To survive in a shifting future, many of California's wineries should form alliances with other wineries -- sharing financial control, marketing and production costs, a UC Davis economist recently told winery executives. As the state's wineries have reached maturity the industry has become fragmented and oversupplied, according to Bob Smiley, dean of the Graduate School of Management and wine economist. In addition, buyers have become more knowledgeable and discriminating in their choices of wine and are less likely to purchase premium brands. Smiley predicts that industry profitability will continue to fall and market expansion will be slowed, unlike in the l980s when the number of California wineries doubled. Since consumers are buying cheaper wines, it also means the industry has fewer distributors -- leading to an increase in the power of those remaining. Smiley says the wine industry must do as other mature industries have already done -- form cooperative agreements between firms for purposes of research and development, production and marketing.