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October 2017, Volume 23, Number 4

Wine, Food

The availability of labor became a pressing concern in Napa and Sonoma counties in Fall 2017, where many vineyards rely on management companies to harvest their grapes. Most management companies are registered as farm labor contractors, and some complained of difficulty recruiting workers despite average hourly earnings of $16.

Sonoma County Winegrowers say that the 58,000 acres of vineyards in the county require 5,200 full-time and 2,600 seasonal harvest workers; a third of Sonoma vineyards offer housing to some of their workers. A 2015 survey found that almost 90 percent of Sonoma farm workers are local residents, and that housing costs were 30 to 50 percent of income for farm worker families. In September 2017, Sonoma supervisors approved several 37-bed bunkhouses for H-2A workers near Geyserville. Sonoma grapes sold for an average $2,600 a ton in 2016.

The response to fewer workers includes more machines to harvest grapes, more H-2A guest workers, and more out-of-area FLCs who bring crews to high-wage and high-cost-of-living Napa and Sonoma. E & J Gallo Winery, Jackson Family Wines, and Silverado Premium Properties, the three largest owners of vineyard acreage in Sonoma county, use machines wherever possible.

Seghesio Family Vineyards in Sonoma has been using H-2A workers since 2008; a foreman returned to his native Michoacan to recruit 40 guest workers. Seghesio says that costs for 34 H-2A workers were $41,600 or about $1,225 per worker in 2017, including return travel costs of $10,000, machine-readable visas costing $7,600, and pre-employment physicals costing $6,100. The H-2A workers from Michoacan say that the cost of crossing the border illegally into the US is $10,000.

Wildfires swept through Napa and Sonoma wine country in mid-October 2017, forcing dozens of wineries to close temporarily. Napa (four percent) and Sonoma (five percent) counties combined account for less than 10 percent of California wine production.

Prices for bulk wine vary by country, which encourages blending cheaper imported wine with more expensive local wine. In 2017, Australian Chardonnay averaged $0.50 a liter, compared with $1 a liter for Chilean Chardonnay and $1.50 for California Chardonnay.

Southern Europe had a very warm summer, reducing yields in France, Italy and Spain by up to 20 percent, with larger drops in Sicily and Bordeaux. The Languedoc region of southern France, which produces table wine, has vineyard owners who oppose French businesses that buy lower-cost Spanish wine in bulk to blend with French wine.

European wine production peaked in the 1980s at 210 million hectoliters (one hectoliter is 26.4 gallons), and was about 170 million hectoliters in 2016.

Australian winemaker Treasury Wine Estates is the world's largest publicly traded winemaker. In August 2017, TWE's stock price rose to a record A$14, as TWE announced a focus on selling luxury wines in the US and China. TWE's US brands include Beringer, Chateau St Jean and Sterling.

Food. Traditional supermarkets had US sales of $440 billion in 2016; some 25,380 stores offered a full range of groceries and had sales of over $2 million each in 2016. Most analysts believe there are too many traditional grocery stores for ever-fewer consumers.

In 1990, there was 1.7 square feet of space in traditional grocery stores per US resident; in 2017 there were 2.7 square feet. Club stores, mass merchants such as Walmart, and convenience and dollar stores offer another 1.5 square feet of space for each US resident devoted to selling food.

Amazon paid $14 billion to buy the 470 stores of Whole Foods in summer 2017, and immediately lowered prices on staples such as milk, eggs and bananas. The stocks of grocery retailers fell 20 percent in summer 2017 in anticipation of Amazon putting downward pressure on already-low margins.

Kroger, the largest traditional US supermarket chain by stores and sales, has slowed the opening of new stores and increased offerings of prepared foods in its supermarkets, which are especially appealing to millennials born in the 1980s and 1990s and retirees. Kroger's stock fell over 35 percent in summer 2017.

Traditional grocery stores are also expected to be squeezed by deep-discounters such as Aldi and Lidl and expanding online offerings of prepared meals. Aldi, with 10,000 stores in 18 countries, including 1,700 in the US, and global revenues of almost $85 billion a year, plans 2,500 US stores by 2022, which would make Aldi third in grocery stores, after Walmart and Kroger.

Aldi offers a limited selection of frequently bought items, 1,700 or less, many of which are private label. Costco stores offer 3,800 items, and Walmart supercenters over 100,000. Most traditional grocery stores offer about 40,000 items in 40,000 square feet.

A Silicon Valley start-up, Chowbotics, developed the $30,000 Sally the Salad Robot to reduce food-borne illness by assembling up to 50 salads from precut vegetables stored in refrigerated canisters. Customers order salads made by the machine, limiting human contact and the risk of spreading disease. Robots may eliminate jobs in food preparation, where often immigrants peel, slice and mix ingredients.

Food Stamps or Supplemental Nutrition Assistance Program benefits provided money to 42 million US residents to buy food in 2016 at a cost of $48 billion or about $125 a month.

Britain has one of the world's most competitive supermarket sectors, with the Big four of Morrisons, Sainsbury's, Tesco and Walmart's Asda fighting for market share. German discounters Aldi and Lidl have been expanding in the UK, and in 2017 accounted for 12 percent of grocery sales in the UK with 1,400 stores.

About 20 percent of Dutch egg farmers who hired the firm to rid their chicken farms of lice face financial ruin because Chickfriend added the poison fipronil to its cleaning solution on 180 farms. The E700 million a year Dutch egg sector was in free-fall in August 2017, as family farms with up to 50,000 chickens could not sell their eggs. Some 900 Dutch egg farms producing 10 billion eggs a year, two-thirds of which are exported.