Just as out of control finance, demographics and other forces wreaked havoc in Hollywood, California’s wine industry is now upset by the stresses of an era that is shattering yet another mainstay in the state’s economy.
Aging of baby boomers, who have long been the mainstay of the industry, changing taste among younger consumers, changing tastes among cheaper foreign wines, surplus of US products, and new medical warnings against alcohol trembling businesses that seem to be coagulated. Then there is Trump’s tariffs and retaliation obligations. Even a complete boycott by Canada, California wine’s biggest export market.
“We really hit the storm of today’s complete crisis,” says Natalie Collins, president of California Asun. Wine grape producers.
After nearly 30 years of annual growth, US wine sales and cargo fell into a long-term slump.
A time has passed when international acclaim for NAPA and other California products seemed to have promised an infinitely bright future. Now, there is no market for their grapes, so thousands of grape grapes are being destroyed.
There was a short grace when Covid home consumers flocked to the wine club and caused a rampage that they bought online. Once entertaining a large number of customers, the tasting room is struggling to survive. Those good times seem to be declining quickly.
And beyond the current issues, the industry is facing structural demographic changes, suggesting that potentially irreversible industry failures will sell products and build a new generation of customers. Low-priced wines are especially bad because young adults prefer craft beer, seltzer, kombucha, cider and other flavored drinks with little or no alcohol.
Medical research, on the other hand, opposes the old idea that slow consumption of alcohol, particularly wine, can actually provide health benefits. Instead, some experts now say that even a very minimal amount of alcohol consumption is potentially dangerous.
At the same time, wine producers across California and across the country are battling a surge in imports not only from old world stubborns such as Italy and France, but also from new players such as New Zealand, Argentina and Chile.
These imports had a particularly significant impact on grape growers in the Central Valley. It specializes in producing cheap wine grapes. American consumers can usually find better quality foreign wines at that price range. Additionally, some imports are mixed with domestically produced wines and are sold as American appellation wines.
California accounts for about 85% of the wine produced in the US. Thousands of grape growers and wineries are many of which are small, old-generation, dotted across the state from Mendocino to Riverside. The Wine Institute says the industry is helping to hire more than 420,000 Californians, creating an economic impact on the state by creating $73 billion.
US wine cargo fell 4.2% last year from 2023, down 11.3% from five years ago, according to Jon Moramarco, a graduate of UC Davis Enology and managing partner at alcoholic beverage research firm BW166. Wine as a share of all alcoholic beverages offered in the US fell from 18.2% in 2018 to 16.4% last year.
The similarities with current troubles in Hollywood are impressive. Similarly, in the entertainment industry, the flagship of the state and Los Angeles economy, changing taste among younger customers – charged by streaming and dramatic new technology – has taken away the very foundation of the industry.
And cheaper, and often foreign venues for production, have hit businesses in the state much, causing considerable unemployment.
In California’s wine country, mechanization means that grapes are primarily chosen by machine. But the bigger problem today is that about half of all wineries in the state are experiencing negative growth, including the biggest names of the business, gallo, wine groups, and constellations.
In fact, the latest wine report from Silicon Valley Bank, which has around 500 West Coast winery clients, showed that the major industry measurements (which account for the majority of domestic shipping) for the eight largest wineries in the United States were 3.9%-3.9%.
E.&J based on Modesto. Gallo Winery, by far the largest flock of the industry, has refused to comment privately, like most others. However, financial reports filed by Constellation and several other handfuls of publicly released wineries suggest that industry sales have deepened last year. Wholesalers and distributors continue to cut their bloated inventory.
Rob McMillan, executive vice president and wine expert at Silicon Valley Bank, says it may take years for the industry to start growing again. “We built it to overproduce, and we have to balance it,” he said.
Other major wine drinking countries face similarly strong demographic headwinds, but the US is the world’s largest wine market and struggles more than most people. The premium wine side is getting relatively better, but the entire industry, from wineries to distributors to retailers, is adapting to a new reality.
The California Wine Grape Farmers are having a particularly strong hit. Growers were planning to harvest about 3.2 million tonnes of grapes last year, but the amount of grapes purchased and crushed for wine was 2.8 million, the lowest in 20 years, according to USDA data.
That is, about 400,000 tons of wine grape are left on top of the grapes, much of which is found in Lodi, the Upper San Joaquin Valley, San Joaquin Valley, which has a vast area of high-producing grapes for inexpensive wines that are prone to competition shocks.
Craig Leadbetter, a third-generation farmer who owns and manages around 18,000 acres of wine grapes from Mendocino to Santa Barbara, says he left more than 10% of Roddy’s grapes last year. He also tore hundreds of acres of vineyards in Roddy and elsewhere, removing them permanently from production, planting more pistachios.
“We see them writing on the wall,” he said.
Since 2019, Ledbetter’s Vino Farms has cut around 10% of its workforce. It is currently about 300. It’s better than most people. The statewide, employment at Grape Vineyards has declined 26% since 2019, according to California’s Employment Development Division.
During that same period, the number of wine grape growth facilities in California fell 13% to 1,244, but thousands of small grape farms and Vintners are active in the state.
Ledbetter remembers when it was all by the side of the wine. In 1976, when the French Oenofilter chose Napa as the top of both red and white wines in blind tastings. And in the 1990s, research reported how one glass of wine a day is good for the brain, heart and longevity.
The Big Baby Boom generation was converted and from the early 1990s to the late 2010s, the US wine industry grew by an average annual rate of 3.5%.
However, recently, the World Health Organization and other groups have published it as a practical handrail against alcohol consumption and as a cause of toxicity and major disease.
The youngest baby boomer generation is now in their early 60s, and is at a peak of wine preferences, the study shows. And when people enter the 70s, they drink significantly less alcohol.
According to Gallup, the percentage of adults who believe moderate alcohol consumption is not healthy over the past two years has increased from 30% to 45% by people under the age of 30.
Ledbetter believes that part of the decline in wine is related to changing social norms. Growing up, he remembers that wine was regularly served in family meals. “We don’t have family dinners so we don’t have wine on the table,” he said.
He and other growers of Roddy have imported many of their financial issues. The value of foreign wines appearing in the United States has increased by 60% since 2010, with Italian imports of sparkling wines like Prosecco reaching nearly $1.8 billion over that period, according to data from the Census Bureau.
In comparison, US wine exports have remained little changed over the past 15 years. The total amount was $1.25 billion last year, with almost half going to Canada and the UK.
The strong dollars that make US goods more expensive overseas are one factor, but foreign governments are providing subsidies and more support to wineries.
Unlike Hollywood, which receives millions of state tax credits for local filming, all wineries can do to banks is to rebate excise taxes for imports proportionately to what they export. The programme supports big wineries and even encourages them to buy some more imports, but it helps them lower prices and make unwanted fruit drinks on top of the grapes at the expense of domestic wine grapes.
“There’s no defense on this,” says Stuart Spencer, executive director of the Roddy Wine Grape Committee, which represents more than 750 wine grape producers.
The prospect of increased tariffs on imports from the new Trump administration could narrow the wine trade deficit, but analysts warn of retaliatory tariffs from Canada and other countries.
“That’s not a clear plus. Terry Reese, professor of wine business at Calpoli San Luis Obispo, said: What’s more, tariffs don’t address the underlying issue of weak demand.
After decades of growing much faster than beer and spirits, wine is lagging behind. In the fiscal year 2024, constellation brands, including Modelo Beer and Robert Mondavi wine, reported a 9% increase in total beer sales and a 10% decrease in the wine segment.
Health concerns about the higher alcohol content of wine are one factor, but also relatively higher prices compared to other alcoholic beverages. The average price for a typical bottle of wine rose just 8% last year to around $19.19. BW166’s data on beverages purchased at grocery stores, liquor stores and other offsite facilities showed that beer prices rose 4.6%, and the spirit actually fell.
The wine industry is beginning to do more to attract younger customers. For example, Ledbetter’s Avivo Winery in Sonoma County devotes a large acre to regenerative agriculture and produces organic wines that use less Brix or sugar than Brix or sugar to reduce alcohol content.
“The younger generation – they want to know what fruits are and what they are drinking, is that better for the environment?” Ledbetter said.
MacMillan of Silicon Valley Bank agreed: Does not print calories on the bottle. People believe that wine has more sugar than other drinks. That’s not true, much of it is fermented. Most wine is dry. ”
Not only are you changing your message, you’re doing more. “We don’t do much with advertising. That’s our fault,” McMillan said.
“It seems the wine industry thought the anti-alcohol movement had lost its steps and had left,” he said. “We didn’t need to promote, we didn’t need to promote wine. We were self-absorbed.”
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