortage and excess.

Bearing acres will increase during the next several years, but this will be partially offset by a probable return to more typical yields per acre for established plantings. New plantings, however, often return higher yields.

Significant acreage of Cabernet Sauvignon is being planted in Mendocino County, Lake County, Suisun Valley and other competitive regions, despite the discouraging factors such as lack of water and environmental restrictions. As wineries try to increase case-good prices to cover increasing costs, they will also focus on maintaining or elevating quality and ratings to justify those price increases.

That will probably lead to a wider range of prices for Mendocino County, Lake County and Suisun Valley Cabernet Sauvignon as growers and wineries (and brokers) choose the right grapes for the right programs.

Tons crushed for 2014 Lake County Cabernet Sauvignon were just 1% below the previous year’s record, while Mendocino was 8% below last year, but near the five-year average.

The spot market price for 2014 Lake and Mendocino County Cabernet Sauvignon grapes increased 17% from the previous year’s record, according to Turrentine.

The grape market has been slower to start in 2015, but prices so far are similar to last year, the Turrentine report said. Buyers feel less urgency to close deals today for North Coast Cabernet Sauvignon, and quality standards have tightened.

As for 2014 bulk wine, buying activity for North Coast bulk Cabernet Sauvignon from Mendocino County and Lake County has tapered, and values have dropped. The value of standard-quality North Coast Cabernet Sauvignon is between $12 and $15 per gallon.

The next few years are likely to be a contest between growth of consumer demand for Cabernet Sauvignon and increasing supply. Fredricks said most wineries that depend on Cabernet Sauvignon grapes from these secondary North Coast regions would want to sign long-term contracts if they can find the right quality and prices.

Growers, however, will want to weigh the relative security of long-term contracts versus the upward potential—but greater risk—of the spot market. Growers will be wise to remember that the best grape customer is not always the one who pays the highest price: Yield and cultural requirements, financial stability, marketing prowess and general reasonableness are all critical. “Each business is different,” according to Fredricks. “Growers and wineries should evaluate their own situations carefully, and we think this report will help them do that.”

The Turrentine Outlook costs $1,350 per year. Learn more at turrentinebrokerage.com.

(Editor's Note: This story was updated on June 11 to correct the sentence that originaly stated the price for 2014 Lake County Cabernet Sauvignon was just 1% below the previous year's record, when it should have been tons crushed.)