California Grape Prices: Weighted Averages Can Miss the Point

The California Grape Crush Report is an indispensable and widely used source of information on California grape prices. The data has limitations: it is backward looking and can be skewed by anomalies such as the impact of fires in 2020, so it is an imperfect indicator of the current state of the market. Nonetheless, it is the only source of readily available pricing statistics, and the data represent a useful starting point for price setting and market analysis.  

However, the weighted average prices (WAP) that the report provides obscure important subtleties in the market. The WAP is calculated by multiplying the price associated with each sale by the number of tons sold, then summing the results and dividing by total tons sold. A 1000-ton purchase receives 100 times the weight of a ten-ton purchase in the calculation. Thus, WAP metrics are biased toward the prices paid for the largest quantities, which tend to involve lower quality grapes than those sold in smaller lots. Moreover, they provide no insight into the range of prices that exist in the market. 

WAPs are most relevant in the interior districts where variation in quality is limited. They are less relevant in districts with wide variations in terroir and farming practices as well as to buyers and sellers focused on the boutique end of the market. 

Fortunately, the report also includes the underlying transaction-level data used to calculate the WAPs. So, with some manipulation of the data it is possible to derive metrics that provide a more relevant and nuanced perspective on grape pricing and market trends. I’ll illustrate this using District 8 Cabernet Sauvignon as an example. 

The WAP for Cabernet Sauvignon in District 8 (San Luis Obispo, Santa Barbara, and Ventura counties) was $1,630 per ton in 2021. But grape quality varies widely throughout this large and heterogenous region, so prices vary widely as well. They ranged from a low of $500 to a high of $10,567.

We can utilize the sale-level data to create metrics that capture the subtleties in pricing. There are several techniques available to summarize price distributions – I prefer weighted percentiles because they are most intuitive. 

The weighted percentile values in the chart below show the share of total Cabernet Sauvignon tonnage that sold for above and below a specific price threshold. For example, the 50th percentile value indicates that half of all Cabernet Sauvignon sold for $1550 a ton or less (and half sold for $1550 or above), which is close to the overall WAP.  

The 25th and 75th percentiles indicate that most fruit traded within a relatively narrow range of between $1,325 and $1,725. But the highest quality grapes fetch much higher prices: the top 5% sold for $3,137 or more.

These metrics provide a more nuanced view of Cabernet Sauvignon pricing in District 8, but they still obscure the boutique segment of the market. More than one-third of all transactions included fewer than 20 tons. These typically involve higher quality grapes destined for small production bottlings by boutique wineries. But these small purchases accounted for just 1% of all tonnage sold in 2021, so the overall price benchmarks have limited relevance for this segment of the market. 

We can address this issue by segmenting the data by sale size. As demonstrated in the chart below, boutique Cabernet Sauvignon prices are considerably higher and vary more. The WAP for this segment was $3,294 per ton, more than double the overall figure. The middle 50% of fruit sold for between $1,950 and $4,050 – a much wider range – and the top 10% commanded $5,800 or more. 

More refined grape price metrics such as these can help buyers and sellers to position their pricing within the context of the full distribution of prices. Market participants can also use them to create more relevant comparisons across districts and varietals as well as to achieve a clearer perspective on price trends over time. 

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Chris Bitter 

Bitter@VinEconomics.com  

206-981-6885