San Luis Obispo, Calif.—After several years of grim news for the wine industry, a strong sense of optimism prevailed at the Central Coast Insights Program. Hosted by the Wine Industry Symposium Group, this year’s program focused on “How the Central Coast Wine Industry Will Adapt to the New Global Economy.” That global economy, most speakers agreed, is improving, although there’s still some uncertainty because of the unrest in the Mideast and the ongoing trouble in Japan.

David Freed, chairman of the Silverado Group, noted that 2010 was the best year the industry has seen in the past three. “There is a change going on,” he said.

Freed presented results of the 2011 Central Coast Insights Survey of the region’s vintners and growers, which found plenty of optimism. For example, 75% of respondents expected their sales in 2011 to surpass those of 2010. “This is sort of incredible,” Freed said. Two-thirds also expected profits to be up. (The Central Coast encompasses most of the coastal area from the San Francisco Bay Area to Santa Barbara County.)

Demand for Central Coast Pinot Noir and Cabernet Sauvignon remains strong, the survey found, while supply outstrips demand for Merlot and Syrah. The survey also revealed that the supply of Chardonnay was only slightly greater than the demand. “This is sort of counter-intuitive,” Freed said, because there’s still a perception that the market for Chardonnay is soft. Several speakers mentioned that bulk inventories had been reduced, and the market has become more balanced.

The weak dollar has made it hard for imports from Europe and Australia to compete, although Vernon Crowder, an agricultural economist for Rabobank, said that Europe still hopes to sell in the U.S. market. He expects Australia, on the other hand, to focus more on Canada and Asia. But he predicted the dollar will appreciate in 2012-13, and he cautioned that vintners shouldn’t base their long-term planning on a cheap dollar.

Several speakers also warned of competition from Chile and Argentina. Chile sees the $10-$20 price range as its focus, Crowder said, and is “shooting at the very same market that you on the Central Coast are.”

Todd Azevedo, a wine and grape broker with the Ciatti Co., noted that Chile exports 70% of its production, and he thinks Chilean Cabernet, in particular, could be a competitive threat to the Central Coast. The most popular Argentine Malbecs are in a similar $10-$20 price range, and Azevedo called Malbec “a big deal.” Crowder added that, despite inflationary pressures, the Argentine government is trying to keep its peso stable, and the country is focused on the U.S., Canada and Eastern Europe.

Market environment is changing
Recognizing the changing environment in which wines are sold, two presentations focused on direct-to-consumer marketing, social media and mobile applications. Clay Wallin of Vintank, a digital think tank for the industry, talked about how businesses could influence offline behavior through online activities, such as location-based media and social gaming.

The affordability of Central Coast wines was a recurring theme, especially as sales have grown in the $8-$20 range. Nicholas Miller, director of communications for his family’s Bien Nacido Vineyards, said Central Coast prices are “palatable to the general public.”

Miller also recapped some of the recognition that the Central Coast has received in recent months, including Wine Spectator’s naming of the 2,000-case Saxum Vineyards’ James Berry Vineyard blend from Paso Robles as its wine of the year. At the 2010 California State Fair, 70,000-case Robert Hall Winery of Paso Robles was winery of the year, and Bien Nacido in the Santa Maria Valley was vineyard of the year.

The Central Coast also has been in the news because of two high-profile transactions in Paso Robles: 45,000-case Justin Vineyards’ acquisition by Fiji Water, and the sale of 100,000-case EOS Estate’s inventory and brand to Foley Wine Estates. The purchase of Fetzer by Chile’s Concha y Toro could also have an impact, because the deal includes a winery in Paso Robles. Tony Correia, an expert on the valuation of vineyards and wineries, expects the Justin deal, in particular, to bring increased attention to the region. He noted the marketing skill of Stewart Resnick, whose company owns not only Fiji Water but also POM Wonderful pomegranate juice.

One looming deal that has created uncertainty is Foster’s plan to sell its Treasury Wine Estates division, which includes the 800,000-case Meridian facility in Paso Robles.

As for Central Coast vintners or growers who are looking for additional financing, the news is mixed. “Banks are still making loans to wineries,” said Lee Ann Pearce, senior vice president of Farm Credit West. The bankers “are all here today. That should tell you something.”

The basic standards for lending haven’t changed, she said. “What is changing is how they’re looking at operational profits.” She advised participants to get their financial statements in order: This information will also be crucial if someone wants to sell a business or property. Collateral is no longer enough, Crowder stressed. “Banks are very focused on cash flow.”

The full presentations will be posted online at winesymposium.com.