This year’s harvest is coming to a close with what appears to be an excellent vintage. However, the wine industry is facing worrisome challenges from a changing marketplace, accentuated by declining consumption, rising production costs and higher interest rates. These factors combine with overabundant past harvests to fuel an oversupply situation exacerbated by bulk grapes being returned to the bulk wine sector as unsold wine.
“I think that the industry is pretty darn risk-averse,” says Marc Cuneo, a wine broker and partner at Turrentine Brokerage. “After going out and trying to sell wine from bulk into the consumer retail space and not getting much positive feedback, we’re less likely to see opportunistic buyers putting together 10,000 cases of Sonoma Cabernet from the spot market.”
“There’s a lot of excess inventory in the marketplace today, with far too many grapes than the wineries need right now,” agrees Christian Klier, North Coast Grape Broker for Turrentine. “I would argue that this started happening in 2019 after 2018 produced the largest crop in the history of California.” The Turrentine team even called this out in its January 2019 newsletter, “A new year is underway, and a growing percentage of the wine industry is begrudgingly accepting the realization of a market transitioning to excess.”
During that time, wineries began replacing white grapes with reds to reflect consumer demand. The result is a macro theme this year of less white wine and white grapes across the state versus the oversupply conditions in the red wine markets.
“There are roughly 27 million gallons available on the spot market,” Cuneo warns. “Whether you’re growing grapes, selling wine or making wine, we’re facing tremendous challenges ahead.”
To help compensate for the overage, some wineries have already begun pulling vineyards out to adjust their future inventory and increase profitability. Says Klier, “It’s already started happening in the Central Valley, where over 20,000 acres, maybe even 40,000 acres at this point, have been pulled out.” However, “it is so expensive to remove vineyards in the coastal zones that on the North Coast, they’re mothballing vineyards and just letting them sit.”
Turrentine’s goal is to help its clients navigate the changing market. “We work to help our clients better understand their position in the whole marketplace,” Cuneo says. “Understanding what their options are and their overall business practices, whether they’re a winery, an independent grower or a large investment company grower. How can they move successfully through these cycles, especially with the amount of confusion and challenge that’s in this market.”
To learn more about how Turrentine Brokerage can guide you, attend their presentation and stop by their booth 128 at the WIN Expo on December 5, 2024
WIN Expo Exhibitors by Category:
North Coast Wine Industry Expo – WIN Expo – at the Sonoma County Fairgrounds in Santa Rosa, CA on Thursday, December 5, 2024.
