Clouds on the Horizon for Wine?

The economy seems rosy, people spent lots of money over the holidays, but maybe the wine biz is in for a bit of a downturn. Not talking about a recession coming, but maybe a premium wine downturn. Several factors are leading people to think this might be about to happen.

from Silicon Valley Bank
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Sales Growth

In the last half dozen years since the end of the Great Recession the premium wine market has grown significantly. As you'd expect that has to level off eventually. However, we may be in for more that a leveling off.

Grape Supply

Free markets go through a supply-and-demand cycle. When demand started to pick up more wine grapes were planted and eventually came to market and more are coming. There's an oversupply of wine with a lot of wine in the bulk market right. This is unsold wine that no one wants to buy and bottle right now. Of all the items on this list this should be the biggest concern for wineries. For consumers, this will mean some good wines at lower prices.

Fires

For California the wildfires of the last few years may be scaring off visitors. This is happening even in areas that weren't near the fires. Some people thinking of an autumn vacation might be planning somewhere besides California during the fire season. As to be expected, Sonoma and Napa are feeling this the most.

Baby Boomers

The boomers are the biggest buyers in the premium wine market and they are aging out. As a winery's customers age out how do they attract new ones? This, of course, is something that happens continually, but may be a bigger force now that the population bulge of the boomers is the group aging out and there are fewer people to take their place in the generations born in the late-60s through the 70s.

The Natural Changes in Brand Loyalty

Speaking of boomers: I call it a natural change because what happens is over time as wine consumers get older many gravitate towards certain brands they trust. The younger drinkers coming on won't have the same brand loyalty as they are still experimenting to see what they like.

Competition

The beer market, fueled by craft beer, is still growing though not as quickly as a few years ago. The spirits market is growing with no sign of slowing yet. So far the cannabis market doesn't seem to be having much of an affect.

The other completion is from other countries exporting wine to the U.S. This is always a concern for U.S. wineries. Luckily, for the consumer this helps keeps prices down. It will turn to bad news for consumers if the European wine tariffs happen as you can expect at least some American wineries will get a bit greedy and raise their prices.

As Samuel L. Jackson Would Say,

Hold on to your butts     :)