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Monday, December 11, 2006

California Wineries Booming, But is it American Wine?

Wine is a major economic driver for California. Last year the state produced 225 million cases of wine, placing it fourth in the world behind France, Italy and Spain among the largest wine producers. While the state's wine business is humming along, some grape growers are questioning the practice of blending foreign grapes with grapes harvested in the state.

A report by MKF Research LLC that was commissioned by the Wine Institute and California Association of Winegrape Growers, pegs the impact of the California wine industry on the state economy at $52 billion and $103 billion on the U.S. economy. The report says the industry generates 309,000 direct and indirect jobs. The state has 2,275 wineries and 4,600 grape growers. It is estimated that 19.7 million people toured California wineries in 2005.

All of this makes for a very healthy industry on the surface, but one of the groups that sponsored the MFK study is complaining about a practice it says has become increasingly popular with some California wineries. The California Association Winegrape Growers (CAWG) says wine imports to the United States are growing and some of that juice is going places that most consumers don't know about: products labeled as "American Wine."

According to the group, even though U.S. wine sales continue to grow at nearly 5 percent a year, California grape growers are destroying vineyards because it costs some more to produce grapes than what they can sell them for on the market. More than 100,000 acres in California's Central Valley have been ripped out in the past five years. Other vineyards have gone to crushing their own grapes and trying to market the juice to vineyards and home winemakers.

The CAWG says the culprit are wineries that may be buying cheap bulk wine on the international market -- much of it from Australia where a wine glut exists -- and then blending it with California wine. Under law, vintners can label the product as coming from the "American" appellation as long as the foreign grapes are 25 percent or less of the mixture. Complicating the debate is the fact that California does import some grapes from other states and it ships bulk juice to several states where wineries do not have the growing conditions or available vines to keep up with demand.

The CAWG says that while the law technically allows the practice of blending the foreign grapes and calling the product American, it questions if the practice is fair to consumers. It notes that other countries around the world do not allow the blending of domestic and foreign grapes.

Grape growers are frustrated by bulk wine imports for blending because it depresses farm prices and reduces the number of potential markets they have to sell their grapes. The CAWG is planning to launch a wine trade public relations blitz in the coming year to promote the quality of California grapes.

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