Given the recent musings here about how ugly the fine wine scene currently is (and is going to get), it feels refreshingly apt to today provide what might be a touch-of-grey silver lining to that (very) dark cloud.
Intrepid friend of 1WD Bob Henry (thanks, Bob!) recently alerted me to a handful of news articles covering the glut in wine grape production in California, a phenomenon caused by the unfortunate intersection of decreasing demand and a higher-than-average yield coming from the 2023 harvest.
For more detail, you can check out the LA Times’ coverage of the global wine scenario at Global wine glut compounds headaches for struggling California vineyards, and a deeper look at the situation via Market Watch (California Wine Battles Oversupply After 2023 Harvest).
Now, this might not seem like good news, and if you’re in the fine wine business, it’s not.
BUT…
If you’re in the bulk wine business? This looks like very good news, indeed.
As Market Watch reported:
The California wine grape crush came in at 3.6 million tons for 2023, according to the California Department of Food and Agriculture’s preliminary grape crush report. Top varieties Cabernet Sauvignon (+15%), Chardonnay (+25%), Pinot Noir (+21%), Sauvignon Blanc (+28%), and Pinot Grigio (+19%) were all up double-digits compared with the previous year, and all were also well ahead of their five-year averages. “The combination of higher-than-average yields per acre in 2023 and the increasing concern over slowing consumer sales have resulted in the California wine market moving into an excess market cycle,” notes Turrentine Brokerage president Steve Fredricks. “The good news is that now the perceptions of bulk wine sellers and grape sellers are more aligned with the reality of the market.”
What this means, potentially, is that you will see a marked quality increase in inexpensive wines in alternative packaging formats (cans, bag-in-box, etc.), as well as in retailer custom brands, one-off labels, and the like.
Put another way, the stage has been set for better cheap wine.
What’s particularly exciting about this, to me, is that the wine business has an opportunity here—if it plays its cards right—to set a higher quality standard at lower price tiers, enticing younger consumers with less disposable income to buy wine and to be impressed with the quality that they’re getting for their hard-earned buck.
I have very, very little confidence that the wine business will play those cards correctly, mind you. I mean, the track record with the “enticing younger consumers” part is, for the most part, abysmal.
But one can hope, right?
Cheers!
Intrepid (but belated) friend of 1WD Bob Henry here . . .
(I’m mildly surprised Joe didn’t lobby to put my “missing person” head shot on a milk carton.)
Bob Henry’s intrepid friend David Morrison Ph.D. has written on the subject of a wine “glut” in his weekly wine blog:
“When is the wine industry going to wake up to itself?” | Wine Gourd (October 23, 2023)
URL: https://winegourd.blogspot.com/2023/10/when-is-wine-industry-going-to-wake-up.html
Further:
“American producers are making the current wine problem worse” | Wine Gourd (April 15, 2024):
URL: https://winegourd.blogspot.com/2024/04/american-producers-are-making-
And more recently:
“Global wine production has exceeded consumption for decades” | Wine Gourd (June 3, 2024)
URL: https://winegourd.blogspot.com/2024/06/global-wine-production-has-exceeded.ht
Agricultural crops are known for “boom and bust” cycles. Wine grapes are no different.
Undercapitalized family wineries that struggle from vintage to vintage to make a living may quietly go out of business. Their land (but not the brand) purchased by a much larger, better financed name recognition winery as source grapes for valley- or county-designated wines.
A continuation of this news report from 2013:
Excerpt from Wine Spectator Online
(November 12, 2013):
“West Coast Wineries Are Up for Sale — Quietly”
(A wave of recent deals show investors see opportunities in wine, while owners see an exit strategy.)
URL: http://www.winespectator.com/webfeature/show/id/49221#.UoI_yAMMzG8
By Tim Fish
Senior Editor
“. . . While small wineries can succeed by selling most of their inventory direct to consumers and large producers have muscle with wholesalers, those in the middle — annual production of 5,000 to 15,000 cases, for example — can’t get much attention from distributors unless the brand is hot.”
I do feel for those brands that are in that level of production who don’t have a robust DtC presence, it’s going to be a difficult few years for them…
Two more sources of dour statistics:
First:
“New Company Breaks Barriers to Distribution for Small Producers” | Wine Industry Advisor (March 22, 2017)
URL: https://wineindustryadvisor.com/2017/03/22/libdib-breaks-barriers-distribution-small-producers/
“Consolidation continues to make distributors bigger and fewer while the number of producers grow with new small producers enter the market. The vast majority of wineries in the US produce less than 5,000 cases, and they’ve been effectively blocked from three-tier distribution because distributor giants wont take them on . . .”
See next reply for the second . . .
And the second excerpted one:
“Wine trade secrets revealed at OIV Wine Marketing Program” | The Gray Report (July 31, 2017)
URL: http://blog.wblakegray.com/2017/07/wine-trade-secrets-revealed-at-oiv-wine.html
“John Collins, CEO of a company called GreatVines that sells alcohol distribution software, started the week off with a slap in the face to all wine companies: ‘None of the wine companies are getting any attention (from distributors). Period. Because the spirits companies are that important to the distributors.’
“Collins compared the profit size of Diageo, a huge spirits company, to Jupiter. Gallo, the largest wine company, is Neptune. And if Gallo doesn’t matter to a big distributor like Southern Glazer’s [ the largest in the nation ], no wine company does. . . .”
“The opposite of Constellation was a presentation by Bruno Walker, director of sales and marketing for Chambers and Chambers Wine Merchants, a California distributor with an outstanding fine wine portfolio.
“Walker was one of several speakers to caution people that large distributors won’t do much to sell wines by small wineries.
” ‘If your wine is not on some kind of special of the month, it won’t sell’ at a big distributor, Walker said. ‘That sales person is not out making presentations of your wine. Their manager is telling them, you’ve gotta sell this and you’ve gotta sell that. That’s how their bonuses work. That’s how they’re hired and fired.’
“But Walker also chilled expectations for what a distributorship like his can do.
” ‘The reality is, I have 15,000 unread emails,’ he said. ‘Most people are really, really busy.’
“He said that when his salesmen present wines to stores or restaurants, they only have about 45 seconds per wine. ‘We have to be able to deliver a compelling story, quickly,’ he said.”
Two more sources of dour statistics:
First:
“New Company Breaks Barriers to Distribution for Small Producers” | Wine Industry Advisor (March 22, 2017)
URL: https://wineindustryadvisor.com/2017/03/22/libdib-breaks-barriers-distribution-small-producers/
“Consolidation continues to make distributors bigger and fewer while the number of producers grow with new small producers enter the market. The vast majority of wineries in the US produce less than 5,000 cases, and they’ve been effectively blocked from three-tier distribution because distributor giants wont take them on . . .”
See next reply for the second . . .
[Oops! Let’s attach an identity to this reply. Once again.]
Two more sources of dour statistics:
First:
“New Company Breaks Barriers to Distribution for Small Producers” | Wine Industry Advisor (March 22, 2017)
URL: https://wineindustryadvisor.com/2017/03/22/libdib-breaks-barriers-distribution-small-producers/
“Consolidation continues to make distributors bigger and fewer while the number of producers grow with new small producers enter the market. The vast majority of wineries in the US produce less than 5,000 cases, and they’ve been effectively blocked from three-tier distribution because distributor giants wont take them on . . .”
See next reply for the second . . .
~~ Bob
And the second excerpted one:
“Wine trade secrets revealed at OIV Wine Marketing Program” | The Gray Report (July 31, 2017)
URL: http://blog.wblakegray.com/2017/07/wine-trade-secrets-revealed-at-oiv-wine.html
“John Collins, CEO of a company called GreatVines that sells alcohol distribution software, started the week off with a slap in the face to all wine companies: ‘None of the wine companies are getting any attention (from distributors). Period. Because the spirits companies are that important to the distributors.’
“Collins compared the profit size of Diageo, a huge spirits company, to Jupiter. Gallo, the largest wine company, is Neptune. And if Gallo doesn’t matter to a big distributor like Southern Glazer’s [ the largest in the nation ], no wine company does. . . .”
“The opposite of Constellation was a presentation by Bruno Walker, director of sales and marketing for Chambers and Chambers Wine Merchants, a California distributor with an outstanding fine wine portfolio.
“Walker was one of several speakers to caution people that large distributors won’t do much to sell wines by small wineries.
” ‘If your wine is not on some kind of special of the month, it won’t sell’ at a big distributor, Walker said. ‘That sales person is not out making presentations of your wine. Their manager is telling them, you’ve gotta sell this and you’ve gotta sell that. That’s how their bonuses work. That’s how they’re hired and fired.’
“But Walker also chilled expectations for what a distributorship like his can do.
” ‘The reality is, I have 15,000 unread emails,’ he said. ‘Most people are really, really busy.’
“He said that when his salesmen present wines to stores or restaurants, they only have about 45 seconds per wine. ‘We have to be able to deliver a compelling story, quickly,’ he said.”
I suppose that we technically didn’t need any more detail to underscore why we should all hate the current alcohol distribution system in the USA, but here we are. Well, all of us who don’t work for distributers, I mean!
Even folks who work for leading distributors would tell you privately that they hate their “corporate overlords.”
The politics and duplicity of meeting your monthly/quarterly/annual sales quotas and the ass kissing to seek and secure upward promotion is oppressive.
~~ Bob