Do You Know the Location of the First Successful Winery in the US?

This week we're moving off the normal marketing, economy, and business issues and asking a basic question anyone working in the US wine business should know:"Where was the first successful commercial winery in the United States?" Do you know? I confess I didn't know for sure. I remember thinking Jefferson was a really important figure in American wine and he worked at establishing a commercial presence in Virginia early on, so maybe Virginia was first? Surely with the native vines in existence, there must have been a successful wine businesses established before the time of Jefferson?

I had this debate over a bottle of wine with someone smarter than I last week. The discussion of "firsts," depending on where you live and who is telling the story can change dramatically, so the interwebs - which everyone knows is the possessor of all that is true - can sometime provide false information. The reality is the real beginning of the US Wine business has been butchered in history books and folk-lore. There is however a definitive rendering of the subject.

If you haven't ever read A History of Wine in America, I highly recommend spending the time to do so. I've even linked a free Google e-book to the above title so you have no excuse. The book sheds a bright spot light on the subject and will have you the envy at your next party where you win the attractive table centre piece for getting the right answer. That said, I know many of you are Cliff Notes kind of people and wont spend time in the book, so if you want the shortcut to the answer, read on.

 

The history of US winemaking started as a fight between native varietals

Native Grapes, Norton

which didn't produce good wine, and vinifera based grapes which could produce wine but couldn't take the cold, rain, humidity, mold, fungus, and pests that were native to the New World. Bracketing that, the realization must be that while the Colonies were set up to be exporters of wine and silk to the Old World, the inputs to create wine took people, and the people were distracted by trifling things like getting enough food early in the New World's existence. Then there were the occasional wars, least of which was the one that started around 1776. People headed off to fight and nobody tended the vines. Some encouraging starts to winemaking were noted at various times after slave labor from indigenous Indians and Africa was added. The US Civil War then became another one of those events that put a damper on the production of wine and grape growing in the Eastern US.

Some bullet points of early winegrape growing and winemaking:

• Grapes that can be used to make wine have been on the Continent of North America since before Leif Erikson discovered America in the year 1001. Seeing abundant vines he proposed to name the new country Vinland.
• Paris Island in South Carolina is favored as the likely first place wine was made on the Continent in the

  

  East Coast in 1640

  year 1568 by Spanish colonists but that's not a commercial success.
• Dr Laurence Bohune is the first winemaker whose name is known. He made wine from Native grapes in the year 1610 in the Jamestown settlement.
• In 1672 Charles Calvert, the proprietor of Maryland laid out 240 acres of vines using a 'hogshed' of vines from Europe. The vineyard died the next year and as many other vineyardists at the time, suffered from the success of the tobacco industry which pulled people and resources away from wine experimentation.
• Robert Beverly (b.1673 d.1722) was one of the largest of Virginia landowners and in 1705 wrote the first comprehensive history of Virginia, including the planting of his estate which he named Beverly Park.
• In no colony before the Revolution was there any enterprise that systematically grew and harvested grapes, and then crushed them for wine outside of a few individuals who had modest production.
• The first successful commercial winery in New York was founded in 1839 at Washingtonville on the Hudson. Its still in existence today under a successor name.

Lore notes some other likely places where commercial operations could have first started including Ohio, Georgia, North Carolina, Texas and California among others. Vinifera grapes were planted and never did well in the US East Coast which is why Jefferson was such a fan of Madeira wine. He couldn't get his vineyards to produce and wine from Europe often came spoiled. Wine from Maderia however was enhanced by the journey to the Colonies. That was a better bet for Jefferson than the local native wines made.

The first successful American wineries using vinifera grapes were established in drier conditions in El Paso in the New Mexico Territory. The region produced up to 200,000 gallons as early as 1846, but sadly that business died out soon thereafter for many reasons including the California Gold Rush which led to a massive migration west ..... that people component again closed out that business.

California's history books suggest the wine industry started with the Spanish Missions through Father Junípero Serra in 1769, but the first clear reference to the planting of grapes at a California mission comes from San Juan Capistrano in 1779; ten years after the arrival of the Franciscans in California. Besides, the secularization of the Spanish Missions in Texas and California in 1833 led to the nearly complete demise of mission wine production by 1844. So its hard to call that the start of commercial winemaking in the United States.

Mission Espada Chapel, Weches Texas

Of course Texans like to say they were first but then again, Texans like to think they are first in everything. Talking to a docent on a tour of the missions there a few years ago, the local perspective is Texas wine history was identical to California's with the establishment of Spanish Missions in the state in the 1650's, and since that predates California which likes to say they were first, they must be first - right? That's not entirely accurate because the Missions didn't operate commercial wineries. They made their wine for communion and made it from Mission grapes which never proved successful for commercial wineries. In fact the record shows the production from the Missions was never sufficient even for the Mission's sacramental needs.

General Vallejo who presided over the secularization of the Mission at Sonoma in 1835 has been given perhaps a little too much credit over the years in advancing the cause of US wine production in the North Coast of California, as he inherited his vines and replanted to some non-mission varietals, but produced only about 540 gallons of wine in total.

Image from a L.A. Wine Company 1876

Winemaking in Los Angeles started shortly after 1781 when a group of 11 families comprising 44 Mexicans settled by the river. Felipe de Neve, Governor of Spanish California, named the settlement "El Pueblo Sobre el Rio de Nuestra Señora la Reina de los Angeles del Río de Porciúncula." Right after the city name was thankfully shortened, grapes for wine were planted. It wasn't until 1833 that a Frenchman named Jean Louis Vignes imported European varieties to California by way of Boston and around the Horn and started making vinifera based wine. By 1846 the total non-native population of all of California was estimated to be no more than 8,000 while modest in size, that was the start of the California business nonetheless. In 1848 under the Treaty of Guadalupe Hidalgo, Mexico formally ceded California to the United States and wine in California took off after the Gold Rush population explosion. California just wasn't first in commercial wine production.

Wine Festival In Vevay, Indiana

The answer to the question is probably a little surprising to most Americans because the first successful commercial wine operation was in Vevay, Indiana located along the Ohio river at the southern end of the State. The first vintage of wine was created in the year 1806 or 1807 using native grapes and production increased thereafter with 800 gallons produced in 1808, 2,400 gallons in 1810, and 3,200 gallons in 1812. The effort was influenced by John James DuFour who in 1825 wrote his treatise "The American Vinedressers Guide." The industry is continuing healthy in Switzerland County, Indiana to this day.

Here is the definitive wording from A History of Wine in America for all those who want to suggest another solution to the question:
 

 

That's it then. Indiana of all places. Go figure? As a final footnote, you probably noticed A History of Wine in America has 2 volumes. The first volume is the beginning to Prohibition and the second volume is from Prohibition forward. I've only used Volume 1 in this blogpost, but if you're interested in reading that, here is the Google e-books link: Volume 2.

So .....how did you do on the poll? I can tell you for a fact neither I nor my smarter friend got the right answer in our debate. I thought for sure it had to be in New York, Virginia, or maybe Texas if the US meant the land encompassing the current US and included the then possession of Spain.

Log in an offer your thoughts. How did you answer the poll and why?

Is Demand for Wine Dropping?

I saw the above video last week referencing demand for wine and the title got my attention. Is the demand for wine really falling? When you watch the video above many people might think so, but I don't really put a lot of faith in LiveEx as a measure of demand for fine wine. This might be speaking to Bordeaux largely and LiveEx might have use in other areas but not for overall consumer demand.

Last week we did a version of a Mid-Year State of the Industry Blog, but in it noted that its hard to do a State of Anything in a blog so we left out consumer demand. With this video clip from Bloomberg hitting the interwebs, I thought it might be worthwhile to debunk the above perspective.

In the 2013 SVB Annual Wine Report we predicted sales growth between 4% and 8% in the fine wine segment. One of the factors that we considered in the forecast was the expectation of a rough first part of the year as sequestration kicked in, pulling back the growth rate in demand. But we also believed the back half of the year would be better as we bottomed in the housing market and the consumer started loosening their purse strings.

It seems as though we were pretty close in the blue-print, but at this stage it appears sequestration didn't have the dire impact many in Washington predicted and in fact has improved the Debt to GDP ratio to the point where our Debt Rating was upgraded again to AAA. We have seen the bottom of the housing market and continue to see improvement in consumer and retail spending though it remains to be seen how we did predicting the back half of this year. That said, according to information provided from Wines & Vines in cooperation with IRI, off premise sales through July are up 7% for 12 months.

Moving to one more perspective, a compilation of data provided by Demeter Group shows continuing growth in overall US consumption, consistent with flat to declining hectares of production. That gap between what is planted and what is consumed is being met with imports. The 2012 harvest size at this point in the year has slowed down the continual march upward of the growth in market share for imported wines. That said, as of this writing and as mentioned last week, the harvest in the Southern Hemisphere appears good, and with the US Economy still seemingly recovering ahead of the rest of the world, one has to believe the dollar should strengthen against a basket of currencies thus favoring import growth.

Of course this is such a big topic and only a small top-of-mind commentary on where we sit today, but I don't want to lose my Blogger Credential that requires brevity in prose. Hopefully this is enough for you to agree with me the Bloomberg video above isn't properly representing the state of consumer demand in the US. Consumer demand for wine continues to rise by all measures and if our early year forecast proves out, should increase YOY through the end of 2013.

 

What are your thoughts? Please log in and offer your views about growth in wine sales and consumer demand at this point in the year.

Mid-Year State of the Wine Business

There are several thingies (......that's a technical economic term) that are happening right now that all link together in some form to drive components and the present direction in the wine business. Since this is a blog though, and blogs are generally top of mind and brief, discussing the state of anything is going to either violate the Constitution of the Blogosphere or the tenants of mildly meaningful research. Instead, I'm going to leave out a pantload (......that's another technical economic term) ... of discussion topics such as demand for wine, and go with the top 4 thingies worth pondering at this point in the year.

• The first thingy is water. There isn't any as the video above portrays. That's not good. And it's not just  a Central Valley thingy. This water thingy is running throughout the Ag. and wine industry and will only get worse.
• Second is the heat wave from the past week. Early discussions suggest the heat will reduce expected crop size by 10% plus or minus due to sunburn from the recent record heatwave. A related issue vis-à-vis supply is the size of the world harvest in the Southern Hemisphere.
• Third is rising interest rates. That does all kinds of thingies to the wine business.
• Fourth: the world is shrinking and so is the market share for US produced wine.

Even Edyie Gorme Knows it

Let's start with the last point. In May I saw an article in the Modesto Bee that said Gallo is launching a wine with juice from four continents. Because of the interwebs and the increased speed of communication the world keeps getting smaller every day and that continues a decade long impact on wine making and wine sales. It wasn't that long ago getting bulk wine from foreign sources wasn't really possible in any measure. We tried that in the late 90's when we were really short winegrapes but it didn't really take off. In fact it probably set Chile's reputation in the USA back a decade. Today, the issue is more price instead of grape supply. When the big guys can save a penny, they pick up a phone and buy juice like it was crude oil, and have it shipped in to fill supply gaps and lower the overall cost of varietal blends. It hits the dock, and the next day its in the tanks for blending and bottling. Back in the day, that would have been wine that was produced from the Central Valley.

I'm Channeling Milton Friedman ........

Rising interest rates. I recently wrote in this Blog about the Feds actions signaling the end of quantitative easing and what that means for the wine business. Never in the history of the world has there been such a coordinated effort by the worlds Central Banks to pump in liquidity and try to stop world economies from falling into a global slide. That said, each of the Central Banks have also been operating in self-interest too. Its just their interests seemed to have all aligned over the past 5 years. So what happens when self-interest at the Central Bank level diverges? We end up with uncoordinated policy leading to surprises and lots of finger pointing from other countries who don't agree with a sovereign country's approach to manipulating their currency to their own benefit.

What is clear at present is the US Economy is ahead of world economies in recovering. As our domestic interest rates rise, foreign currencies depreciate unless they increase their own rate structures to attract capital inflows. If they don't they lose in the carry trade translation. The expectation in Europe should be to do nothing and let their currency sink versus the dollar so their exports to the US have a rate advantage. But there are many who expect to see European rates rise "in sympathy." I'm doubting that as of this writing. My guess today is we see the US dollar strengthen across a basket of currencies leading to cheaper imports overall, and that keeps our purchasing power up at the consumer level, and inflation contained. The problem, is a strengthening dollar equals cheaper wine imports, for both bottled and bulk wine.

My Akward First Dance

The heat wave is part of a larger discussion on grape supply. Its hard to get a firm grasp on where that is. We took an stab at that subject earlier in the year in this Blog. The upshot in that post .... after treating my readers to intimate details of my first dance in 7th grade, is that growers and producers have different interests and benefit from fanning the flames of over or under supply. Once we get into late July though, the picture starts to become a little more clear and pure speculation starts to give way to partial reality. We wrote about that very thing last year when we asked, "Is there really a grape shortage?"  When we wrote that, the early year consensus was we were short on grapes, but the pre-harvest read last year suggested something else was going to happen and we ended with a record crop. This year the discussion of a large crop has dominated the early discussion, and at the same time growers have been holding out for higher prices and getting them early in the season. That doesn't make sense from a current year perspective if we are long again this year. But there are two parts to the grape and bulk business, the current outlook and the long-term trend.

Turrentine Bulk Volumes

The growers are looking at the long term position which is trending to shortage or is already short in many price points and varietals. The short term trend in grapes is a little different. The recent heat wave it appears has had an impact on many growing areas and crop losses have been discussed in the 10%-15% range in many circles. Also worth considering is tanks are still brimming after the record 2012 harvest and producers aren't really forced to fill short term needs today. More likely they will want to make sure they have tank space and sell down some of their excess wines creating an odd collision of a longer current bulk market, and a shorter long term market. As an aside, recent press out of Argentina and Australia suggest good harvests, some of which will be certain to hit our shores. That also has to play into the discussion. What I take away is the current grape supply is surprisingly a little long, but the long term supply is going to be short.

Drought might be a crack in California's Recovery

Last thing to note is water. Water is something (....not a thingy in this case) that gets plenty of discussion in the San Joaquin as noted in the above video. The farmers there almost never get more than 50% of their allocation anymore and have salt issues to deal with from ocean intrusion into the Bay. The Federal Government knew about the drainage problem when they put the Federal Water Project together but they never did anything about it and still aren't - unless you count Governor Moonbeam's Peripheral Canal II attempt as a Federal plan. In any case, it does bring in the specter of Climate Change which we covered in a earlier blog titled Bovine Excrement & Global Warming (are you getting tired of the gratuitous hyping of my blog yet?) ..... anyway, the bottom line is whether you are a believer in climate change or not, you have to believe we are experiencing interesting weather and can't help but recognize that we live in an arid state that has increasing demands from population expansion and increasing legislation surrounding water use. That factor is increasing in importance each year and will have an impact on domestic supply.

The Ghosts from Italian Swiss Colony say...

So ........ all that said, where are we mid-year?

• It looks like harvest is trending to be normal to maybe slightly above normal.
• Long term supply is going to be short with normal harvests in the next few years.
• World supply seems enhanced by good harvests in the Southern Hemisphere.
• Rising interest rates will strengthen the US currencies leading to cheaper imports which does have an impact on our wine growing brothers and sisters in the Central Valley in particular, especially when water - or the lack of it cuts into supply, and the damage from the just passed heat wave is factored in to the equation.
• Grape supply and juice seems adequate if not a taste long for now based on last year's harvest and and expected average to above average return this year, but still should be short-ish going out for the next few years.
• There is every reason to believe imports will continue to get a larger share of the US consumer dollar.

Its a lot to cover for a blog and I know that I'm hanging on a thread by bloviating on a blog but that was pithy and doesn't begin to really cover all that is going on in this wonderful business in which we work. We will have a more complete view after doing our annual Wine Conditions Survey in October this year. We hope you will participate in that effort.

Please ping me if you want to participate in the annual Wine Conditions survey. We normally have between 500 - 700 wineries participate in exchange for the consolidated results.

So ... what are your views at mid-year? Please sign in (with a name please or a pseudo-name if you prefer), and share your own thoughts with the forum about what you are seeing at this point in the season, what you find of interest or any thingy you think I have wrong.