The North American wine industry, facing an increasingly competitive international market, continues to seek a balance between quality derived from traditional winemaking practices and getting wines to market quickly and cost-effectively.

Results from the 2006 Wine Business Monthly Barrel and Oak Survey show that wineries overall are decreasing their use of barrels and are increasing their use of alternatives, including micro-oxygenation. The survey indicates that small wineries, in particular, are significantly stepping up their use of barrel alternatives. In addition, mid-size wineries are continuing to increase their adoption of alternatives and, in many respects, are beginning to resemble large wineries, which have been aggressively using oak alternatives for some time.

Another important finding of the 2006 Survey is that wineries' views of alternatives are shifting: Alternatives are no longer viewed as a means for cost-cutting but also as another tool for producing quality wine. This is borne out by the fact that wineries are starting to use alternatives at higher price points, in some cases in wines that retail for above $25.

Barrel Usage Down at Small, Mid-Size Wineries

The percentage of wine aged in barrels continues to decline. In previous years this decline was driven by mid-size wineries; however, the 2006 Survey shows that both small and mid-size wineries are aging a smaller percentage of their production in oak barrels. The shift away from barrel aging is occurring more frequently with white wines, but red wines, especially at mid-size wineries, are also making a shift away from barrel aging as alternatives gain popularity.

The declining use of barrels to age wine at mid-size wineries has been remarkable. In 2003, mid-size wineries were behaving very much like small wineries, aging just over 75 percent of their wine in barrels (see Chart 1). Over the past three years the percentage of wine aged in oak barrels has dropped to just over 50 percent. Mid-size wineries are now behaving very much like large wineries.

"One very important consideration is simple logistics," said Ron Giesbrecht, winemaker at Henry of Pelham Estates Winery in St. Catharines, Ontario, Canada (70,000 cases). "Compare the floor space required for one stainless tank versus the same gallonage in barrels. It is also a matter of labor: where one person can work a single large tank, barrels all require individual topping, stacking and forklift movement around the winery."

But the fact that using barrels to age wine is declining in small wineries, and that price points at which barrel alternatives are being used continue to move up, suggest that there may also be other factors at work aside from cost-cutting. One factor is that certain varietals, especially Sauvignon Blanc and Chardonnay, may be stylistically moving away from aging in oak barrels. Second, wineries now view the use of alternatives-especially when combined with the use of micro-oxygenation-as another path to producing quality wine.

For Horacio Herrera, winemaker at Cataclua Lake Winery (7,000 cases) in St. Helena, California, it is a combination of things. "For our premium Zinfandel, we are still using oak. For our growing second brand, however, the use of micro-ox is terrific; we find the tannins integrate quicker so we have an earlier release while still maintaining a high-quality product."

Oak Choices Fluctuate

Small wineries' use of French oak barrels is climbing along with Eastern European oak while their use of American oak continues to fall (see Chart 2). Mid-size wineries remain fairly consistent with their choices, staying mostly with American oak barrels, but showing a slight drop in French and a small rise in Eastern European. Large wineries are also offsetting their American oak with slightly more expensive Eastern European. These changes in the types of oak used may be partially explained by wineries having gained more experience with American and Eastern European oak barrels as well as a better understanding of how to integrate each type into their barrel program.

"Each barrel has its place," said Kelly Symonds, winemaker at Hillside Estate Winery in Penticton, British Columbia (10,000 cases). "For our wines we like the French for the finesse, American for the gut for our Cabs and Merlots, and Hungarian for our Pinot Gris."

Respondents were asked to rate French, American and Eastern European oak according to (1) aroma and flavor, (2) aging, (3) pricing and (4) overall. Many winemakers remain consistent in their preference for barrels made from French oak, the preferred oak choice across all categories except price (see Chart 3).

Eastern European barrels have edged up and are almost identical to American oak in aroma/flavor and aging while American oak still holds an edge in pricing. American oak is far and away the number one choice when looking at price and will probably continue to remain so until the euro begins to achieve a level exchange rate. Again, price will probably continue to be the driver for mid-size to large wineries. The small winery, with fewer barrels purchased, is often less susceptible to market fluctuations and will continue buying expensive French oak. Not only will price affect what kind of barrel is used, it might also influence the extent to which barrels are used.

Alternatives Continue to Gain Popularity

The most telling statistics can be found in Chart 4, our question pertaining to alternatives in winemaking. Beginning in 2003, we see an increase in wineries of all sizes utilizing alternatives.

While smaller wineries remained fairly consistent for the last three years, 2006 showed an almost 10 percent jump in usage. Mid-size wineries continued a steady climb from 70 percent in 2003 to over 90 percent in 2006; and as expected, fully 100 percent of large wineries use additives. Again, when comparing this to Chart 1, there appears to be a direct correlation between the drop in barrel usage and the use of alternatives.

Typically, winemakers have viewed adjuncts and alternatives as merely a cost-cutting measure. Take, for example, the difference between purchasing a new 59 gallon, French oak barrel for around $800 or installing French oak staves in a neutral barrel for around $95. A new American oak barrel currently costs between $300 to $400 while American oak barrel staves are just $85.

If one were to consider stainless steel tanks with staves, however, the cost savings are even more dramatic. Today 100 French oak barrels would cost approximately $80,000. A 5,900-gallon stainless juice tank (which lasts nearly forever) will cost, depending on winery location and accessories, somewhere around $16,000. The French oak stave inserts for this tank would cost roughly $6,100. American oak staves would be about $5,000. Finally, if you already had 100 barrels that had gone neutral, the French oak stave replacements would cost you only $9,500.

In addition to cost savings, however, alternative technology and the variety of "flavors" have evolved so quickly that yesterday's tool has become a "spice rack." All types of wood and levels of toasting are available, from American at the front and middle of the palate, to French at the middle to finish. Some would argue that price is the driver; the truth might also be creativity.

"We have gone way beyond the issue of cost," said Jeff Runquist, winemaker at McManis Family Vineyards, Ripon, California (250,000 cases). "We initially looked at alternatives because of barrel pricing, labor, humidification issues and logistics. But the real advantage to alternatives is accuracy because you can zero in on a particular blend of flavors and then consistently repeat it. We have now effectively mimicked the barrel by using a rainbow of products," said Runquist.

Alternatives and adjuncts are rapidly becoming a "toolbox" for winemakers. In 2006, 59 percent said that alternatives usage will increase while 33 percent say it will remain the same (see Chart 5). These numbers mirror the attitudes in 2005.

Wood chips and blocks continue to be the most popular alternative to barrels, dropping only slightly from 88 percent usage in 2003 to 80 percent this year (see Chart 6). Staves, in either barrels or stainless tanks, remain the second most popular alternative. Oak powders (also know as "flour") are the third most popular alternative and are generally added during destemming and fermentation, aiding greatly in the extraction of color, particularly in Pinot Noir.

Earlier it was mentioned that among barrels, French oak was still the preferred choice. We have also seen the drop in barrel usage and the rise in alternatives. It is not surprising, therefore, to see that the barrel stave of choice should be French oak by a margin of two to one in small wineries, to a lesser degree in mid-sized wineries, and a much larger percentage of American oak staves are used in large wineries (see Chart 7). While barrel costs vary considerably, the French barrel stave costs slightly more than an American barrel stave. For the larger winery, however, the price for stainless "tank" staves can run almost 25 percent more for French than American oak. Again, costs become larger issues as the winery increases production.

Micro-Oxygenation

Another French innovation in winemaking has been the introduction of micro-oxygenation, the addition of oxygen before and following the fermentation process. In addition to softening tannins, aiding in color stability, aroma integration and the lowering of reductive flavors, "micro-ox" also can be used by wineries as alternatives to barrel aging.

Our survey shows wineries increasing their use of micro-ox, though in varying degrees and for different purposes. From a low of 8 percent of small wineries in 2002, currently 16 percent of wineries are now using micro-oxygenation (see Chart 8). As expected, when we look at mid-size wineries, the growth since 2002 has jumped from roughly 30 percent to near 50 percent, and currently 83 percent of all large wineries use this practice.

The reason wineries use micro-ox varies by winery size. Large wineries seem to use it primarily as a cost-cutting technique while small and mid-size wineries use it to improve quality. These reasons are consistent with earlier results, indicating that wineries are adopting alternatives as another avenue to quality. For Kelly Symonds, micro-ox is a great tool: "We use it even for stuck fermentation and blowing off H2S," she said.

Thirty-six percent of small wineries cite lower costs as an incentive to use micro-oxygenation, compared to 89 percent for larger wineries (see Chart 9). Increasing quality of wines, both going into barrels and not going to barrels, is the leading driver for small and mid-size wineries to use micro-ox. An average of 55 percent of small wineries and an average of 60 percent of mid-size wineries claim that quality is the main reason they use micro-ox. Speed to market is another consideration, with close to 25 percent of small and mid-size wineries, and 44 percent of large wineries taking advantage of the time-saving method.

Price Points

The price points at which winemakers are considering using barrel alternatives continue to increase. In 2002 no wineries were considering using alternatives for wines with a retail bottle price of over $25, and only 10 percent of wineries were considering alternatives in wines priced from $14 to $25 (see Chart 10). This year, 9 percent of wineries are considering using alternatives in wines priced above $25, and 22 percent of wines priced between $14 and $25. This is a clear indication that some wineries believe they can use alternatives to produce quality wines. As winemakers continue to experiment with alternatives and barrel usage continues to drop, it is expected that price points shall continue to inch higher.

Conclusion

This year's survey reflects the many changing attitudes about barrels and alternative usage. While pricing and the euro exchange have certainly impacted wineries of all sizes, the developing trends show a willingness to adapt and make necessary changes in order to stay competitive. While it may be true that some of their hands were probably forced, the number of wineries making and building upon those changes continues to grow.

Purists may argue for and maintain traditions, however, as technology improves and winemakers learn more about how to make better wine, the alternatives and micro-ox technology merely play into this strategy. And as more winemakers begin to willingly make adjustments, we can expect more creative uses and combinations of techniques in the future. wbm