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Friday, March 23, 2012

Reflecting on the California Wine Industry

This is my 300th post on this wine blog and it's had over 30,000 hits according to the counter. You guys should get out more. It's not like I know what I'm talking about!   :)

It's a good time to reflect on the general state of the California premium wine industry.

The recession had a major impact for a couple of reasons.

(1) People cut out or cut down on luxury goods if they feel financially insecure. Considering most premium wines run between twenty and fifty bucks that's definitely something you can cut out. When the recession first hit in 2008 I received lots of calls to cancel wine club memberships as that was something people could easily do without.

(2) Travel was down as that's also a luxury especially if it involves air travel, hotel rooms, and dining out every day.

Since last summer this has turned around as hotel occupancy is up. The number of visitors is up (day travelers and those on vacation). Wine club memberships are growing again. Wine sales are doing well.

California wine shipments and exports are up by several percentage points. This is partly because we're coming out of the recession and also because the value of the dollar makes overseas sales a better deal. And, of course, there's China. Everybody is looking to increase sales of everything from wine to cars to the new Chinese middle class.

Marketing to the Millennials (21 to 34 year olds) is still going strong even though they tend not to buy much premium wines as they shop more in the under $15 range. Still, wineries wish to cater to them because they are the future. There's great hope down the road as the current crop of 20-somethings is much more into wine than any previous generation was at that age.

The number of wineries continues to grow substantially though the rate slowed during the recession. There's been consolidation as wineries or corporations that own wineries have bought mostly smaller operations in financial difficulty. This will continue for a while as there are more over-extended wineries that won't be able to survive on their own. The folks doing the buying may turn out to be the ones in the best position when this recession finally ends.

Americans drink relatively little wine per capita compared to much of Europe, but it is increasing while other countries are dropping. Part is due to the good press about the health benefits of moderate consumption and part is an overall trend towards higher-end goods--not just wine, but microbreweries, coffee, tea, etc.

The growth and strength of the wine industry in California is quite a entrepreneurial success story.