A recent article in the San Francisco Chronicle discussed the dwindling amount of available land in Napa that can be used for grape cultivation. The Napa valley just about thirty miles long and at most five miles wide making it one of the smallest major grape growing regions in the world. From 1968 to the early 2000s, the acreage planted in grapes has blossomed from 12,000 to 45,000, but little expansion had occurred in the last decade. The article discusses that efforts have continually been sought to limit the amount of more agriculture in favor of other uses such as open space. Today, available new optimal planting areas on the valley floor are in essence non-existent with the only possibility being on the hillsides that have much regulation to manage risks or erosion.
As with any situation where demand exceeds a limited supply this will mean the price for Napa acreage will likely continue to rise. As a wine drinker, this also has the impact of a finite supply of valued Napa grapes which will continue to force up the cost each season of grapes and translate to higher bottle prices for Napa wine. On average across California about three-quarters of the wine grapes grown are not made into wine by the grower but rather are sold to vintners. Therefore there is a direct relationship between prices paid for grapes and the required cost of a bottle produced in order to make a reasonable return.
The numbers bear stark witness to the economic realities and the pressure on wine pricing. In February, the preliminary grape crush report for California was issued by the U.S. Department of Agriculture. In Napa the most prized grapes are Cabernet Sauvignon, and in 2017 the most paid per ton of these was a staggering $50,000. A good rule of thumb is that one-ton of grapes will eventually translate into about 720 bottles of finished wine. So at the high price paid for Cabernet in Napa this means just the cost of the grapes would be over $69 before any of the other costs for making the grapes into wine, marketing, overhead, etc. The average price for a ton of Napa Cabernet in 2017 was $7479 so about $10.40 per bottle in just the cost of grapes. It is no wonder that finding a bottle of Napa Cabernet in the future for under $100 at retail will be a rarity. The average price for Cabernet has risen 19% in just the last three years with no abatement in sight so expect the costs to continue to be a challenge much the real estate in the San Francisco Bay Area. Currently of the 45,000 acres of vineyards in Napa, Cabernet accounts for just under half this total with 20,342 acres. Chardonnay is second with 15% of planted acreage and Merlot third with 11%.
Cabernet is significantly higher than any other of the grape varieties grown in Napa but the trend of consistently increased pricing is similar with most rising 8% or more since 2015. Syrah and Zinfandel from Napa are the next most expensive grapes, weighing in at $3739 and $3622 per ton respectively. The most expensive white wine grapes as likely expected are Chardonnay at $2808 per ton in 2017.
Comparing Napa to the Sonoma area displays numbers that are drastically different. Sonoma County with 1500 total square miles of land is substantially larger than Napa, although Sonoma has just 60,000 acres of land under vineyard so about one-third more than Napa. The top two grapes grown in Sonoma are Chardonnay at about 15,000 acres and Cabernet Sauvignon with almost 12,000 acres. The deviations on a pricing basis are even more dramatic with Sonoma much less.
The most paid for a ton of Sonoma Cabernet in 2017 was nearly $16,000, which is about one-third the highest price in Napa. The difference in average price is even larger with Sonoma Cabernet averaging $3071 per ton that is merely 40% of the average in Napa. The gap is smaller for other grape varieties with Zinfandel just 17% below Napa prices and Syrah 25% less. Given the cooler climate in much of Sonoma, especially in the more coastal areas, it is not surprising that Sonoma Pinot Noir grapes are more highly valued on average than Napa grapes of the same variety. In Sonoma during 2017 the average price per ton was $3913 while in Napa it was just $2797.
Over time, the big question that will develop is whether the wine made from the much higher priced grapes creates a discernable advantage in flavor or quality that justifies the cost. The pricing also continues to allow a distinct space for foreign import wines of similar varieties whose pricing is substantially below either Napa or Sonoma. These factors will continue to test the business of wine marketing into the future and may at some point force some changes to deal with economic realities.
Is Napa running out of land for vineyards? by Esther Mobley, The San Francisco Chronicle, February 22, 2018.