An interview with Christian Klier of Turrentine Brokerage
These are lean times. Or at least, they sure seem that way for many a grapegrower. As a viticulturist, market analysis is out of my wheelhouse. I wanted to sit down with someone who could give me a better idea about where the market is actually headed.
Christian Klier is a broker for Turrentine Brokerage specializing in the North Coast. Turrentine Brokerage has a 51-year history of matching up buyers with sellers in the market for winegrapes and bulk wine. Prior to joining Turrentine as a broker three and half years ago, Christian worked for 25 years as a vineyard manager all over Northern California. He knows what he’s talking about. Frankly, I can’t think of a better person to explain the state of the market.
This is a long one, but it’s full of good information. Dig in.
LL
So as a broker, who do you typically work for? Who are your typical sellers and who are your typical buyers?
CK
We represent everyone and anyone: small growers, small wineries, large growers, large wineries. You name it, we do business with them.
LL
Now I assume that high-quality niche growers already have buyers. Do you deal much with high-end stuff, or more middle-range and lower tier?
CK
We work with high-end as well. We broker Howell Mountain Fruit, Mount Veeder Fruit, Atlas, Diamond Mountain. You name an AVA in Napa, we work with it. However, everything’s considered lower-end this year. That’s just the market. It’s an oversupply situation.
LL
And that’s what I’m mostly interested in hearing your opinion on. I think people tend to think monolithically about the wine industry as a whole. As someone who understands the industry with more granularity, what are the segments of the market that are being hardest hit and which ones are doing okay?
CK
We pride ourselves on our historical data and being the best at predicting what’s going to happen tomorrow. We saw this coming. We tried to prepare our clients, both on the winery side and on the grower side, for this correction in the market. We were already in an oversupplied situation prior to the pandemic. Looking back at 2018, we had a big crop. In 2019, nobody needed fruit. In 2020, the smoke cleared out the North Coast because of the taint, and no one wanted to take it. We don’t think that fruit would have sold anyway. It probably did a lot of growers a favor so they could collect their insurance on fruit that would not have sold in 2020. 2021 the pandemic hit. People were pantry stocking and wineries saw a huge decrease in their inventory through distribution.
Then distribution was calling for more cases and wineries reacted. They went back out and contracted more fruit, and that stayed the course for ’21, ’22, and ’23. We started seeing a big pushback on pricing in 2023, especially in Lake and Mendocino County.
So this year, we knew this correction was coming. It was hard for a lot of growers in Napa and Sonoma to grasp this change. Napa was especially hard hit in light of having the highest district average in the history of that county the year prior. Everyone was hoping that was going to stay the course. People felt Napa was bulletproof. Even if people weren’t going to sell grapes in Lake, Sonoma, or Mendocino Counties, Napa fruit would still sell. But we’re seeing that to be a different case now.
Ultimately, and historically, we’ve seen these cycles last about 7-10 years, but we think in the information age, these cycles are moving quicker.
LL
How so?
CK
Information is being transferred from distributors to wineries, wineries to their winery reps, and then those reps to the grower. They’re able to correct the ship quicker than they were in the past by email, text, so on, so forth. So wineries are getting information based on case depletion much quicker and reacting to that faster. It’s working in both directions up-market and down-market. These cycles are turning quicker than they had in the past. Rather than a seven or ten-year cycle, we’re looking more at a five to six-year cycles. If you count 2019 and 2020, and now 2024 in that cycle, we think next year is going to be tough times as well. Then 2026, we should start to see a little bit of recovery in this market.
LL
Do you ever see Napa prices floating back up to where they were? You mentioned this being a market correction. Was it just speculation that was garnering such a high price?
CK
No, I think we were seeing good sales. We track all the numbers and those wines were selling. People were buying high-end luxury wine. What was confusing to us is in tougher economies, and arguably we’re in a tougher economy now with the interest rates what they are and inflation, but typically when people had less disposable income, they would shift down to a lower bottle price say from $15 bottle to maybe a $7 bottle or from a $200 bottle to a $50 bottle. We really didn’t see that in the lowest segment i.e. the segment that runs between $5.99 to $8.99 a bottle. That is actually the largest segment of our industry. Most people don’t know that. That accounts for almost 70% of production in the state of California. We did not see that shift down rather we saw a shift away from wine in general.
Then at the luxury level, which most Napa fruit falls into, we actually saw continued sales. That was giving everyone a lot of hope that even at the upper echelon level, people were still buying wine, but that has changed in the last six, seven months. Where normally, we would see people shift down to a less expensive bottle of wine, that is not the case. They shifted away. We’ve seen an increase in spirits demand, and RTDs (Ready to Drinks i.e. hard seltzers) have taken that share.
We’ve seen large wine companies invest into those RTDs rather than trying to market to the wine drinkers and bring those customers over to the wine industry. It’s been a huge shift in the market.
LL
So you’re seeing a downturn in drinking cheap bottles of wine and high end wine now?
CK
Yes, the $6 to $8 tier has dropped over 6%. That’s the largest decrease in consumption at that price point category in the history of that category. We did see luxury holding pace at that higher level, but that has changed in last six months. Now in Napa for instance, we’ve seen a drop of around 6% to 7%
We’re actually seeing the best sales right now in the premium category. Those are wines that fall between $15 and $25 a bottle.
LL
And when you say the best sales, you mean the least crappy?
CK
Yes. It just hasn’t been hit as hard. We’ve seen that decrease as well, but not as large as we’ve seen the other two categories.
LL
How has this downturn played out regionally? You mentioned Napa, which was used to getting really high prices, and now they aren’t. How’s Lake County and Mendocino County doing comparatively?
CK
We did see significant demand for Sauvignon Blanc, and Lake County is known for Sauvignon Blanc. I think every grape of Sauvignon Blanc was sold out of Lake County. We’ve definitely seen more interest from wineries in white grapes than we have in red grapes. We’re just dramatically more oversupplied in red grapes than we are in white grapes currently. But in general, I would say the hardest hit has been the Central Valley, which feeds into that economy class bottle of $5.99 to $8.99. We’ve seen the most pullouts of vineyards in that region as well.
LL
Has any region or price tier been safe? So far anyway?
CK
As I mentioned before, I would say that white grapes are much more in demand. Obviously, Sonoma County grows great Chardonnay. That was our most active market this entire year. White grapes in general seem to be doing better than red grapes. And specific regions like Russian River Valley and Sonoma Carneros for Chardonnay, had very sought after fruit. Similarly with Sauvignon Blanc in Napa, Sonoma, Lake, Mendocino, and Solano counties there’s probably not going to be grapes left on any vines.
LL
Do you think that’s just because people are looking for lower alcohol wine, and that’s where white tends to come in? What do you think is driving that?
CK
There were a couple of short crops on Chardonnay in the interior valley and other areas of the state of California. But I think also wineries look at whites as a quick turnover wine. It doesn’t have to be aged in barrels and their investment cost in inventory is less. They can turn white wines over and get it on the shelf much quicker than they can red wines. Wineries have continued to see stronger sales in white varietal wines than they have in red wines.
LL
Do you see any niche white varieties coming into play? I always felt like consumers were a little bit more malleable when it came to trying out a new white than trying out a new red. I’m curious. Are you seeing anything weird?
CK
We’ve seen interest in Albariño. We’ve seen Grenache blanc along with some of the white Rhone’s like Roussanne. Wineries are trying to see what other varietals they can do well with at the marketplace. I don’t think that there’s a huge consumer base yet, but wineries are looking at those varieties to take a gamble on.
LL
It’s interesting, I mean, anytime you take in red grapes, you’re making a prediction about what the market is going to be like in two, three years, depending on how long you want to leave it in barrel. In that sense, whites are an easier bet and less of a risk.
CK
Yeah also, when we have as many gallons as we do listed on the bulk wine market right now, wineries don’t have to take the risk of working all year with a grower, investing in viticultural discussions, having their grower reps go out there and check those fields to make sure that they are following the requirements based on the contract. They can actually just call up our bulk brokers and say, send me 12 different samples of this red varietal from this region. They have them at their disposal. They can taste through them, and they can order what they want on the spot, and they don’t have to invest all that time and money aging, processing, and all the employment required to make wine.
LL
For the producer, selling wine as bulk is essentially just about covering as much of your costs as you can? It’s not a lucrative thing that someone could go into, right?
CK
Every once in a while, it is pretty lucrative. Some people win on the bulk wine market. Some growers just choose to not deal with contracts and wineries and take their fruit to the bulk wine market every year and have the financial stability to be able to do that. It’s quite expensive. You have to sit on it and if you’re custom crushing it, you have to pay rent on that wine as long as it’s held at that winery that you chose to make that wine with. It can get very costly very quickly. We always say your first loss is your best loss in this industry.
LL
So how do you see this correction essentially correcting itself?
CK
Well, I think a lot of good wine is going to be made very affordable in this market. I think new consumers will have access to high-quality wine that they may not have been able to afford a year or two ago. When really good wine is made available to people who don’t normally have access to it, that tends to bring a new consumer into the market. As that new consumer gains in their disposable income and works through their career and moves up in their field and has more disposable income, they will follow that quality even as the price increases.
LL
Are there any other trends you’re seeing in wine consumption? I know we mentioned whites and lower alcohol wines. Are people drinking more foreign-produced wines?
CK
Internationally, most countries, France, Australia, Italy, Chile, Argentina and all the other large producers are in the same boat as us. I think in general, there’s just been pushback on alcohol. Some would refer to it as Neo-Prohibition, based on health benefits and government recommendations. We are seeing overall less consumption.
On the same token, when people go out to a restaurant, they may want to have a glass of wine with their meal, and they look on the restaurant menu and their glass of wine is $15, equal to the high ball or the whiskey drink or vodka drink right next to it. It used to not be that way. So people are choosing spirits over wine at the restaurant. Until we can find a way through mechanization or other ways to control labor costs to make this product more affordable to the new consumer, I think we’re going to struggle in this industry. Sometimes a correction will put good wine into the hands of a consumer that may not been able to afford that wine. That might be the trigger that carries that new consumer into our industry.
LL
On that note, what do you think are some things that growers can do to weather the storm best? If you were a grower, what would you be doing?
CK
I would definitely be looking at my input costs. I would definitely be looking at my contracts with the wineries that I have and what they’re paying and what realistically, viticulturally, I can afford to do in that vineyard. Then I would also be trying to mechanize as much as possible, as much as the wineries would allow me to. Mechanization of harvest, that brings down your cost. If you can mechanize leafing, if you can mechanize suckering, all those things are quite expensive with the labor costs in California. You’re looking at $400 to $500 per pass for each one of those. So anything you can do to save money in terms of farming costs, the growers should do it, just not at the expense of the contract.
LL
If you’ve got a contract, don’t lose it basically.
CK
Yeah, I would say you want to be a very good partner with your winery right now.
But also, very understanding of their situation. I know as a grower for 25 years, and prior to that I was raised as a pear farmer in Lake County. I’ve seen a market collapse. What you don’t want to do is offend your current partner. Your current partner is your best bet on safeguarding you in the future. They’re buying your grapes because they’ve liked them and they’ve worked well for their programs. So any type of understanding with that partner is going to make things easier for you going forward.
LL
Would you recommend anyone start grafting over their vineyards to a more favorable variety at this point or do you think that that would be premature?
CK
I wouldn’t do it speculatively. I would make sure that you’re talking to a winery and has some interest in buying in on that grafting project prior to doing it.
What we did see in 2022 and 2023 was a lot of rejections based on old red varietal vineyards that didn’t even make minimum Brix. I would say in 2021, we saw wineries work with that fruit and negotiate with growers to find a price that worked. Then in the last two years, we saw flat-out rejections for that fruit. The wineries just weren’t going to deal with it. So if you have a compromised vineyard with a lot of virus, now is a good time to think about ripping out and replanting.
LL
I agree with you. It’s hard to tell people they need to replant right now though.
CK
There’s just no sense in keeping a vineyard in the ground that can never make Brix in a cool year or in a hot year. It’s never going to get there. Continuing to throw money at it just means eventually having your contract rejected. If nothing else, if you’re not ready to replant, at least pull out.
LL
What do you think that the wine industry as a whole can do to lessen the blow to growers and producers? Investment in marketing maybe?
CK
I agree with marketing. This industry has been built on the backs of the baby boomers, and we’ve all rested on our laurels for the last 10 years. We’re all in business because the boomer generation was such a large consumer of our product, but that consumer base is shrinking, downsizing, and drinking less.
We haven’t courted the next generation. Millennials are the next big generation and have the best potential to replace the baby boomers. They’re now coming of age and they have disposable income. I don’t think as an industry, we’ve done a great job in marketing to them or making them feel included in our industry because we’ve been leaning on the baby boomers. It will take wineries spending some money marketing to that next generation and creating that next generation of consumers.
It needs to be an industry-wide effort, too. I think as a grower, we have to open our vineyards up to these experiences and partner with wineries to showcase specific vineyard sites and create an agrarian experience for this next generation. I think they will appreciate the hard work that goes into it. Right now, they don’t know anything about it. Growing wine grapes and then turning them into wine is a much more complicated scenario than just making an RTD in a can: throwing some malt liquor in there and some flavoring that you bought from who knows where. Those products don’t have as sweet of a story. The wine industry is built on the backs of hardworking farmers in Northern California who put their lives and families’ lives into making wine. I think there’s some romance there that can be captured and presented to the next generation.
LL
Absolutely. Any closing remarks?
CK
We’ve seen these times before. I know a lot of people say that this might be the worst it’s ever been, but we’ve been through these types of slowdowns. It’ll come back around, and it always does. There are going to be winners and there are going to be losers. I mean, there are some wineries out there that are doing very well and there are wines that are selling. Do your research. Know who you’re working with and know who you’re partnered with. Ask them about their marketing plan as a grower. Ask them about who their target consumer is. Get to know the marketing background as a grower too. That way you know you’re partnering with the right company who you want to be doing business with.
Ultimately, what it all boils down to is great partnerships. A winery has got to trust the grower, and the grower has got to trust the winery. If they can do that and they can get along and they can support each other through up markets and down markets and stay steady, I think you can have a great long-term relationship.
LL
Well, thank you so much, Christian. I really appreciate you taking the time to chat with me.
CK
Of course. Likewise.
