Wine Opportunities Ripe in Central Coast

While water and labor remain top concerns, experts bullish on area's growth potential

by Andrew Adams
wine grape vineyard paso robles water
Nicholas Miller of Thornhill Cos. (from left) leads a discussion about growth in the Central Coast wine industry featuring Matt Heil, Marty Spate and Matthew Steel.
Paso Robles, Calif.—Several top executives and successful brand builders say they expect the wine industry along California’s Central Coast to continue expanding as demand for both the region’s grapes and wine remains strong.

The area’s major concerns—shared with other regions throughout the state—are the availability of water and labor, as both are expected to be more scarce and less affordable in coming years. 

The Central Coast, which runs from the Santa Cruz Mountains and Livermore Valley AVAs in the north to the San Lucas and Hames Valley AVAs in the south, may also need more tank capacity in coming years—especially if the region encounters another truncated harvest.

Matt Heil, director of fruit supply for Copper Cane Wine and Provisions, who is credited with helping to build the successful Meiomi Pinot Noir brand, said he sees a need for one or two new custom-crush wineries with significant capacities.

Heil’s comments came during the recent Central Coast Insights conference hosted March 14 by the Wine Symposium Group, which is now a subsidiary of Wines Business Monthly. (Both Wine Business Monthly and Wines & Vines magazines are part of Wine Communications Group.)

More investment, fewer tanks for custom crush
Many of the largest wineries in the area, including Courtside Cellars in San Miguel, are now owned by the largest wine companies in the state. E. & J. Gallo Winery bought Courtside Cellars in 2012, and Trinchero Family Estates purchased the Five Rivers Winery in Paso Robles from Fetzer Vineyards in 2016.

Marty Spate, director of “masstige” winemaking for Treasury Wine Estates, said the company has the crush capacity it needs but added it would be difficult for someone to try and build a brand at a grand scale and enjoy sustainable growth without making a big investment in a winery.

Spate added that Treasury is making a large investment in replanting its vineyard blocks but said the prospects for new vineyard development are limited by the availability of water. He knows of several sites that are currently fallow pasture land and could make for good vineyards, but what’s never clear is whether they have the water to support a vineyard.

Spate and Heil were part of a panel discussion that also included Matt Steel, who is the senior winemaker in the Central Coast for Gallo. Steel said the company is also redeveloping vineyards with tighter row spacing, new clones and rootstocks and with precision agriculture technology. Such improvements, he said, could increase the yields and quality of grapes from existing vineyard land.

When asked about constraints on their potential growth, all of those on the panel agreed it had been a top priority of their respective companies to control sourcing. Gallo purchased Talbott Vineyards in Monterey County in 2015, and a big motivator in that deal was the company’s 525-acre Sleepy Hollow Vineyard, which bolstered Gallo’s supply of premium Chardonnay.

Spate said a big incentive for Treasury to make the deal for Diageo’s wine business was the opportunity to acquire large vineyards planted to Cabernet Sauvignon and Chardonnay. TWE now owns more than 6,000 acres of vineyards in the Central Coast.

Spate added that the company also has invested heavily in machines so that supply won’t be crimped by a lack of labor. “Almost all of our premium grapes are grown under mechanization,” he said. “Definitely all machine harvested now.”

While labor has always been a challenge, the problem is becoming acute. “We’re finding it tougher and tougher,” Gallo’s Steel said. “We’re competing with better paying jobs that offer a longer season.”

He said labor is now a challenge for a large winery like Courtside Cellars, which had been designed when labor was relatively affordable and available. “We’re working on ways to fix that and hopefully come with a win-win and enhance our wine quality at the same time,” he said.

Paso is open for business
The conference took place at the 171-room Allegretto Vineyard Resort that opened in 2015. Part of the continued investment by wine companies in Paso Robles in particular is because of the city’s openness to the wine industry and its growing reputation as a destination for wine tourists, particularly those from the Los Angeles, Calif., metro area.

During a session about community relations, Morgan McLaughlin, executive director of the Santa Barbara County Vintners, discussed the lengths she and members of the vintners group had to take to halt the passage of an updated winery ordinance that had the potential to affect not just new wineries but those already open in the county.

Those lobbying efforts included a petition on Change.org, an email campaign and comments against the new ordinance during public meetings. In what she described as a last-minute decision, the revised ordinance failed on Nov. 22. “What it gave us was some breathing room,” she said. “We really see this as an opportunity to be proactive with the community.”

When executives with other wine companies approached Paso Robles with an interest in developing something, they reported being welcomed with open arms.

After Trinchero built its new winemaking facility near Lodi, Calif., vice president of winemaking Glen Andrade said the company was looking to simply buy a new winery and not build another from scratch. Part of Trinchero’s due diligence process included lengthy meetings with city officials about water as well as meetings with people who lived in the area of the winery. “There seemed to be a good receptance to larger wineries moving in and trying to develop something,” he said.

Anthony Riboli, winemaker and fourth-generation member of the family that owns Los Angeles-based San Antonio Winery, which produces more than 500,000 cases per year, said his family specifically chose to build in the city of Paso Robles because it could provide the dependable water and infrastructure for a new winery. He added they also had a few meetings with people who lived near the new winery, which opened in time for the 2016 harvest, and generally no one was concerned about the winery. “Overall the city was very, very helpful and made it a great fit for us,” he said.

He said as his family company plans to grow and compete in the premium, nationally distributed sector, the Central Coast offers quality grapes at prices to support such growth when compared to Sonoma and Napa counties. The Paso region also offers a chance for the company to build brands around the region. “People want to get excited about Rutherford dust and Russian River Valley Pinot Noir, and that will happen here in Paso,” he said. “Consumers want that and a story—a real story—and that’s hard to find.”

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