The increase of U.S. wine consumption over several decades has flattened. The top 30 U.S. producers sell 90 percent of the wine sold in America, but there’s an ever-increasing number of wineries, with every state in the country having at least one. (And yes, even Alaska has about half a dozen wineries, the oldest of which is Denali Winery, located in Anchorage.) This dynamic—flat growth and an increasing number of producers—has resulted in strong competition for existing wine consumers and even pushed some wine companies to begin shifting their marketing focus from exclusivity to inclusivity.
The world of wine is changing, and 2019 is poised to be a year full of both opportunities and challenges for Northern California winemakers and growers alike. Here are the trends to watch.
In the 1960s and ’70s, there was a collective societal buzz that having a glass or two of wine a day was akin to a sort of medicine, treating everything from indigestion to heart disease. That buzz eventually turned into “facts” when studies seemed to back up the assertions. Years passed, and the idea that wine was good for you became something nearly everyone accepted. But over the last decade there has been growing evidence that is counter to the “wine is medicine” hypothesis. And what is at the moment a low buzz of concern will likely grow in intensity in the coming years. These growing health concerns will have a negative impact on wine consumption and therefore sales.
Because the wine industry is now oversaturated with brands that have followed the “premiumization” bubble, some experts are extolling the virtue of discounting wine to increase sales. But don’t be too quick to take the bait because once price becomes your key value proposition, it’s nearly impossible to do anything more than chase your tail into the discount bin at your local supermarket or online flash-sale site.
For any major holiday or special event when I was growing up, our family would clamor into my father’s van and drive unencumbered by seatbelts to one of our extended family’s homes. There, the women congregated in the kitchen preparing the meal, while the men gathered around libations (beer, jug wine and spirits) and the children slipped out of sight to accomplish some forbidden act, such as competing for the title of Highest Tree Climber.
In the last couple of decades, the number of formally trained wine professionals has exploded. Each year more than 2,000 winemaking students have earned degrees—a bachelor’s, master’s or Ph.D.—and graduate from top-tier programs in the United States alone. Thousands more, through dozens of accredited colleges and hundreds of internships and apprenticeship training programs, are provided some sort of certificate of winemaking. Beyond the burgeoning numbers of winemakers (enology), vineyard (viticulture) programs also continue to expand, as does the popularity of programs for becoming a certified sommelier.
Recent headlines suggested that drinking much more than one glass of wine per day can have negative health effects for both males and females. That would be very bad news for an industry that has pinned much of its marketing efforts on the view that drinking wine has positive health benefits. But looking more deeply into the science behind these headlines actually suggest that drinking a glass or two of wine may be better than drinking no alcohol at all. So what gives? First a little background.
By 2021 Generation X (born approximately between 1965 and 1979) will consume more wine than any other generational group in America. Five years later, the Millennials (born approximately between 1980 and 1994) will take over that spot, according to Silicon Valley Bank. Years later, sometime in the future, Generation Z (born approximately between 1995 and 2014) will take over the most prominent wine-drinking position.
Recently, craft beer has been one of the hottest new trends to hit what is being now referred to as the “relaxant market,” which includes alcoholic beverages and cannabis products. In the last 10 years, there’s been a mad rush of new entrants, as everyone and his brother seems now to be making beer. But like all booms, this one is coming quickly to a bust, where only the strong, lucky or steady will survive.
It’s a cheap shot when a columnist says “I told you so.” It’s especially unattractive when the issue in question is particularly bad news. If, for example, I’ve been saying for the last year that you’d better get cracking when it comes to nailing down your grape- and wine-sales strategy, you might scoff and tell me, “What’s new?” And that’s when I’d sit back and go down the list.
I’ve never been a big believer in the power of social media when it comes to selling wine. The idea that someone might become enamored with a new winery or wine brand because of some pithy antidotes on Twitter or a few hyperbolically colorized photos on Instagram has always seemed far-fetched. However, what we are seeing now is that social media coupled with technology is helping to fuel unprecedented volatility that will eventually spread to the world of wine.
Recently, three California agencies released rules on growing and selling cannabis. The regulations, devised by the state’s Department of Health, Department of Food and Agriculture, and the Bureau of Cannabis Control—who knew that even existed? Together, these agencies offer the first glimpse into how things have changed since the sale of recreational marijuana became legal on January 1.
The fires in Northern California Wine Country are tragic beyond comprehension and resulted in an obscenely too-high number of people losing their lives. Beyond the loss of life, thousands of families’ homes and hundreds of businesses were damaged or destroyed, and countless animals and forests have been decimated.
The wine industry is heading for a bumpy ride in the next decade, and those without a well-planned and realistic strategy in place will either get very lucky or fail.
I have a friend—let’s call him “Bob”—who is in his 60s and has a vacation home and small vineyard in the hills above Calistoga. He made a fortune as an early investor in some of the biggest tech companies around, and now he drives expensive cars and is often traveling through some distant country in search of adventure. Bob flies his own helicopter and sits on the boards of three or four successful companies, and his children are being groomed to attend Ivy League colleges. Bob is also a total stoner, smoking marijuana daily.
Amazon’s recent purchase of Whole Foods Market for $13.7 billion will decimate small wine and beer retail shops across the country and hasten the consolidation of wineries and distributors.
It’s a fact that increasing temperatures will impact wine-grape growing. I’m not arguing one side or the other of the climate change debate. You either believe humans are the cause of increasing temperatures or you think this is a normal cycle of warming.
Over the last year or so, the number of winery and vineyard acquisitions has been surging at a breakneck pace. Jackson Family wines has been on a tear, purchasing many wineries, including Penner-Ash Wine Cellars. GI Partners bought Far Niente Wine Estates, TSG Consumer Partners purchased Duckhorn Wine Co., E. & J. Gallo bought Orin Swift Cellars, Constellation Brands purchased the Prisoner Wine Co., Francis Ford Coppola purchased Silverwood Vineyard and the owners of Silver Oak purchased Ovid Winery. This is only the tip of the iceberg, with many more deals that have been completed or are near completion.
What could possibly go wrong?—Source Unknown
Love him or hate him, President Donald Trump is already having an impact. His proposed budget would slash funding for—or completely eliminate—many aspects of the government and shift much of the focus to military spending. Many of the changes he advocates will not make it through Congress. But the ones that do, will create an impact that will be felt throughout the economy and perhaps especially in luxury goods such as wine.
Got competition? There are 9,091 wineries in the United States and 4,202 are in California, reports Wine Business Monthly, What’s more, nearly 39 percent of those are “virtual,” meaning they don’t have a physical place to call home and instead make wine at a custom-crush facility or through some other arrangement. What this means is there are wine producers with significantly different cost structures, all trying their best to sell wine to an increasingly saturated market
“I miss all the old vineyards,” she said quietly. “Remember when there were vines and we didn’t drink synthetic wine, but it came from actual grapes?"
The problem with wine distributors is out of control, but that\'s not likely to change anytime soon.
I don’t really envision the wholesale removal of vineyards in favor of cannabis, but I can imagine adding a marijuana crop to existing operations will be too attractive to pass up for many.
As wine businesses continue to evolve, it's important to know what the value proposition of wine actually is for most consumers.
Up until recently, hedge funds and private equity typically stayed away from wineries and vineyards. There just wasnt enough profit potential.
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