{"id":7743,"date":"2015-02-28T21:54:13","date_gmt":"2015-03-01T01:54:13","guid":{"rendered":"http:\/\/www.hagarty-on-wine.com\/OnWineBlog\/?p=7743"},"modified":"2016-09-25T12:17:25","modified_gmt":"2016-09-25T16:17:25","slug":"grape-gap","status":"publish","type":"post","link":"http:\/\/www.hagarty-on-wine.com\/OnWineBlog\/grape-gap\/","title":{"rendered":"Grape Gap"},"content":{"rendered":"

Virginia<\/strong> vineyards struggle to meet growing demand<\/strong>\u00a0<\/strong><\/p>\n

Reaching unanimity on any subject today is rare. We live in a world of diversity, nay controversy. But there is one fact that\u2019s undisputed in the Virginia wine industry: There are not enough Virginia wine grapes to meet the rising tide of the Old Dominion\u2019s vinous success.<\/p>\n

\"027\"To be certain, it\u2019s a good problem to have. But if not addressed, it could stymie the growth of the Nation\u2019s fifth largest wine producing state. It may also create a dependence on out-of-state fruit.<\/p>\n

In 1975, Farfelu Vinyards received the first winery license in the state. While it\u2019s no longer in operation it started a floodtide of wineries. Today, 275 winery licensees dot the state\u2019s landscape.<\/p>\n

In the process of achieving such explosive growth, it catapulted the Commonwealth to the fifth largest wine producing state in the Nation.<\/p>\n

Not bad for a state known more for battlefields than vineyards.<\/p>\n

Let\u2019s do the 2013 numbers:<\/strong><\/p>\n

Sold 6.25 million bottles of wine<\/p>\n

Employed more than 4,700 people<\/p>\n

Collected $1.8 million in wine litre taxes<\/p>\n

Generated over 1.6 million tourist winery visits<\/p>\n

Contributed almost $750 million to the Virginia economy<\/p>\n

Harvested 6,862 tons of fruit from 3,088 acres of vineyards<\/p>\n

By any measure, the industry is emblematic of the word success and demonstrates what science, talent, and passion can bring to bear on making quality wine.<\/p>\n

Wine cognoscenti no less esteemed than Bartholomew Broadbent (listed as #48 in the 2013 Into Wine 100 Most Influential People in the U.S. Wine Industry) opined, \u201cVirginia is capable of producing balanced, Old World-style wines—the types that made Napa what it was 25 years ago. Virginia\u2019s reputation is ripening.\u201d<\/p>\n

It\u2019s a commonly heard refrain from national and international wine critics and consumers alike. But as the industry is poised to rise to the next level, the engine driving its success could begin to stall.<\/p>\n

Without an increase in Virginia grapes Virginia wine is threaten.<\/p>\n

What is Virginia?<\/strong>
\nFederal and state law permits up to 25 percent of out-of state-fruit to be bottled and labeled Virginia wine. If the fruit comes from a specific Virginia American Vinicultural Area—such as Monticello—and is labeled as such, 85% of the fruit has to originate from that AVA. Virginia has seven designated AVAs.<\/p>\n

In 2011, the state\u2019s premier wine competition, the Virginia Governor\u2019s Cup, revamped its rules requiring all entries be made from 100% Virginia fruit, further increasing the importance of the regional character of the competing wines.<\/p>\n

Moreover, all entries require an affidavit with a certification of the 100% requirement, including the growers\u2019 names, location, as well as information on alcohol, acidity and residual sugar.<\/p>\n

The message was clear: Virginia wine counts.<\/p>\n

Yet in 2013, grape production dropped 670 tons from 2012: 6,862 tons versus 7,532 tons, respectively. The loss was a combination of insufficient vineyard acreage growth and weather related pressures such as spring frosts, persistent rains and the ever present animal depredation.<\/p>\n

Overall, 2013 was considered a fair vintage quality-wise, it was typical of the unplanned effects of Mother Nature combined with a paltry increase of only 114 new vineyard producing acres statewide.<\/p>\n

\"Tom

Tom Kelly<\/p><\/div>\n

\u201cThere is absolutely a grape shortage in Virginia. It\u2019s moderately severe and likely to get more severe as time goes on if it\u2019s not addressed,\u201d said Tom Kelly. Kelly serves as President of the Virginia Vineyards Association and owns Kelly Vineyard Services, a consultant firm.<\/p>\n

Kelly said farmers are planting more grapes but it takes time for those grapes to come into production. A new vineyard takes three to five years of growth before measurable fruit can be harvested.<\/p>\n

Kelly goes on to explain that one reason for the supply shortage is that many wineries are coming on line and not planting vineyards at a rate that satisfies their share of wine production.<\/p>\n

A winery producing 1,000 cases of wine a year but only growing enough fruit\u00a0 to produce 100 cases will contract for the additional grapes elsewhere; either in-state or out-of-state. The small amount of acreage such a winery might plant is referred to as a \u201cbillboard vineyard\u201d; the vines signal it\u2019s a winery but the fruit contributes little to its wine production.<\/p>\n

The supply problem is well-acknowledged in the industry. \u201cWe have determined we need to grow grape acreage by 200 acres a year for the next five years in order to meet projected growth,\u201d said Kelly.<\/p>\n

Why not more grapes?<\/strong>
\nWith the industry having met with success over the last 40 years, why isn\u2019t the grape supply keeping pace with demand? The simple answer is the amount of money and labor required to plant and nurture the vines.<\/p>\n

One of the major reasons Virginia wine has attracted wide attention is that beginning in the early 1980s, the growing of Vitis vinifera grapes accelerated dramatically; the species produces 99 percent of all wine worldwide. Prior to then, mostly hybrids and native grapes dominated the paltry number of tasting rooms.<\/p>\n

Attempting to sell wine labeled Niagara, Delaware, Catawba, Baco Noir or even Vidal Blanc and Seyval Blanc was a challenge. Most wine drinkers had simply never heard of wine with such strange sounding names.<\/p>\n

Then science was brought to bear to grow wine in the state that the world loved: Chardonnay, Viognier, Cabernet Sauvignon, Cabernet Franc, Merlot and Petit Verdot to name a few. All of these Vitis vinifera grapes put the Commonwealth on the wine map. But there was a price to pay.<\/p>\n

\u201cA vineyard costs in the neighborhood of $20,000 an acre to install. And that does not include the land,\u201d said Kelly. \u201cAnd it does not end up in the black until about year seven.\u201d Even then, profitability is low.<\/p>\n

Simply put, the delicious Eurasian grapes are more at home in climes less brutal than Virginia\u2019s. As a result, it takes an enormous amount of farming to successfully bring in each year\u2019s harvest.<\/p>\n

Many a Virginia winegrower struggles to produce clean fruit in a frost inclined, rainy, fungi-laced, cold winter and humid summer environment. One could not be blamed if they viewed their hard earned fruit as grapes of wrath.<\/p>\n

\"Tony

Tony Wolf, VA State Viniculturist<\/p><\/div>\n

\u201cMany would say it\u2019s cheaper to buy grapes as to try to grow grapes, said Tony Wolf. Wolf is director and professor of viniculture at Virginia Tech and has been instrumental in advancing the state\u2019s grape culture.<\/p>\n

Last year\u2019s winter \u201ccaused a dip in production and it has intensified into a more systemic problem. The capacity of wineries is out stripping the capacity of Virginia grape growing acreage, said Wolf.<\/p>\n

\u201cIt\u2019s a big enough problem that has made getting more vineyards into the ground one of their number one priorities.\u201d<\/p>\n

He goes on to state, \u201cThere is a lot of land that can be planted. We launched an online vineyard evaluation tool about a year ago. It allows the user to go in and look at a parcel of land and produce a report that gives the land a grade for the suitability for grape growing.\u201d<\/p>\n

A shortage of available land is not necessarily the problem. \u201cAs I look around, I see a lot of forested land. It isn\u2019t going to be cheap but there is some good land that could be planted,\u201d said Wolf.<\/p>\n

The cost and difficulty of farming the fruit has also led to a growing phenomenon called \u201ccustom crush\u201d. The concept permits new wineries to contract with larger ones to secure grapes and make wine that in turn is sold through the new winery\u2019s tasting room.<\/p>\n

The problem is obvious. As such operations proliferate, the shortage of grapes is exacerbated. It\u2019s a legal and above board operation that simply diverts fruit that was previously available on the open market.<\/p>\n

\"John

John Delmare<\/p><\/div>\n

Other unforeseen market actions can also accelerate supply and demand problems. John Delmare, owner of Rappahannock Cellars in Huntly, offers one explanation.<\/p>\n

\u201cThe problem was masked because 300 acres of Kluge grapes in Charlottesville were being sold into the marketplace each year. Then Trump took over and they started keeping a large portion of their fruit. The industry went, \u2018Oh my gosh, not enough fruit here! People began losing contracts.\u201d<\/p>\n

A similar situation happened with the former Sweely Estate Winery. Steve Case, of AOL fame, purchased Sweely in 2011 and re-opened it as Early Mountain Vineyards, \u201cand all of a sudden it put long term contracts on a couple of vineyards. Overnight some wineries lost big contracts,\u201d said Delmare.<\/p>\n

It\u2019s a multitude of reasons contributing to the problem and people are starting to plant as a result of the pressure, \u201cBut it\u2019s too little too late. I\u2019ve heard we are 300 to 500 acres short of grapes statewide. I would argue that over the next 10 years we need to plant 1,500 acres to meet demand,\u201d said Delmare.<\/p>\n

His assessment is on point. Planting more vines is the only long term way to solve the problem. In the short run, the solution points to going out-of-state to meet the shortfall.<\/p>\n

In-state versus out<\/strong>
\nWith supplies getting tighter each year, the cost of grapes has begun to rise. \u201cIn the last three years, grape prices on average have gone up a total of about 35 percent. We\u2019ve finally crossed that magic point where somebody can actually plant grapes and make money at it,\u201d said Delmare.<\/p>\n

Thirteen years ago, Delmare was paying $1,300 to $1,500 a ton for Cabernet Franc. Today, quality red fruit can command $2,200 to $2,400 a ton. Rising prices will help spur future plantings.<\/p>\n

In the interim, fruit from California, Oregon and especially Washington State are legally ending up in bottles of Virginia wine. It\u2019s a simple matter of financial survival for many wineries. With typical investments of $2 to $5 million for a new winery, owners cannot let production fall short of capacity without jeopardizing their businesses.<\/p>\n

Fruit is the engine that drives profitability and it makes little difference to the bottom line if its grapes are from Virginia or elsewhere. Owners are in broad agreement that ideally only Virginia fruit will be used to make their wine but necessity demands importing fruit from elsewhere. Much of that fruit is from Washington State.<\/p>\n

\"Chris

Chris Pearmund<\/p><\/div>\n

Many wineries are loathe to admit they use grapes grown outside of the Old Dominion but it\u2019s not an unheard of practice elsewhere. \u201cIn Maryland, there are more grapes grown out-of-state than in-state,\u201d said Chris Pearmund, owner of Pearmund Cellars in Broad Run.<\/p>\n

Last year, the Maryland Grape Growers Association reported only 40 percent of its grapes were used to produce the state\u2019s wines; 60 percent of the remaining fruit came from across its borders.<\/p>\n

\u201cSeventy-five percent of foods in a grocery store won\u2019t even tell you what country the food came from. Go to a restaurant and you would rarely know where that food came from either,\u201d said Pearmund, explaining how many industries operate.<\/p>\n

In Virginia, \u201cWe have taught the consumer to ask \u2018Where do your grapes come from?\u2019 Now we are getting bit by that.\u201d<\/p>\n

If one accepts that Virginia wine produces a particular style of wine that is directly attributed to grapes grown in Virginia, \u201cand you cannot make that style of wine from grapes from other sources, it will affect the character and style. And yes, Virginia does have a distinctive terroir,\u201d said Pearmund.<\/p>\n

He goes on to say, \u201cWe\u2019ve planted 38,000 grape vines on 28 acres this year at an out-of-pocket cost of well over a million dollars to purchase the land and plant the vines. Our needs are going to be met by planting this vineyard but it takes three to four years to get there.\u201d<\/p>\n

\u201cThe industry is a slow, slow turning boat. We need about 500 more acres to fulfill Virginia\u2019s needs, said Pearmund. In the interim, an increasing number of wineries are seeking fruit elsewhere.<\/p>\n

Westward Ho<\/strong>
\n\"LisaLisa Kendall\u2019s business, Kendall Farms, is a success story by any measure. Her father was a grape grower in Washington State and she took over his operation a decade ago. In 2005, she sold the vineyards and focused solely on selling grapes and juice. Today, Kendall has 30 Washington State growers selling her fruit.<\/p>\n

\u201cVirginia was my first customer. I thought, \u2018Washington ships all kinds of produce why can\u2019t we ship grapes?\u2019 I connected with a winery in Virginia and shipped them fresh grapes,\u201d said Kendall.<\/p>\n

It was a nascent business that blossomed like a spring vineyard. \u201cVirginia is one of our biggest customers today. We\u2019ve had a huge increase in business from there since 2006. I worked hard to build awareness that Washington State fruit was for sale,\u201d said Kendall.<\/p>\n

Demand for her fruit from across the US today is dramatic. West Coast fruit is grown in what is often described as a Mediterranean climate. Conversely, Virginia and many other states host a Continental climate. The net effect is that grape growing on the West Coast is easier that on the East Coast.<\/p>\n

Evidence of this is reflected in the numbers. California produces over 90 percent of American wine consumed in the states. Last year, the Golden State shipped 215 million cases of wine for distribution within the Unites States and 258 million cases for both domestic and international distribution.<\/p>\n

By comparison, Virginia bottled 521,000 cases, almost all of which was consumed within its borders; a mere drop in the Nation\u2019s wine bottle.<\/p>\n

These figures, coupled with a growing demand for Virginia wine, set the stage for importing out-of-state fruit. \u201cWe serve 40 states and have 350 customers. Virginia is one of our biggest customers. I have a lot of connections in Virginia. We ship them red grapes and white juice.<\/p>\n

\u201cI have 27 customers in Virginia and sold them 500 tons of fruit and bulk wine this year. I believe Virginia will be dependent on out-of-state wine for the foreseeable future. Due to weather conditions it\u2019s just not in the cards; the rain, the hurricanes, et cetera. We don\u2019t have that in Washington. We are known for our consistency of weather here,\u201d Kendall underscores.<\/p>\n

She goes on to state that Virginia \u201cwill become more dependent on out-of-state fruit because there are wineries going in all the time. Things are looking great here. Hopefully, we meet the need that Virginia has. We\u2019re glad we can help.\u201d<\/p>\n

Further south in California, a similar story is heard from Mike Colavita, owner of F. Colavita and Sons, another grape supplier. While smaller than Kendall\u2019s business, he too sees \u201can increase in fruit headed towards Virginia.\u201d<\/p>\n

In 2014, he shipped 35 tons of fruit to six Virginia wineries, doubling sales within the last few years. He goes on to explain that the growth is driven to some degree because of \u201cMother Nature. Like last winter when a lot of vines got hurt. I was a supplement.\u201d<\/p>\n

He reinforces that wineries across the U.S. want to use their own state\u2019s fruit. \u201cBut when their crops fail I can keep them in business, explains Colavita.<\/p>\n

Most of his fruit comes from the Del Ray and Lodi areas. \u201cI think a combination of western grapes and eastern grapes makes an excellent wine. Your lower sugar and higher acid wines and our higher sugar and lower acid ones makes a really balanced wine with good flavor,\u201d said Colavita.<\/p>\n

There is no definitive way to know how much fruit from outside Virginia is finding its way into the state\u2019s wine cellars but it\u2019s likely less than a 1,000 tons, but growing. By comparison, there was a total of 6,862 tons of fruit produced within state in 2013.<\/p>\n

Honesty<\/strong>
\nWith an apparent increasing dependency on fruit from elsewhere, the question arises as to how the phenomenon is marketed to the consumer. Since legally up to 25 percent of out-of-state wine can reside in a bottle of wine labeled and sold as Virginia, is there any need to enlighten the public of the blend?<\/p>\n

\"Brian

Brian Roeder<\/p><\/div>\n

\u201cIf we muddy the waters about the source of our fruit, we go right back to where we were seven, eight, nine years ago when critics said \u2018this is mighty good wine but is it Virginia?\u2019, said Brian Roeder, owner of Barrel Oak Winery in Delaplane.<\/p>\n

Roeder is a straight-spoken winery owner who takes the subject head on.<\/p>\n

\u201cEverything we\u2019ve done, especially the rules around the Governor\u2019s Cup, has been designed to put that question to rest. I believe it\u2019s going to damage, potentially, some or even a significant amount of the success we\u2019ve had.<\/p>\n

\u201cAt Barrel Oak we disclose the source of our fruit and customers don\u2019t care because it\u2019s about the experience at the winery. For wineries trying to position themselves for national and international distribution this could be a problem.<\/p>\n

\u201cWe\u2019ve never had to go out-of-state until this year. We\u2019ll call our wine American or simply won\u2019t say Virginia if the fruit is from elsewhere. Those are the two options. We will change our labels with wines made from out-of-state fruit,\u201d emphasizes Roeder.<\/p>\n

He goes on to say that a system should be developed that creates a marketplace for available Virginia grapes. \u201cThe process is still being done haphazardly, where somebody knows somebody who knows somebody, and through that network they try to find fruit.<\/p>\n

\u201cIt\u2019s been proposed, but not put in place, that an online marketplace be established where every farmer can post what they have available and that a winery owner can go and find and purchase it. That tool alone would probably provide at least one, two or three hundred additional tons into the marketplace,\u201d said Roeder.<\/p>\n

But he states it would still not be adequate to fulfill the industry\u2019s needs. \u201cThe opportunity to expand is going to have to be tied to out-of-state fruit for quite sometime. Ultimately, it isn\u2019t important to most consumers. But the issue of honesty is going to be very important to our reputation and to the critics who write about Virginia wine,\u201d said Roeder.<\/p>\n

Government support<\/strong><\/p>\n

\"Annette

Annette Boyd<\/p><\/div>\n

Echoing the mantra heard around the state, Annette Boyd, director, Virginia Wine Board Marketing office, said, \u201cYes, there is a grape shortage. I think it\u2019s predominately because we are selling everything we make. We need a couple of really nice years, nice harvests under our belt to see production to pop.\u201d<\/p>\n

No one would challenge that wish but Virginia is Virginia. \u201cWe are hopeful production numbers will increase this year. Everybody is really excited about the harvest,\u201d said Boyd.<\/p>\n

Indeed, word from around the state is that the quantity and quality of the 2014 harvest is very good. But what can be done at the state level to further assist the industry?<\/p>\n

\u201cBoth the Virginia Wine Board and the Virginia Vineyards Association are evaluating what they can do to stimulate an interest in people growing grapes. But we can\u2019t grow grapes directly. It\u2019s a big investment and you need farmers who understand the risk and are willing to make the investment,\u201d said Boyd.<\/p>\n

The Board is funded through the General Assembly from excise taxes the wine industry pays to the state. One hundred percent of the tax revenues—$1.8 million—comes back to the Virginia Wine Board. One third of those funds go to research and two-thirds to support marketing efforts.<\/p>\n

\u201cI hear rumors of an increasing amount of out-of-state fruit all the time. The wineries that are choosing to bring in fruit are open about it. For everyone that chooses that path I know of five who say \u2018I\u2019m not. I want to use my estate fruit and I\u2019m not choosing to do that even if that means capping production.\u2019\u201d<\/p>\n

\u201cConversations are happening about incentivizing farmers. It\u2019s something they want to do,\u201d said Boyd.<\/p>\n

\u201cWe are a product of our own success. We are in this predicament because sales are out pacing production. We are looking forward to getting more people interested in growing grapes. It\u2019s happening. It takes time,\u201d said Boyd.\u00a0<\/strong><\/p>\n

The Future<\/strong>
\nNo less a luminary than Winston Churchill once said, \u201cSuccess is not final, failure is not fatal: it is the courage to continue that counts\u201d. Clearly, the determination of Virginia winery owners, winegrowers, and winemakers to further grow the industry will dictate how the current grape supply issue is resolved.<\/p>\n

But with 40 years of continual advancement, it\u2019s a safe bet that Virginia wine will continue to see its industry prosper. For it\u2019s often through adversity that success is achieved.<\/p>\n

 <\/p>\n

\"Nature's

Nature’s Bounty<\/p><\/div>\n

Published in the Winter 2015 edition of The Business Journal. \u00a0\u00a0\u00a0<\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Virginia vineyards struggle to meet growing demand\u00a0 Reaching unanimity on any subject today is rare. We live in a world of diversity, nay controversy. But there is one fact that\u2019s undisputed in the Virginia wine industry: There are not enough Virginia wine grapes to meet the rising tide of the Old Dominion\u2019s vinous success. To […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"spay_email":"","jetpack_publicize_message":"","jetpack_is_tweetstorm":false,"jetpack_publicize_feature_enabled":true},"categories":[1],"tags":[706,118,703,156,700,702,704,701,296,705,12,707],"yoast_head":"\n\n\n\n\n\n\n\n\n\n\n\n\n\n\t\n\t\n\t\n