Future Issues with the California Wine Industry

There are short- and long-term potential shake-ups coming to the local wine industry. Following are a few things that may have a large impact on the local wine biz.

Real Estate

Land (and housing) prices are at an all-time high. This includes vineyard land. Along with this comes escalating grape prices. This ends up as higher wine prices. Who might suffer?

Of course, there is the consumer that's hit by price increases. Also, the producers when that consumer's favorite $20 cabernet becomes $25 and they look somewhere else. The little guys in the wine making business without a multi-million dollar backing or a marketing department might pay the biggest price along with anyone trying to break into the business with their own label. If you're a corporate-backed winery with a well-known label you have a better chance of surviving. If you're a small, but established high-end brand you're probably okay. If you are a small family operation without your own vineyards this might be trouble.

Established vineyards in Sonoma County sell for $150,00 on average with good pinot noir vineyards the most expensive. In Napa the average is $400,000 and the best cabernet vineyards will be much higher.

Some smaller wineries are taking the money while the money is good and selling off their successful operations. As my economics professor often said, "Make hay while the sun shines."

The thing about California real estate historically housing has gone up and then come crashing down on a ten year cycle so we're overdue.

Natural Turnover

The boom in California wine in Napa & Sonoma started in the 1970s then got really going in the '80s. The people starting up these new wineries are retiring.

Some of these folks are turning the business over to younger family members. You often find changes where the new generation will do things to attract younger people, customers their age, rather than depending on the older folks who may have been fans for years. This is probably good news for the longer term. However, just because their father may have been great at making wine, cultivating relationships with customers, giving people what they want, etc. doesn't mean the next gen is good at doing this.

Many of the older winery owners are selling off. Who wouldn't want that nice retirement nest egg after years of hard work? Often this means selling to a corporation. Most wineries are still family-owned, mainly small and medium-sized ones.

Weather & Climate

Climate change is a major concern as grape varieties are very susceptible to slight changes. There's a reason pinot noir grows where it does and cabernet sauvignon grows in certain areas and the two don't mix. The potential disruption in the wine industry from climate change isn't just a California thing, it's worldwide. Don't believe in climate change? That's fine, but California recently had a five year drought plus has had record hot summers over the past couple decades. The farmers are noticing.

There's no doubt the wine country fires of 2017 hurt along with the recurring fires that seem to be happening almost every year. It's not just tourism that hurting, it's the whole grape growing and wine making process that has to go on while fires could be nearby. 

Will some winery owners be scared off by the longer term potential of climate change or harmed enough by lower visitation in the short term to sell off? Between that and Covid-19 I'd say yes.