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Friday, January 20, 2017

The Wine Industry in 2017

It's a new year so here is a new look at the state of the wine biz. Silicon Valley Bank works with many wineries. They put out a yearly report with predictions for the coming year. The following info is based on that report.

The Consumer

This has been talked about before. Actually, it seems we hear about Millennial buying trends ad nauseam. But the fact is Boomers are hitting retirement age and won't be buying as many $50 wines off their 401k money and won't be buying wines to age for 20 years. The questions being asked: How much longer will Boomers control the premium wine market? When they do fall off in that market will someone be there to pick up the slack?

There are a lot of Millennials in the SF Bay Area in the tech biz making good money and have disposable income for luxury goods like wine. But a lot of Millennials seem to go from college to a retail sales job and can barely pay rent let alone stock up on Pinot Noir.

The good news is the younger generation learned to like high-end wines from their parents, the Boomers. Of course, it's not like the Boomers were buying expensive wines when they were in their 20s. It was more likely Blue Nun and Boone's Farm so the Millennials are definitely doing better at a similar age.

The Wines

Under $20 wines like rosé, New Zealand Sauvignon Blanc, Italian Prosecco, and red blends are rising in popularity. This would seem like bad news for California's premium wineries, however shipments  directly to consumers is still going up so somebody is buying the stuff. Now that Pennsylvania has opened up to direct shipping there should be a noticeable increase as this is a large untapped market.

A little tidbit from Ship Compliant, the industry average price of a bottle of wine shipped to consumers is $38, but the average price from Napa is $62.

The Competition

Craft spirits and craft beer have been known competitors for awhile. Now with the legalization of marijuana many believe this could impact wine sales. Or maybe you market your wine to go with marijuana brownies (I think I'm joking, not sure).

The Labor Shortage

The economy is humming along and unemployment is low. Sonoma County was at 3.5% last summer during the busy tourist season. There are many lower paying hospitality and seasonal jobs in the wine and tourism industries and it's tough staffing them. So there is pressure to pay more to get people.

Now there are worries over migrant labor being available if the government cracks down on illegals. Whatever your stance is on illegal aliens in the country it's a fact that migrant labor is the backbone of much of the country's agriculture, wine included.

Expect the combination of high demand and the labor shortage to mean higher prices for your wine.