The same market forces that have combined to help end the over-supply of grapes and bulk wine in California over the past two years have also played a big role in the tightening grape juice concentrate market.

Over 100,000 vineyard acres were removed or abandoned in California over the last few years as per-ton payments fell below cost of production. Much of that acreage supported grapes that were crushed for bulk wine or concentrate. Most of these fields were replanted with other more profitable crops, such as almonds, stone fruit or the very profitable, long-term crop known as residential real estate.

As acreage disappeared and the U.S. dollar fell, wineries discovered that they could make good quality, super-value varietal wines from grapes traditionally used in concentrate. Export wine sales have surged to industry highs, and the increased demand has effectively drained any concentrate reserves.

Demand for raisins continues to increase, as well, further siphoning off grapes used to make concentrate. Pricing for this year's raisin crop will likely be set at $1,200 per ton for the second year in a row. Previous pricing for raisins went as low as $450 per ton, well below production sustainability.

Finally, California lost three concentrate suppliers due to escalating production costs that essentially wiped out any profit margins. This below cost of production pricing was due to a previous glut in the world concentrate market and has effectively eliminated 16 to 20 million gallons of domestic annual production.

Concentrate Uses

Grape juice concentrate has been traditionally used in the fruit juice beverage industry. In the last 15 years the demand for grape juice concentrate in that industry soared due to the market demand for 100 percent natural fruit juice beverages. Cranberry juice labels that read "100 percent fruit juice" aren't necessarily 100 percent cranberry juice.

Grape juice concentrate is the preferred choice for blending 100 percent natural beverages because it has a neutral color and odor. Grape juice concentrate also has a tendency to remain color stable, unlike apple or pear juice concentrates that will brown. Apple and pear concentrates also impart heavy flavor notes to the finished product.

Red grape juice concentrate is basically sold in two categories: as Concord juice, known for its distinctive flavor and deep purple color, and as Rubired grape juice. The Rubired grape juice concentrate is used primarily as a natural colorant. Its neutral flavor and intense red color are preferred over other red fruit juices because it holds color and doesn't brown or fade when blended with other juices.

More recently, grape juice concentrate has found its way into the wine industry, primarily as a great blender and sweetener for varietal and super-value wines. Concentrate is also used to produce a small category of high-intensity red and purple colorants known as "mega colors," or red and purple 8000 color. These products are used to enhance color and add body to wines.

Off-Shore Concentrate production

During the recent cycle of grape juice concentrate over-supply, the major South American countries that supply concentrate to the U.S, mainly Chile and Argentina, also faced major insolvency issues because of lower demand and costs well below production costs.

Suppliers that managed to stay in business focused more on wine sales and less on concentrate production. A large volume of grapes previously destined for concentrate markets is now being used in wine production.

The bottom line for the long-term conc/MonthlyArticle.cfm?dataid=38030" target=_blank>"Australia: Cautiously Optimistic"

February 2005
"The 2004 California Market: Signs of Recovery or Historic Changes?"