The mood was upbeat during the Unified Wine & Grape Symposium in Sacramento, California. Commenting on the state of the U.S. industry, the experts at the podium said growth in demand for wine is outstripping growth in grape supply.

Two years ago people were talking about the massive 2005 crop and they still are. There's plenty of wine and grapes out there. The quality, selection and price have never been better.

Yet the industry finds itself on the upside of the long-term supply cycle where demand for grapes starts catching up with and even exceeding supply.

In the many presentations at Unified, we were hearing pretty much the same thing: in some areas grapes could even be short this year or next. Who knew? Well, non-bearing acreage in California is at a 30-year low and sales are brisk. Even the head of Allied Grapegrowers was a teensy-weensy bit optimistic when he took to the stage.

In certain instances, wineries are committing to multi-year contracts, which we hadn't heard for awhile. Planting is occurring in states such as Oregon and Washington too.

But some growers in California sold fruit for less than their production costs again last year. Try telling them supplies are tight. Some are still removing vines and switching to pomegranates or almonds. We were told that in the last several years, upwards of 125,000 acres of grapes were removed in the Central Valley.

No wonder the supply cycles have been tracked in what's been called, the "manic-depressive wine wheel of fortune."

There was some talk at Unified about how wine sales go in recessions, but the last couple of economic downturns coincided with oversupplies of grapes, not a shortage, and we haven't seen too much of a sales slowdown, yet.

If the wine business supply cycle is repeating itself and overall demand will exceed supply, will grape prices increase? One would expect them to. At Unified people were asking when the next round of planting will start. That was the buzz.

On the flipside, the experts reminded us that vineyard development costs have gone through the roof since the last boom and that global sourcing is now part of the mix.

To plant or not to plant

One exchange in the Q&A period of a break-out session illustrated the dilemma:

Grower: "Watch what happened to Detroit. As an industry, if we don't have the grapes and don't have that production out there, we'll have a reduced share of our U.S. market."

Grower: "I agree, and we need to keep up the quality. Otherwise, we'll get our butts kicked just like Detroit did by the Japanese."

Banker: "Many people remember the 1980s where the U.S. made good wine but with a strong U.S. dollar there was an influx of good wine from Europe. The market has changed and evolved and may be short on grapes in coming years. Can you imagine what it would be like if the dollar was strong?"

Grower: "If we plant and if the dollar gets strong, what the hell are we going to do with the grapes? The imports are going to come in."

Banker: "Last year there was a nine million case equivalent that was imported bulk wine put in domestic labels and that all used to be sourced from the Central Valley."

Grower: "Don't forget that one of the reasons this supply correction has happened so quickly is it's gone dry for three years in Australia. What if it starts to rain in Australia for three years in a row?"

Accountant: "What we're seeing here is our own industry shooting ourselves in the foot. We're seeing more and more wine being imported by large wineries, public companies that have to show a bottom line, that need to show sales growth, so they're bringing in the wine. It's a travesty. It's a free market but folks out there with small wineries and vineyards--they're screwing us--my personal opinion."

Grower: "There is less cheap wine around the world at this point and that will help us. But remember, 10 wineries control 85 percent of the marketplace. There are 500,000 plus acres of vineyards in this state but the top 10 growers don't control 25 percent of the grapes. The consolidation isn't on the grape side. We all want to plant grapes. Don't get carried away with this stuff. It's coming our way but it's not easy for the grower."

The trade show floor at Unified, meanwhile, was bustling with activity. Attendance soared to 11,500, compared with a record 10,400 the year before. The crowd remained cheerful despite annoying new restrictions on serving wine at exhibitor booths. One could just tell by standing on the trade show floor that the industry is growing. There was more new technology and new products on display there than I can remember. Senior technical editor Curtis Phillips was cruising across the trade show floor too, of course, and in this issue he gives us his picks for the coolest new products he saw. Check it out.

Water use is fast becoming a big topic and one session at Unified was dedicated to sustainable winery water management. A summary of what was said appears this month, with a preview of a new guidebook developed by Kennedy/Jenks in association with Wine Institute, the California Association of Winegrape Growers and the California Sustainable Winegrowing Alliance. The Best Practices Guide for Sustainable Management of Winery Water, Wastewater and Associated Energy Resources will be released later this year.

Cyril Penn - Editor