I notice numerous advertisements appearing in wine industry newsletters advertising the sale of wine in bulk, and I often wonder why there is this classification of wine for sale and who buys that wine. I see advertisements for many bulk wines from California, as well as some of these sales for wines from Oregon, Washington, and the East Coast wineries and vineyards. And with some frequency it is not unusual to see advertisements for wine sales from many international wine regions.
Bulk wine is another facet of the wine industry that is not understood by the casual wine consumer, but is a major contributor to the growth of the wine industry. What is bulk wine and grapes? This wine comes from a production surplus in a winery that has not yet been bottled and labeled. There is also a market segment where wineries and vineyards produce wine only for the bulk market. There are also brands that do not have a warehouse and depend on the bulk market to create their brand. Bulk grapes, like wine, come from a winery’s vineyard or from an independent vineyard. These grapes are sold by the ton at the time of harvest; often a year in advance.
Bulk wine is of a known quality that is tasted by a buyer prior to purchase. Brokers who sell homeless wines never take possession of the wine, but they still have licensing requirements from the Tax and Commerce Office of the Department of the Treasury. The point is that bulk wine is a high-quality wine that has a pedigree: it has a known producer, a known quality, historical characteristics and can be easily tasted / tasted by the buyer.
With 2016 US wine sales growth of 2.8% year-on-year, it would be easy to assume that all wine produced would have a demand-driven market. Vineyard acreage in California is expected to be flat in 2017 compared to 2016, with 15,000 new acres planted; mainly in the coastal area of San Lois Obispo. (The number of acres of vineyards planted is misleading, as the acreage is removed when the vines are removed for replanting.) Even with the changes in the wine market around the world, the market for bulk wine and grapes continues to grow and the reasons for growth are complex and numerous. So the question that requires clarification / amplification is: What happens to the excess wine and grapes?
Basically anyone can buy excess wine. There are many wine labels on the market that come from surplus wines or even bulk grapes. For example, someone could buy the wine, send it to a winery, do their blending magic on that wine, bottle it, and send it to a distributor.
Now you want to know how this bulk wine impacts you as a consumer. Let’s say you go to a restaurant or a friend’s house and experience a wine that you love, you go home and try to find the winery that produced the wine so you can buy it online, or maybe you want to schedule a visit. To his surprise, he cannot find the winery. The wine you are excited about may come from an accomplished winemaker who bought bulk wines from which he blended / bottled / labeled that new favorite wine you just discovered. The bulk wine was probably sold by a “bulk wine” broker, of which there are many. Many all over the world, only a few in each country.
The world’s largest surplus wine and grape broker is The Ciatti Company in Northern California. They have been selling these wines and grapes around the world for 46 years. “On an average day, we initiate or receive approximately 4,000 conversations about the sale or purchase of wine in bulk,” says Steve Dorfman-Partner at Ciatti. “For the most part, the bulk market is a business-to-business transaction ranging from extremely large warehouses with global brands to start-ups with a new brand vision.” Home winemakers are not the target market for bulk middlemen. For example, some of your wine transactions are for more than 10,000 gallons.
This type of wine business is different from the custom grinding sector of the wine business. These wines come from a winery that, in general, has produced a fermented product that may or may not be a varietal wine. Custom crushing is primarily a process of acquiring grapes, crushing, fermenting and bottling wine to a specific specification by a specific customer.
The wine and grape surplus business is the weak point of the wine business. This business is big and doesn’t just apply to a winery with excess juice. There are wineries and vineyards that exist only for the exclusive production of bulk wine. Quite simply, there are vineyards (as well as wineries) that only cater to a market that hopes to buy wine in bulk that they label as their own brand. In the case of bulk grapes, some wineries and wine brands forecast their grape needs for their expected production for the next harvest. In the winter months, the bulk grape corridors are busy selling next year’s crop and / or past vineyard production. Some bulk grape buyers may even specify grapes per clone; then bulk brokers try to match sellers and buyers.
What is the bulk wine procurement process? Remember, this type of wine is basically a finished product.
· Phone call or email starts the process. The buyer has a defined style of wine required for a specific label or blending, or a varietal style. Some wines can be purchased in bulk to test a new concept of wine product that a winery or private label is contemplating.
Then define the requirements regarding ABV, acidity, tannins, color, and aromas. Based on these details, a bulk broker can select specific bulk wines for sample wines to be shipped overnight for buyer analysis / tasting. Perhaps there are requirements related to a very specific source of the fruit / AVA.
Customer / buyer tastings of the initial sample may result in other options being obtained and new samples provided.
· Eventually it all comes down to pricing. Bulk wine and grapes remain a function of market conditions. “Market conditions are a function of availability, quality, the prestige of the initial producer, trends in customer preferences and demand,” says Dorfman. “Nothing in the bulk wine business is a constant.”
After the seller and the customer negotiate the price, a Memorandum of Understanding is signed outlining the terms, the condition of the wine or fruit, the shipping requirements, and the terms.
Now the deal is done.
Because of their efforts, most bulk wine companies work to a set commission schedule; generally established by country of origin. The commission is generally between 2 and 4% depending on the country of origin.
As noted above, it would be wrong to assume that surpluses (grapes or wine) are the result of overproduction. It is entirely plausible that wineries or vineyards plan excesses that can be sold to finance a small / limited private production or to test new wine ideas. Wineries that own their own vineyards often plan for excess production for reasons of economies of scale for certain grapes that they need for established in-house labels.
And there are wineries and vineyards (that do not produce their own label wine) that exist only to supply the business market, private label producers and wineries that need additional wines for their brands. Some of the larger wineries buy wine in bulk because they were not producing enough to expand production or were having problems with current supplies. Buying wine in bulk appears to offer new and established winemakers a low-risk option. One example is Cameron Hughes Wines, which started with a small initial bulk purchase, then accelerated in the following years.
The Ray Isle writer for Food & Wine explains the merchant as: first started in Burgundy, buying grapes or finished wine from the countless small estates in the region, then blending, bottling and selling the wine under the merchant’s name. Some of the best and best known Burgundian producers are primarily negotiators, including Jadot, Drouhin, and Bouchard Père & Fils.
As a general rule, there is generally no good or bad wine, only wines that are looking to fit in. “At Ciatti we know that there will always be an application for all bulk varieties or bulk blends. Every winemaker experiences problems in the production of their wines that can be solved with an available bulk wine,” said Dorfman. Given that 55% of its business is domestic and 45% international, there seems to be a home for quality bulk wine somewhere in the world.
At times, there may be times when bulk wine is not sold somewhere in the world. For those rare occasions, bulk wine can find a place like food grade vinegar or brandy distilled.
Although bulk wine is a business-to-business business, bulk wine brokers will spend time developing new potential buyers who have a solid plan. The beginning of such a relationship always begins with free advice: don’t buy the wine first and then start thinking of a solid business plan. “I’ve seen customers buy wine first, then work on the marketing plan, TTB requirements, labeling, and finally start looking for customers,” says Dorfman. The first order of business is knowing where and how you will sell your proposed brand. Second, contact TTB and start the licensing process and learn about the laws that govern your business. While at TTB, you will find the labeling requirements to be a very difficult process for the uninitiated. Designing a label can be a quasi-scientific and painstaking process. Dorfman said he was aware of a group hoping to launch their own label within months of purchasing their wine. Four years later, they finally released their new wine. The problem was that they bought the wine first without understanding state and federal laws, labeling approvals, and without having reliable commitments from customers.
Wine is not as simple as crushing grapes, turning juice into wine, putting wine in a bottle with a cork, and delivering that wine to a retailer. The iterations and nuances in the wine industry are complex, intricate, and highly controlled. Fortunately for the consumer, we only see the industry when we drive through the vineyards of the wine country.
