The Van Trump Report

Wine Grape Growers Face Extremely Tough Market Downturn

Farmers of every kind are struggling this year as crop prices languish at the lowest levels seen in years. The slump is even being felt by specialty growers that are typically more insulated from commodity price swings. But as some US wine grape growers are learning, no one can escape the basic dynamics of supply and demand.

California grape growers this year are experiencing the worst market downturn since the Great Recession, according to president of Allied Grape Growers Jeff Bitter. This cycle is “about as bad as it gets,” Bitter said, more severe than the tough times in and around 2008.

The problem for growers is twofold – an oversupply of grapes and shifting consumer preferences for low-to-no alcohol beverages. It’s not limited to any one type of grape or quality segment either. From high-end to low-brow, the US West Coast to Australia and France, grape growers of all kind are feeling the pain.  

“What we are seeing in the wine industry is a perfect storm,” says Natalie Collins, president of the California Association of Winegrape Growers. “It looks like one issue—an oversupply—but really, it’s several issues coming together, including a hangover from COVID when importers, distributors, and retailers purchased too much wine and they are still trying to sell through those stocks. Plus, there has been a shift in consumption, increased competition from other categories of alcohol, and economic constraints.”

The demand shift is has seen tasting room traffic this year in Sonoma County and the Napa Valley fall -5.9% and -5.3% respectively, with sales drops of -2.9% and -4.2% reported year-to-date. Multiple critically acclaimed wineries aren’t even open this year. Major conglomerate Vintage Wine Estates, which typically producers more than 2 million cases of wine per year, filed for bankruptcy earlier this summer.  

Bitter also notes that California growers had three consecutive very small crushes between 2020 and 2022 due to smoke taint and short crops. “The high prices the grapes received and the demand during COVID sent false signals about the health of the market,” Bitter explains. “It felt so much better than it was in reality, which has why the last few years have been so brutal.”

Bitter says many growers will not only struggle to cover costs, some are facing catastrophic losses. Growers that aren’t able to sell their grapes this season are opting to not even pick.

It’s worth noting that several growers are finding success catering to the non-alcoholic wine market. One of them is Rachel Martin, winemaker and co-founder of Oceano Wines in San Luis Obispo, who started producing a line of non-alcoholic wines called “Oceano Zero.” She also notes that she hasn’t bottled a new wine with alcohol since 2022 and is currently still trying to sell through that inventory.

Martin says the non-alcoholic wine consistently sells out and has “ironically” helped drive sales of her regular wines. Sales of non-alcoholic wine are projected to grow at a rate of 7+.9% through 2030, according to Grand View Research. And as Martin has witnessed first hand, 78% percent of people who buy such wine also consume alcohol. (Sources: The Drinks Business, San Francisco Chronicle, Vinetur)

chart showing leading grape varieties crushed in California
Grapes burned by the Glass Fire still hang from some of the vines at Spring Mountain Vineyards in St. Helena, California, on Friday, October 2, 2020. (Alvin A.H. Jornada / The Press Democrat)

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