California wine is in serious trouble. For 25 years, the industry boomed. Then it started to unravel.
When (Megan Bell) released a new batch of wines in August, only three of her 19 distributors agreed to buy any. She was running $65,000 over budget on opening a tasting room in Santa Cruz. And she owed $80,000 to grape growers.
Sales in the second half of the year were the worst Bell had seen since starting her small business, Margins, eight years ago. “2023 was a disaster,” she said. And she knows she wasn’t the only winemaker feeling it: “If anybody’s not telling you that, they’re lying.”
The entire $55 billion California wine industry is, like the wine industry worldwide, experiencing an unprecedented downturn right now.
No sector is immune — not the luxury tier, not the big conglomerates, not the upstart natural wines. Wine consumption fell 8.7% in 2023, according to leading industry analyst the Gomberg Fredrikson Report, a sobering reversal for an industry that had, for a quarter-century, taken annual growth for granted.
Link (paywall): https://www.sfchronicle.com/food/wine/article/california-wine-industry-downturn-18711236.php
Highlights (from the link):
• Millennials and Gen Zers aren’t drinking as much alcohol as older generations.
• Hard seltzer and canned cocktails have stolen market share.
• Current medical consensus suggests that alcohol is unequivocally bad for human health.
• Beer and spirits sales are struggling, too.
• Many in the industry are predicting “a good-sized house cleaning,” -- Ian Brand, owner of I. Brand & Family Winery, Monterey County.
• “There’s too much competition” -- Steve Lohr, president and CEO of J. Lohr Vineyards, San Jose.
• This may simply be a market in need of a correction.
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Predictions:
Largest U.S. companies -- Constellation, Gallo, The Wine Group, maybe Trinchero, and Kendall Jackson -- are in a better place to survive because of their large portfolios, guerrilla marketing techniques, and strong distribution channels. So are smaller family-owned producers that have paid off and own their equipment, buildings, and vineyards.
There will be always be an international millionaire's market for the really high-end, rare stuff like Screaming Eagle and Opus One.
Prices of a lot of middle tier and life-style brands will drop as inventory needs to be cleared out.
Article focuses on producers, but grape growers are in the same boat.
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Quote (from the link): “Things feel really sad right now,” Bell said. “I’m looking at people who are like me eight years ago and thinking, you’re never going to make it.”
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