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4/23/= 03
www.= cmprlaw.com
1
Grape Quality:
In the Eye of the Beholder?
lNorth Coast Winegrowers
lApril 23, 2003
l
lJay M. Behmke
lCarle, Mackie, Power & Ross LLP
l100 B Street, Suite 400
lSanta Rosa, CA 94101
lTel. 707-526-4200
ljmbehmke@cmprlaw.com
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4/23/= 03
www.= cmprlaw.com
2
Carle, Mackie, Power & Ross LLP
lWin= e and Food Practice
Wineries
Growers
Distributors
Retailers
Lenders
Investors
&= #13;
lAtt= orneys
Bill Carle
John Mackie
Simon Inman
Phillip Kalsched
Jay Behmke
l&= #13;
Gra= pe Contracts
Vin= eyard Leases
Lic= ensing and Regulation
Mer= gers and Acquisitions
Tra= demarks

Attorn= ey since 1983
Attorn= ey in Wine and Grape Industry since 1992
CFO, B= elvedere Winery (350,000 cases) and
Hambre= cht Vineyards (500 acres) 1988-1992
Two im= portant achievements
   Sunridge Nurseries, ENTAV = clones
   CAWG, Chardonnay with natu= ral flavors
Experi= ence on both sides
Buying= and selling
Termin= ating and enforcing
Drafti= ng for winery and grower
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www.= cmprlaw.com
3
Three Trends to Quality
lGrapes as products:
Commodity è Custom-farmed
lQuality specifications = ;
Objective standards è Subjective evaluation
lFarming practices
Left to judgment of grower= è Specified by winery
l <= /span>
lEffect on winery-grower relationship
Grape purchase agreements = è ???
Over l= ast 14 years, there has been a definite evolution

Concep= ts of quality

Grapes= are custom farmed

Wineri= es are more involved with farming

Grape = contracts have not caught up. We lawyers have work to do with our clients to help them define what the issues are.

This t= alk is a part of that effort. Because I think the question I was asked to talk about, is itself a mistaken question.
ItR= 17;s not how to define quality that’s the problem,
ItR= 17;s who gets to define it, that’s the issue.
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A Tale of Two Markets <= /span>
lCommodity products
Standardized
Buyer can easily switch = ;
Price set by market = = conditions
Growers compete by <= /span>becoming the low cost producer =
Key to success - efficiency=
Market will trend to small = = number of large growers = ;
l =
lCustom-farmed products
Customized
= Buyer can’t switch easily
Price set by private negotiation
Growers compete by <= /span>understanding and satisfying customer needs&#= 13;
Key to success -customization
= Market will trend to large = number of specialized growers<= b>
These = categories can be used in many industries.
Classi= c difference between buying Land’s End or custom tailored.
In gra= pes, there are two markets

One fo= r a commodity grape: like a California appellation chardonnay.
One fo= r custom farmed grapes: single vineyard, ENTAV clone, specific trellis, hillside.<= /font>

As win= eries compete in the North Coast for quality, they rely more and more on custom farmed grapes to create the quality they need in the bottle. So more and more, grapes in this region are not commodities. And this is reflected in higher prices this region commands over others.

Grape = contracts evolve as this trend continues. When I started they were one page. Now th= ey usually run 15 pages. Part of the change is the need to specify more of t= he terms which make the grapes a custom-farmed product.

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5
Standard Quality Provisions
lTechnical Objective Standards
l Chardonnay: = ;
l °Brix: 23.5° - 25.0° with optimum of = 24.5° Brix =
l TA: 6.0-7.5g/l with optimum of 6= .75 g/l
l pH: 3.25-3.4 with optimum of 3.3= 5
l 
l Pinot noir: = ;
l °Brix: 23.8° - 25.0° with optimum of = 24.5° Brix =
l TA: 5.5-6.5g/l with optimum of 6= .0 g/l
l pH: 3.4-3.6 with optimum of 3.5<= /span>
Classi= s by the numbers approach.

But th= is is now only the starting point.

Must h= ave these numbers. But the winemakers may want the grower to wait for something els= e to develop.
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Maximum Defects
<= span class=3DBB style=3D'position:absolute;left:-4.23%;top:.3em'>l Second crop grapes not to exceed 5% by weight.
<= span style=3D'font-size:86%'>l Mold or rot not to ex= ceed 3% by weight.
<= span style=3D'font-size:86%'>l MOG not to exceed 1% = by weight.
<= span style=3D'font-size:86%'>l No mixed varieties.&#= 13;
<= span style=3D'font-size:86%'>l No un-authorized/unre= ported pesticides/herbicides.
These = define a negative quality. Things that we don’t want to see.

Again,= these are a standard part of most grape contracts.

Necess= ary, but not sufficient.
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