Is Sonoma reaching ‘peak wine’?
Wine industry growth has been a rocket for 20 years, its trend line drawn like a mountain incline on U.S. industry graphs. Since 1993, when 370 million gallons of wine were consumed in America, consumption has more than doubled – to 770 million gallons nationwide today.
That’s 2.3 gallons of wine annually for every American man, woman and child, an ample pour by anyone’s measure.
California is a major player in the wine game, with 3.8 million tons of grapes expected to be processed statewide this year. And Sonoma, of course, has long been all in, the city’s business linked almost exclusively, and perhaps now inextricably, to wine.
But trends can be as fickle as culture itself, and according to the “State of the Wine Industry 2018” report recently released by the Silicon Valley Bank Wine Division, there may be a dark star on the horizon.
“The U.S. wine industry is at the tail end of its largest growth period in history,” it reads. “After more than 20 years of straight-line growth trends, total volume growth is leveling out. The economic circumstances that set the stage for the industry’s 20-year growth trajectory cannot be repeated.”
In fact, growth for 2018 is predicted to decline by as much as 10 percent, down from 2017’s 10-14 percent growth rate.
What does this mean to a place like Sonoma?
Deepak Gulrajani, owner and winemaker at Nicholson Ranch, already has a pretty good idea. “Business has definitely been down,” Gulrajani said. “Down under what was expected, even.”
But Gulrajani blames Mother Nature rather than consumer trends.
After last year’s fires things ground to a halt, Gulrajani said, and his winery - and many others - were completely shuttered through October.
“I expected a decline into spring after the fires, but then thought that in summer business would pick up,” he said.
It did, for a while. And then it didn’t. Once again, Gulrajani credited a natural disaster.
“All of the news, you know, the Mendocino fire, the Redding fire, they had a big impact on people coming from out of state. The effect of that kind of news can be felt three months after the fact. August has been very slow, off maybe 20 percent.”
Mark Leonardi, general manager of Sonoma Valley Wine Trolley, which ferries thirsty tourists to four wineries and feeds them lunch for $99, agreed.
“After the fires last year we did see a decline in tourism in general and do hear that from some of our winery partners,” Leonardi said. “However, our business is still ahead of sales from last year and still bringing our guests to Sonoma wineries on a steady flow. I think the [national] press shocked the tourists into thinking that Sonoma had burned down completely, which we all know was not the case.”
But Don Rickard, owner of Platypus Wine Tours, believes something less temporal than the breaking news cycle is beginning to affect wine industry traffic. “People are starting to show a reaction to the run-up in price here,” said Rickard. “From hotel rooms to tasting fees to bottles of wine, everything’s been on a long steady march up. Wineries were really aggressive trying to find the ceiling on tasting fees and inventory price. It had to top out somewhere, and consumers are speaking.”
The State of the Wine Industry report divides the industry’s customer base into four generations, and notes their preferences to forecast sales trends. “Matures” (age 69-plus), “Boomers” (age 51-68), “Gen Xers” (age 39-50), and “Millennials” (age 22-38) all imbibe differently, and projections suggest the wine industry may be forced to adapt.
According to the report, Boomers and Matures are more likely to have consumed wine in any given week, while Millennials and Gen Xers are more likely to have consumed liquor or beer. But by 2021, Gen Xers are predicted to surpass Boomers to become the largest wine-consuming demographic in the U.S and, by 2026, Millennials will overtake the Gen Xers.
So wine is an acquired taste, then, with time on its side?
Yes and no, according to the report.
“Successful wineries 10 years from now will be those that adapted to a different consumer with different values - a customer who uses the internet in increasingly complex and interactive ways, is frugal and has less discretionary income than their predecessors,” it reads.
Rickard agrees. “The internet is leveling the playing field for the industry in some ways, with more remote wineries holding their own against the more visible go-to’s. Wineries are going to have to adjust their marketing plans to reach new consumers in new ways.”
At Nicholson, where wine club membership accounts for “more than half our business,” Gulrajani plans to play through with old school optimism. “As long as you’re consistently making good wine, customers will come.”
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