The California wine industry is in the doldrums as it faces three challenges at once: consumer spending on wine is declining, inventory is backed up in the sales pipeline and there’s a glut of grapes and bulk wine left over from the 2024 harvest. The last hazard, the oversupply of grapes, poses an immediate threat. Many growers, even in top regions like Napa, are struggling to sell their fruit. Experts estimate tens of thousands of acres of vines will need to be pulled up to fight the oversupply.
“It's a tough situation. There's no doubt about it, where we sit as an industry,” said Glenn Proctor of Ciatti Company, a global wine and grape broker based in Novato, Calif. “We're kind of going through some resets, trying to understand where we're going to go in the future.”
Christian Klier, North Coast grape broker for Turrentine Brokerage, also based in Novato, agreed. “There will be huge changes in this industry, with more pieces about to fall off the playing board here in the next year or two.”
After the Boom, a Decline
No company exemplifies the industry’s troubled times more than Vintage Wine Estates, which filed for Chapter 11 bankruptcy in July. The Sonoma-based firm owned dozens of California wineries, including Clos Pegase, Swanson and B.R. Cohn, all of which were auctioned off to various buyers in September. VWE’s founder built the company by aggressively buying underperforming wineries and wine brands. The goal was to turn them around. But when the ups and downs of COVID-19 hit, coupled with slumping sales and higher interest rates, the company could not continue.
The writing has been on the wall for wine in recent years, although many in the industry paid little heed. Wine consumption in the United States began decreasing in 2021. Last year, sales volume dipped 2.8 percent to 319.2 million 9-liter cases, a more than 9-million-case decline, according to Impact Databank, a sibling publication of Wine Spectator.
[article-img-container][src=2024-11/ns_grape-glut-bins-110624_1600.jpg] [caption= Sonoma Pinot Noir awaits crushing; after decades of swelling demand, the wine market has cooled off.] [credit= ] [alt= Sonoma Pinot Noir in large bins just after picking.][end: article-img-container]
“If you go back from the early 1990s until 2018, we were growing overall consumption 2.5 [percent] to 3 percent on average a year,” said Proctor. Multiple factors came into play starting in 2018. That grape harvest was the largest in California history, creating a glut of grapes, and then in 2020 the pandemic and wildfires in Northern California created a Jekyll and Hyde situation for the industry. Demand boomed as Americans hunkered down at home, while at the same time, producers lost much of the 2020 crop to smoke taint, decreasing supply. “That kind of masked the situation a little bit,” Klier said.
Things came to a head this spring as wine producers ran the numbers and cut their grape budgets. “It wasn't just one winery. It was a lot of wineries. ‘No, we're not renewing any contracts, and can we cut our amount of fruit that we take?’” said Kris Hicks, vineyard manager of Vimark Vineyard Management, which farms 820 acres in Northern California.
No Grape Is Safe
Proctor and Klier said the hardest-hit varieties were Sonoma Chardonnay and Cabernet Sauvignon, even from prized Napa Valley. “And you can’t give Zinfandel away,” said Hicks, who dropped 25 tons of Zin on the ground this year.
“Napa Cabernet growers saw the highest district average price in the history of the county in 2023—almost $8,800 per ton. So, no one thought the market could shift that quickly,” Klier said. “But we had upward of 10,000 tons of Napa Cabernet listed for sale with us this growing season. In the previous three years, I struggled to find any Napa Cabernet.”
Bidding wars for Napa Cabernet were common in the previous three years, reaching as much as $10,000 a ton for valley floor and up to $20,000 a ton in prime appellations such as Oakville and Howell Mountain. “And this year, I know of fruit that is going to be left on the vine in those AVAs that was selling for $15,000 to $20,000 a ton last year,” Klier said.
Mendocino and Lake counties and Lodi are the hardest-hit growing regions. One grower Hicks works with in Mendocino was forced to sell 210 tons of Chardonnay for just $500 a ton. “And he was lucky he got that for it, because it was just going to hang on the vine if not.”
[article-img-container][src=2024-11/ns_grape-glut-vine-110624_1600.jpg] [caption= Ripe Zinfandel hangs on the vines, awaiting harvest; while these clusters were picked, other growers simply left their Zin on the ground.] [credit= ] [alt= Zinfandel bunches hang on vines in Sonoma.][end: article-img-container]
Carla Forchini and her brother took over farming of their father's 67-acre Dry Creek Valley vineyard when he passed away in 2022. She saw signs of trouble during the 2023 harvest when she struggled to sell her Cabernet Sauvignon.
“Cabernet is a little bit of a harder sell in Dry Creek Valley,” Forchini said. “I met with a lot of Napa Cabernet people. They're dipping into the Sonoma grape pool because they can blend up to 15 percent of Sonoma grapes and don't have to tell anybody. This is a way that they're saving money.” But after selling all her Cabernet for a loss in 2023—“It was a terrible deal, just [covered] picking costs”—she leased the vineyard to Redwood Empire Vineyard Management for 2024.
Wineries typically turn to the bulk wine market to sell off excess juice, but it’s flooded with unwanted wine right now. Turrentine alone had 30 million gallons of bulk wine for sale at one point this year, while 12 million to 15 million are the norm. “At the beginning of the 2023 harvest,” said Hicks, “you could get $30 to $40 a gallon for bulk wine. It's down to $10 to $15 now, if you're lucky to find a home.”
Trying to Find Balance
Many growers are pulling out vineyards. Hicks has removed nearly 100 acres of vines in the past two seasons, mostly old or diseased vineyards. Proctor estimates that between 30,000 and 40,000 acres of vines have been removed in the past year, much of it in Central Valley regions like Lodi. “I think we're going to continue to see more acres removed.” Before the removals began, California had approximately 600,000 total acres of wine grapes, with 150,000 of those acres in the Central Valley.
Turrentine predicts the market will begin to recover in 2026 as supply and demand comes into equilibrium, Klier said. Meanwhile, consumers may start seeing some real deals as producers lower prices to reduce inventory and take other cost-cutting actions. “To some degree, it's going to be a benefit for consumers, at least in the short term,” Proctor said.
Klier agreed. “An oversupply situation means there's going to be a lot of affordable wine—high quality wine—out there for the consumer.”
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