Just as uncontrollable financial, demographic and other forces have wreaked havoc in Hollywood, California’s wine industry is now reeling from epochal stresses that are grinding down yet another mainstay of the state’s economy.
The aging of baby boomers who long served as the industry’s mainstay, changing tastes among young consumers, a flood of cheaper foreign wine, a surplus of U.S. products and new medical warnings against alcohol are shaking a once seemingly impregnable business to its core. Then there’s the possibility of Trump tariffs and retaliatory duties — even an outright boycott by Canada, California wine’s largest export market.
“We’re really hit by a perfect storm of crisis today,” says Natalie Collins, president of the California Assn. of Winegrape Growers.
After nearly three decades of annual growth, U.S. wine sales and shipments have fallen into a prolonged slump.
Gone are the days when international acclaim for Napa and other California products seemed to promise an endlessly bright future. Now, thousands of grape vines are being destroyed because there’s no market for their grapes.
There was a brief reprieve when COVID’s stuck-at-home consumers flocked to wine clubs and sparked online buying binges. Tasting rooms that once entertained masses of customers are now struggling to survive. Those good times seem to be fading fast.
And looking beyond its present woes, the industry faces tectonic shifts in demographics that suggest a potentially irreversible industry failure to market its products and build a new generation of customers. Lower-priced wines are doing particularly badly as young adults favor craft beers, seltzers, kombucha, ciders and other flavored beverages with little or no alcohol.
Meanwhile, medical research is turning against the old idea that moderate consumption of alcohol, especially wine, might actually offer health benefits. Instead, some experts now say even the smallest amounts of alcohol consumption are potentially dangerous.
At the same time, wine producers in California and across the country are battling a surge of imports, not just from Old World stalwarts such as Italy and France, but from newer players such as New Zealand, Argentina and Chile.
These imports have had an especially big impact on grape growers in the Central Valley, which specializes in producing grapes for inexpensive wines — those under $11 a bottle. American consumers can typically find better quality foreign wines at that price range, thanks in part to government support that the U.S. industry lacks. What’s more, some imports are blended with domestically produced wine and sold as American appellation wine.
California accounts for about 85% of wines produced in the United States. Thousands of grape growers and wineries, many of them small and generations-old, dot the state from Mendocino to Riverside. The Wine Institute says the industry supports employment for more than 420,000 Californians and generates $73 billion in economic impact to the state.
U.S. wine shipments by volume last year fell 4.2% from 2023 and were down 11.3% from five years earlier, according to Jon Moramarco, a UC Davis enology graduate and managing partner of bw166, an alcohol beverage research firm. Wine as a share of all alcoholic beverage served in the U.S. dropped to 16.4% last year, from 18.2% in 2018, he said.
The parallels with Hollywood’s current troubles are striking. In the case of the entertainment industry, likewise a mainstay of the state and Los Angeles economies, shifting tastes among younger customers — supercharged by streaming and dramatic new technologies — have undercut the very foundations of the industry.
And cheaper, often foreign venues for production have inflicted heavy blows on in-state operations, causing substantial job losses.
In California’s wine country, mechanization means grapes are now mostly picked by machines. But the bigger problem today is that about half of all the wineries in the state are experiencing negative growth, including the biggest names in the business: Gallo, the Wine Group and Constellation.
In fact, a key industry measure of sales for the eight largest wineries in the U.S. — which account for the majority of domestic shipments — was minus 3.9% in 2023, according to the latest annual wine report from Silicon Valley Bank, which has about 500 West Coast winery clients.
Modesto-based E. & J. Gallo Winery, by far the industry’s largest, is — like most others — privately held and declined to comment. But financial reports filed by Constellation and a handful of other publicly-traded wineries suggest the industry’s sales decline deepened last year. Wholesalers and distributors continue to draw down bloated inventories.
Rob McMillan, Silicon Valley Bank’s executive vice president and wine expert, says it may be several years before the industry starts to grow again. “We’ve built to over-produce; we’ve got to balance that out,” he said.
Other major wine-drinking countries face similarly strong demographic headwinds, but the U.S. is the biggest wine market in the world and is struggling more than most. Although the premium wine side is doing relatively better, the entire industry, from wineries to distributors to retailers, is adjusting to the new reality.
California winegrape farmers have been especially hard-hit. Growers had planned to harvest about 3.2 million tons of grapes last year, but the actual amount of grapes bought and crushed for wine was 2.8 million, the lowest in 20 years, according to data from the U.S. Department of Agriculture.
That means about 400,000 tons of winegrapes were left on the vines to rot, much of that in Lodi in the upper San Joaquin Valley, home to vast acreages of high-production grapes for cheaper wine that are more susceptible to import competition.
Craig Ledbetter, a third generation farmer who owns and manages about 18,000 acres of winegrapes from Mendocino to Santa Barbara, says he left more than 10% of the grapes in Lodi unpicked last year. He also ripped out several hundred acres of vineyards in Lodi and elsewhere, permanently removing them from production, while also planting more pistachios.
“We see the writing on the wall,” he said.
Since 2019, Ledbetter’s Vino Farms has cut about 10% of its workforce, now at about 300. That’s better than most. Statewide, employment at grape vineyards is down 26% from 2019, according to California’s Employment Development Department.
Over that same period, the number of winegrape-growing establishments in California dropped 13% to 1,244, although there are thousands of more tiny grape farms and vintners operating in the state, many of them hobbyists.
Ledbetter remembers when everything was on wine’s side: There was the so-called Judgment of Paris in 1976 when French oenophiles, in blind tasting, chose Napa as tops for both red and white wines. And into the 1990s, studies were reporting how a glass of wine a day was good for the brain, the heart and longevity.
The big baby boom generation was converted, and from the early 1990s up to the late 2010s, the U.S. wine industry was growing on average 3.5% a year, triple the rate of all alcoholic drinks, says Moramarco of bw166.
But in more recent years, the World Health Organization and other groups have been practically railing against alcohol consumption, publicizing it as toxic and a leading cause of disease.
The youngest of the baby boomers are now in their early 60s, the peak age of wine preference, surveys show. And as people get into their 70s, they drink significantly less alcohol.
According to Gallup, over the past two years, the share of adults who believe that moderate consumption of alcohol is not healthy has increased from 30% to 45%, driven by people under 30.
Ledbetter thinks part of wine’s decline has to do with changing social norms. Growing up, he remembers wine being served regularly at family meals. “We don’t have family dinners, so wine isn’t on the table,” he said.
He and other growers in Lodi blame imports for a lot of their financial problems. The value of foreign wine coming into the U.S. has jumped 60% since 2010 to $7.1 billion last year, with imports of sparkling wines like prosecco from Italy nearly tripling to $1.8 billion over that period, according to Census Bureau data.
By comparison, U.S. wine exports have changed little in the last 15 years; the total value was $1.25 billion last year, with almost half going to Canada and the United Kingdom.
The strong dollar which makes U.S. goods more expensive abroad is one factor, but foreign governments provide subsidies and a lot more support to their wineries.
Unlike Hollywood, which gets millions of state tax credits for local filming shoots, just about the only thing U.S. wineries can bank on are excise tax rebates for imports in proportion to what they export. This program helps big wineries and may even encourage them to buy some more imports, but it’s at the expense of state-produced winegrapes, driving down prices and helping create a glut of unwanted fruit on the vines.
“There’s no defense of this,” says Stuart Spencer, executive director of the Lodi Winegrape Commission, which represents more than 750 winegrape growers.
The prospect of higher tariffs on imports from the new Trump administration could narrow the trade deficit in wines, but analysts warn of retaliatory tariffs from Canada and other countries, which will hurt American wine exporters, as well as increase costs for all domestic producers, even for things like corks and bottles.
“It’s not a clear-cut plus. The industry is worried about knock-on effects,” says Terry Lease, professor of wine business at Cal Poly San Luis Obispo. Besides, tariffs don’t address the underlying problem of weak demand.
After decades of growing much faster than beer and spirits, wine now lags behind. In its 2024 fiscal year, Constellation Brands, which includes Modelo beer and Robert Mondavi wines, reported that its total beer sales jumped 9% while its wine segment fell 10%.
Health concerns of wine’s higher alcohol content is one factor, but so is its relatively higher price compared with other alcoholic drinks. The average price of a typical bottle of wine rose 8% just in the last year, to about $19.19. Beer prices rose by 4.6% and spirits actually dropped, according to bw166 data on beverages bought at grocers, liquor stores and other off-site premises.
The wine industry is starting to do more to try to attract younger customers. Ledbetter’s Avivo winery in Sonoma County, for example, is devoting more acres to regenerative farming and producing organic wines that use less brix, or sugar, to bring down the alcohol content.
“The younger generation — they want to know what’s in the fruit, what they’re drinking, is it better for the environment?” said Ledbetter.
Silicon Valley Bank’s McMillan agreed: “We don’t present wine as natural, plant-based, non-GMO. We don’t print calories on the bottle. People believe wine has more sugar than other drinks. That’s not true, a lot of it is fermented out. Most wines are dry.”
It’s not just changing the messaging, but doing more of it. “We just haven’t done much in advertising, it’s our fault,” said McMillan, noting that the beer and spirits industry spends 10 times more on advertising.
“It’s almost like the wine industry thought the anti-alcohol movement had lost its steps and was going away,” he said. “We thought we didn’t need to advertise, didn’t have to promote wine. We became self-absorbed.”
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