Since the West Coast of the U.S. has experienced numerous wildfire events in recent years, growers and wineries are trying to answer a critical question: Who should bear the financial cost of smoke impacted grapes?
“It feels like as an industry, up and down the West Coast, we have not yet come up with a solution,” says Juan Muñoz-Oca, chief winemaker at Ste. Michelle Wine Estates, Washington’s largest producer. It also owns wineries in Oregon and California.
In 2020, when there was wildfire smoke at varying degrees of severity across much of the western U.S., many growers and wineries were forced to make decisions on the fly. The potential financial implications were enormous.
“What we tried to do was complete transparency,” says Brent Stone, COO and winemaker at King Estate in Oregon. The winery shared all of its data on smoke impact with its grower partners. “It didn’t necessarily change outcomes, but I think was very fair,” says Stone.
Washington’s Sagemoor Vineyards, which provides fruit to 100 wineries in the state, developed a standard operating procedure for working with wineries on grapes that are potentially smoke impacted, says Director of Wine and Grape Sales Kent Waliser.
“We just go step by step through the whole process until we get to finished wines,” he says. “And if each step remains positive, we just keep going. So far, we’ve been able to navigate that without any extreme consequences.”
In 2020, Napa Valley’s Duckhorn Vineyards, which works with 420 different growers, evaluated smoke impact based on Air Quality Index and overall smoke duration. It used that data to create a tiered payment system for fruit that it accepted, with the goal of accepting as much fruit as possible.
“We tried to be objective, fair and balanced,” says COO Zach Rasmuson. “You’re doing it with the best information that you have, knowing the information you have is rarely sufficient.”
The winery ultimately offered growers 75% or more of what they’d normally pay for fruit. “I was glad that we were able to do that,” says Rasmuson.
If a grower’s fruit is rejected by a winery, typically, their main recourse comes in the form of crop insurance. Several types of insurance exist and can be purchased at varying levels. However, many growers do not carry it.
According to the U.S. Department of Agriculture’s Risk Management Agency, in 2021, 74% of Washington’s wine grape acreage was covered by some type of insurance. That number drops to 67% in California and 38% in Oregon. This year, some wineries are requiring growers to carry crop insurance to help mitigate the financial impacts of wildfire smoke. Even for those who do have insurance, however, the payouts typically do not fully cover their revenue losses.
“You get to recoup some of your farming costs, but it doesn’t really account for all the wine you couldn’t make,” says Stone. King Estate had to file a claim for its vineyard in 2020.
Whether one can even file a claim can be complicated for growers working with multiple wineries.
“Let’s say you’ve got 30 customers in a 100-acre block, and three of them kind of have problems [with smoke],” says Waliser. “There’s no way practical way to insure that.”
Wineries’ protection comes via their contracts with growers. That language is often deliberately vague to cover a wide variety of circumstances that might impact grape quality. However, some have started using more specific language, in extreme cases going so far as to say growers will bear the cost of wine and even barrels damaged by smoke.
“I won’t sign a contract like that,” says Waliser.
Wineries can reject fruit upfront if they feel it is impacted by smoke based on sensory and analytic testing. Others accept it, and then, if there is a problem they can’t remediate, ask for a reduced price or other considerations.
One year, Duckhorn paid full price for grapes, but said the cost of any remediation for smoke damage would be charged to the grower.
“We just kept a ledger, and we billed back the grower up to $2 a gallon, which was I think the equivalent of $150 a ton,” says Rasmuson. “It was good faith. Growers liked it.”
Others have accepted fruit only to subsequently say that they won’t pay for it due to smoke impact. That has the potential to cause significant strains in relationships.
“The times that I’ve seen problems arise is when there really wasn’t an understanding between the two parties,” says Nichole Schulte, associate winemaker at Barrel 42, a custom crush facility in Oregon. “It’s about coming up with creative solutions that satisfy both our need to make high-quality wine and the grower’s need to get paid for the crops that they have grown all year.”
In the end, most agree that the financial burden of smoke impact needs to be shared. But they’re still trying to figure out what exactly that division might look like.
“What we have said to the vendors over the past several years is ‘Look at it in your own best interest,’” says Andy Beckstoffer, who grows fruit for over 130 wineries in California. “Your own best interest says take good fruit. Don’t take fruit that you can’t sell. Don’t pay a price you can’t make sense out of. And remember the value of your relationship with the growers.”
In an industry where growers and wineries work hand in hand, successfully maintaining those relationships while navigating the business threat of wildfire smoke can be challenging.
“You’re talking about people’s livelihoods and your own,” says Stone. “It’s a difficult combination.”
For better or worse, a surfeit of recent experience with wildfire smoke has allowed the industry to make progress on these issues.
“I feel like even today, we are miles away from where we were [in 2020],” says Muñoz-Oca. “It’s going to take all of us working together and avoiding pushing blame onto each other to get out of it. I would have loved for us as an industry to get to that point faster.”