An Oversupply of Wine

  You have probably heard that we have too much wine in the pipeline, too many vineyards, and various dire warnings about oversupply. Some want you to believe that the wine business is going under. Let's look at why we have an excess amount of wine and why it's probably one of the usual cycles the business goes through.

Removing a vineyard somewhere in France

Learning from History

  The wine biz goes through cycles, just as other segments of the economy will do. Wine is different in that it's an agricultural product with a long lead time. 

  If suddenly, let's say everyone is buying Barbera, so now there's a shortage. In response, many growers will now plant Barbera. Maybe after pulling out some currently slower selling variety, we'll say Syrah. So the soil is prepped, the baby vines planted and three or more years later you're getting a harvest. Then the grapes are made into wine, the Barbera goes into barrels for a while then bottled and released. Now you're into it for about five years. 

  If too many people planted Barbera then later there will be a glut. After those five years, is Barbera still even a thing? Trends can be fickle. Barbera might be out, and the Syrah you pulled might be in demand. The up-and-down cycle starts again.

  The key learning here is to realize that this has happened many times before. This time it might be more severe, some fear it might be permanent.

Pulling Vineyards

  The French government is paying people to pull out surplus vineyards. Washington State has too many vineyards and is looking to sell grapes to British Columbia wineries that lost a crop due to weather. It was big news when California was said to be uprooting vineyards. 

  There are vineyards taken out all the time. Either the vines got old, and it's uneconomical to farm, the location where they were planted turns out to not produce quality fruit for that variety, or that variety of grapes just isn't popular anymore. Yes, it does seem there are more vineyards being removed than normal. 

What I'm not hearing is how many growers are planting another grape variety, a different crop, or nothing. There's probably some of each.

Changing Attitudes

  Consumers have a lot more choices than just wine, cocktails, or a macro-brew. You've got hard seltzer, hard cider, a zillion craft beers, low- and no-alcohol wine and beer. There's more interest in taking breaks, like dry January. Organic, plus low- and no-alcohol products are gaining traction, but are still a very small part of the market.

  For lower alcohol products, the industry will have to get serious about removing most or all of the alcohol from premium wines and have a finished product that's on par with their conventional wines. I'm no expert in this area and don't know what's required to do this or if it's even possible. Maybe there's science that has to happen first, or more about experimentation to find out what works best. 

  The wine market is changing. What the future of wine will look like, that fear of the unknown, is what's worrisome.

Other Factors

  Climate change, the approaching end of the Boomers carrying the market, recovery from the Pandemic shutdown, China cutting Australia out of their import market, possible U.S. tariffs and retaliation have all given wine people the jitters.

  There is a small, but maybe growing, movement to drink less, but drink better. This should be good news for the premium wine market. It would be bad news for places like California's Central Valley where the vast majority of the state's grapes are grown, grapes that generally go into the cheaper wines.

  There was the slingshot effect from the Pandemic. Buying skyrocketed after the lockdown was lifted, everybody bought lots of wine, and now have plenty, so buying has (temporarily?) slowed.

  Inflation means less buying of luxury goods, like premium wine, because you're trying to keep up with food bills and the car payment.

What Could Be Done

  Taking out vineyards that are diseased, poorly performing, or having grape varieties not in demand seems to be underway. That is actually a good thing. Some can be replaced with other crops. The focus should be on regions and vineyards that produce premium wines with their higher profit margins.

  Where does that leave California's Central Valley and their cheaper wines? Probably a lot of vineyards will be going to other crops. They should be looking to plant things with lower water needs such as grains, some vegetables, etc. However, these crops have a much lower profit margin than some high-water usage crops like tree nuts. California exports a lot of nut crops, so any tariff wars will hurt. This will be worked out in the coming years.

Central Valley vineyards