Good news, bad news

Wine prices may be going down. That’s the good news, especially for bargain hunters. Also that 100% tariff that we talked about recently may be going away, at least for a while.

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But here’s the bad news: the long-term picture for the wine economy is not looking good, according to Silicon Valley Bank’s State of the Wine Industry Report for 2020.

What’s causing this bearish analysis? For one thing, the market for quality wine is shrinking as Baby Boomers retire and age out of the wine market, while millennials, by and large, aren’t coming in. Meanwhile, a Northern California grape glut is also expected to drive prices down.

The Silicon Valley Bank report came out this week. It’s an extensive package with videos, downloads, and charts to supplement its extensive text. It got quick local coverage – The North Bay Business Journal responded with alarm, headlining its report “Overextended North Coast vintners face credit challenges amid lower wine values.”

The first national coverage, it seems, came from the business journal Fortune, looking on the bright side for consumers with “Bottoms up: Wine’s going to cost less in 2020.”

Coupled with the U.S. Trade Representative’s decision not to hit the wine and spirits industry with a threatened 100% tariff on European wines, this situation does look like good news for wine-bargain hunters, at least for now, even if the earlier, lighter, 25% tariff stays in place for now.

Rows of full barrels signal good news for consumers; for wineries, not so much.

Rows of full barrels signal good news for consumers; for wineries, not so much.

But good news for us at the wine shop right now may not map to good news for the wine industry – and thus, eventually, for consumers – warns Silicon Valley Bank, one of the primary lenders for North Coast winery operations and development.

Rob McMillan, executive vice president and founder of the bank’s wine division, worries that the industry is in the middle of a “consumer reset,” a changing market that requires wineries to reimagine how they will sell and market wine. Winners and losers are already appearing, he writes, with about 25% of the region’s wineries already struggling even as the upper quartile of wineries is delivering record years.

“Boomers are not your target for growth given that the last of the cohort will hit normal retirement age in 10 years,” McMillan warns.” We are slow to evolve as an industry and must solve for the young consumer, who has different values. There are solutions, but hoping millennials will adopt boomer values as they age – and, as a result, move away from spirits and gravitate to wine – just isn’t a sensible business strategy.”

As the Fortune article summarizes the report, “Acute oversupply will allow for better-quality juice in lower-priced bottles, which will improve value and may provide an incentive for some millennials to become more consistent wine buyers,” according to McMillan. But, “Those shortfalls came due to the industry’s failure to connect with millennials and boomers. While the quality of wine has never been better, winemakers and marketers are missing the mark with consumers.”

(The Wine Advisor continues below this message from our friends at The California Wine Club.)

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Good news, bad news

(Continued)
 
The North Bay Business Journal offers an extended, rather technical business-oriented view at the industry side of the equation; MBA types may enjoy reading the article in full. For a quick take, reporter Jeff Quackenbush sums it up: “While the 2019 North Coast grape harvest ranked only sixth largest ever in tonnage, it followed the record-sized 2018 crush that brimmed winery tanks just as the trajectory of wine sales growth was starting to flatten. Full tanks and ratcheting down of expectations for wine sales growth have sent pricing for grapes and wine that vintners already have crushed down to levels about half of what they were just a year ago. While this means that consumers are expected to eventually get great deals on wine at the shelf, it is also affecting how much vintners can leverage the value of existing wine to operate.”

Times change, and so do markets. It’s not really possible to predict where the wine market will go in coming decades; certainly those of us who have been buying and drinking wine since the ’70s fondly recall the days when most good wines sold for $6 or less, with those rare trophy bottles coming in for $25 or so. I don’t think we’ll see that again.

My advice? Whether you’re a graying Boomer, and up-and-coming Millennial, or something in-between – I know all generations are represented in our readership – treat yourself to good, quality wine whenever you can. Continue your quest to learn more about this fascinating beverage, and support the industry with your wisely allocated dollars. Stuff happens, but wine has been around for 6,000 years or so. It’s not going away.

 

Today’s Tasting Report

Barnard Griffin 2016 Columbia Valley Syrah ($21.99)

Barnard Griffin

This 100% Syrah from Washington State shows very dark purple in the glass, all the way to a thin, bright garnet edge. Scents of plums and red berries lift from the glass in an aroma of fresh, forward fruit. Red fruit flavors follow the nose, framed by bright acidity and firm, astringent tannins, with 13.8% alcohol claimed. It’s a pleasant table red, not overly complex. (Feb. 19, 2020)

FOOD MATCH: The winery suggests pairing it with tender cuts of beef, particularly with a Syrah-based wine reduction sauce. In general it should go well with red meats or firm cheeses.

WHEN TO DRINK: Forward fruit, acidity, and firm tannins suggest decent potential for aging over the next five years, perhaps more under temperature-controlled cellar conditions.

VALUE:
My local $22 price is a fair-size step up from Wine-Searcher.com’s $18 average U.S. retail.

WEB LINK:
Read a short fact sheet on the 2017 vintage on the winery website. Still, it’s a good wine in the range of upper teens to lower $20s.

FIND THIS WINE ONLINE:
Check prices and find vendors for on Wine-Searcher.com.

Follow this Wine-Searcher link for an article about Columbia Valley and links to dozens of the region’s wines.

TALK ABOUT SYRAH
Join this month’s Wine Focus conversation, Syrah from both hemispheres, in our WineLovers Discussion Group.

 

More affordable wines

Want tips to still more good, inexpensive wines? Here are Wine-Searcher links to vendors and prices for a bunch more wines for $10 or less that I’ve told you about during the past year or two. Please tell us about your favorites!

  • La Vieille Ferme Vin de France Rosé ($8.99)
  • La Fiera Montepulciano d’Abruzzo ($8.99)
  • Laroque Cité de Carcassonne Cabernet Franc ($9.99)
  • Domaine de Pouy 2016 Côtes de Gascogne ($7.99)
  • Alamos Mendoza Malbec ($9.99)
  • Caposaldo Chianti ($8.99)
  • d’Arenberg McLaren Vale “The Stump Jump” ($9.99)
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