Santa Rosa, Calif.—With the availability of bulk wine, especially Cabernet Sauvignon, at its lowest level in more than a decade, and growing consumer interest in red blends, grapegrowers may see an increase in demand for Merlot—if, that is, there is enough acreage to support it.

During a recent grower forum in Santa Rosa, Brian Clements, vice president and partner of Turrentine Brokerage, said Merlot acreage is at levels not seen since the mid-1990s, when growers ripped out vines in response to a demand shift. In California’s Central Valley, Clements said, growers pulled 40% of their Merlot vines.

Clements’ remarks came during the Sonoma County Winegrape Commission’s “Dollars and Sense” meeting and tradeshow. This year’s event drew 550 attendees, with 55 exhibitors at the tradeshow.

While Merlot withered, the industry had a bountiful supply of bulk Cabernet. During the past decade, Clements said, “Cab was the biggest Cab blender.”

Today, bulk Cabernet Sauvignon inventories are around 400,000 gallons or just 8% of 2007 supply. “Now, there’s really no Cab,” Clements said. “So what do they turn to? It’s Merlot.”

Interest in Merlot may also be fueled by growing demand for red blends. Mike Colicchio of Nielsen’s alcohol beverage division said red blends saw an 8% growth in sales.

“Merlot has served as the backbone of a lot of those programs,” said Marc Cuneo, a broker with Turrentine.

Clements, however, marked the Merlot situation with a “red flag,” illustrating that the dynamic could be out of balance. “Is there enough? That’s something to take note of,” Cuneo emphasized.

Merlot saw a 5% drop in its share of wine sales in 2011, but the varietal remains the second-most popular wine overall, with a healthy 23% consumer loyalty.

While growers of Merlot—and in fact all other varieties—could hope the diminished bulk market may mean an increase in grape prices, Clements and Cuneo cautioned that most wineries are still moving inventory at discount. Clements said this is the first time he’s seen a market switch that has not been driven by increased winery sales, explaining that the past two light vintages changed the market dynamics. “Mother nature kind of flipped this market,” he said.

The sweet tsunami
Moscato and other sweet wines continue their surging success in the market, said Nielsen’s Colicchio.

As consumers across the board continue to buy more wine—and beer has “just fallen off a cliff” with a 2% drop in total volume sales this year, following years of anemic sales growth—more and more drinkers are going sweet. In the past 13 weeks of market research, sweet table wine enjoyed a 207% growth in total value of sales and a 213% growth in total volume of sales.

“Clearly the sweet wine category is starting to take hold,” Colicchio said, adding that brands labeled “sweet” are seeing the biggest increase.

Leading the sweet surge is Moscato, with 78% growth, accounting for more than 3% of total wine sales and more than $200 million in value.

Moscato has skyrocketed since it first was popularized in rap music. In 2005, Kanye West ordered up cases of Saracco Moscato d’Asti for a party; other rappers followed suit, praising the wine. A 2010 album by artist Waka Flocka includes the song “No Hands” that has the artist rapping: “Girl the way you movin’ got me in a trance, DJ turn me up, ladies this yo jam, I’m-a sip Moscato.”

Table wine still the growth engine
The “engine of growth” for most wine, though, is still table wine, of which two-thirds is Californian. Cabernet is strong with high varietal loyalty, solid 6% growth in 2011 and 15% share of the total market.

Chardonnay held the largest share of the market in 2011 at 21%, but demand for the varietal stayed constant. Pinot Noir enjoyed a 10.5% increase in sales in 2011 with a nearly 9% bump in the past 13 weeks.

Sonoma County is on par with Napa County for share of the market, but Napa and the Central Coast had bigger gains in the market for 2011 and the past 13 weeks. Napa continues to lead with the biggest sales increases in the higher priced wine tiers.

Imports across the board are losing sales and market share, except for Argentina, due to growing interest in Malbec, and New Zealand because of Sauvignon Blanc.

People who enjoy the cheapest wines are also the most loyal. Wines priced less than $2.99 maintain a 68% consumer loyalty.

Nick Frey, president of the Sonoma County Winegrape Commission, said he was very happy with the turnout for Dollars and Sense because it showed that growers in Sonoma County are engaged with the changing wine industry.

He hopes prices will rise: Some growers had been producing grapes at a loss in recent years. He said he found the news about a tight bulk market good, but cautioned, “We can’t get too excited.”