Issue link: http://winesandvines.uberflip.com/i/591609
November 2015 WINES&VINES 35 2015 SUPPLIER SURVEY seeing more well-funded clients." Consequently, Nelson's cli- ents looking to develop branding and packaging materials have the means to produce premium wines that will sell for premium prices. "They're not doing huge volume, but they are in that top tier," she said. "I'm seeing a lot of metal labels, a lot of nice fin- ishes, wax dips. Some of those really high-end finishes seem to be a lot more prevalent than they were a few years ago." ABILITY TO PAY Nelson wasn't alone in her as- sessments. More than 40% of survey respondents reported their clients were better able to get cash and financing this year, and nearly 54% reported no change in the already ample availability of credit. (See "Bank- ers Optimistic and Ready to Loan" in the September 2015 issue of Wines & Vines.) "The number of clients in ar- rears is way down," reported Phil Burton of Barrel Builders. "Our accounts receivable is about $1.5 million, and our overdue can't be more than $5,000: It's a drop in the bucket." Burton says that his friends who deal in winery supplies and services report the same trend, and the only companies having trouble attaining credit are serial offenders of non-payment. "If you hear about one com- pany that didn't pay for a lot of corks, you think: Maybe they got a bad lot, and they're not going to pay for them," he explained. "But when there are six or eight reports like that? They've got a cash-flow problem." Burton echoed Giovanni and Nelson's comments about growth in the $20 and up seg- ment, adding that real estate and brand purchases are indicative of strength in the value arena as well. "With all of Gallo's recent acquisitions, I'm guessing they're doing OK. They're in ac- quisition mode, which speaks well for their sales," he said. Speaking of sales, after three large harvests in California, Bur- ton said wineries are buying fewer barrels in 2015 due to yields that are significantly lower than what was recorded during the previous three years. (See "West Coast Harvest Numbers a Mystery" on page 15.) "We've had a couple people ask if they can cut their orders this year. They don't have the wine for the barrels. I talked to one client yesterday in Paso Ro- bles who thought they were going to get 30,000 cases this year—they would be lucky to get 7,000 or 8,000," Burton said. VENDOR PRICING As reported in the October 2015 issue of Wines & Vines (see "Oak Sales Stay Strong"), prices for American oak barrels are likely to rise in the coming year due to the spirits industry's demand for hardwood. Burton reported "surging demand for spirits in Asia and India, particularly bourbon. "The bourbon makers are snapping up all the available wood, so demand is much higher," Burton said. Meanwhile, he added, a fa- vorable exchange rate for the dollar will help mitigate the rising cost of oak barrels from Europe. "They will still be cheaper than they were two years ago." Since much of the winery and vineyard products sold by West- ern Square Industries are made of steel, prices are somewhat tied to the commodities market, and the supplier lowered prices this year as a result. Mikkelsen said his company will probably have to raise prices after the first of the year, but "it doesn't happen overnight." He pointed out that large winery and vineyard customers have be- come more adept at long-term planning, so they put in orders months before they need them— and before prices increase. "If the steel prices go up the way we see them, (our prices) would go up again, but it would take three to four months before we see the effect of that deci- sion," he told Wines & Vines. Sara Nelson also said that price changes are in store for cor- porate clients, adding: "Increas- ing taxes and insurance costs will force us to increase prices." Giovanni of SGP Packaging said he hopes the lower cost of fuel will help compensate for in- creases in other areas of the pack- aging life cycle. "The wild card will be exchange rates and whether they remain somehow stable after the recent shifts," he said. While many analysts have CLIENTS' ACCESS TO FINANCING Which statement best describes your clients' ability to find cash or financing to pay for your products and services? Getting Worse 6% INDUSTRY HEALTH IN 2016 Based on your orders and knowledge of the wine industry, what do you expect the industry to do in the next 12 months? PRICING IN THE NEXT YEAR Do you expect to change the prices of your products and/or services during the next 12 months? Expand Slowly 68% Increase Prices by More Than 3% 22% Increase Prices by Less Than 3% 34% Expand Rapidly 5% Keep Prices the Same 43% Retreat Slowly 11% Retreat Rapidly 0% Decrease Prices by More Than 3% 1% Decrease Prices by Less Than 3% 0% Remained Unchanged 17% Staying the Same 41% Getting Better 54% The short harvest prompted some winemakers to cut back 2015 barrel orders.