Whether winemakers, sellers and distributors see their industry’s glass as half full or half empty, many see only one constant — change.
At the annual Wine Industry Financial Symposium on Tuesday morning, a variety of wine industry figures described the range of threats or opportunities to their livelihoods. While many incomes limp along with the economy and grape supplies remain tight, more kinds of retailers are opening up shelf space for wine while younger generations show the promise of becoming the nation’s most wine-loving generation yet, they reported.
“There are headwinds and tailwinds for the wine industry,” Danny Brager, a wine industry analyst for the Nielsen Co., told audience members at the Napa Valley Marriott.
Founded in 1992 in Napa, the wine symposium gathers producers, marketers and analysts to discuss current trends in the industry. This week, much of the discussion revolved around tightening supplies of Northern California grapes following consecutive smaller-than-average harvests in 2010 and 2011.
“California’s supply is at the point where we can’t move the needle much,” said David Freed, chairman of the Silverado Group. “Americans are drinking more wine, and demand marches on at 2 or 3 percent of year, (but) our supply is somewhat constrained for a number of years.”
Planting of new grapevines is barely keeping up with the exhaustion of old plants. Freed attributed this trend to tightening environmental regulation of California farmland and the growing competition with nuts and row crops in the Central Valley, a region with the surplus land that Napa County long ago exhausted. About 4 percent of vines stop producing fruit and must be replaced each year, he said.
Anxiety about grape prices marked the thoughts of some of the 25 winemakers and industry figures who took part in two surveys organized by Robert Smiley, director of wine studies at UC Davis. Smiley said some winemakers in the anonymous surveys described having to pass higher fruit costs to consumers earlier this year, though others said the expected increase in the 2012 crop could loosen supplies by mid-decade.
If wine production has become costlier, however, other industry figures countered that the market itself is broadening and providing more ways to profit — sometimes in unexpected ways.
Innovations in blending, promotion, importing and even packaging are extending wine’s reach beyond its traditional customers, according to Smiley. Recent market-expanding products have included the paper-boxed but critically acclaimed Black Box, transnational offerings like the Layer Cake line (whose varieties range from Italian primitivo to Argentine malbec), and new flavor combinations like chocolate red wine and orange-infused chardonnay, he said.
Meanwhile, other symposium speakers pointed to signs the newest generation of drinkers is showing a wine enthusiasm echoing that of baby boomers who helped lift California vintners to prosperity in the 1970s and 1980s.
Twenty-seven percent of “millennials,” Americans ages 21 to 35, are “core drinkers” consuming wine at least weekly — the highest percentage in any age segment, according to John Gillespie, president of the Wine Market Council.
Despite such promising signs, he cautioned, winemakers must keep their eyes on challengers — and unrealized markets — outside their industry, said Brager, the Nielsen wine industry analyst.
While U.S. wine sales have risen every year since 1994 even through two recessions, Brager notes the beverage’s sales growth now trails that of high-end spirits and craft-brewed beer and cider. The analyst also called for wine companies to market more heavily and precisely to Latinos as their share of the U.S. population grows, from 16 percent today to a projected 30 percent in 2050.
Bill Cascio, director of winery relations for the distributor Glazer’s, pointed at the broadening of wine choices — from the popularity of Australian and South American labels to the extensions of existing labels — as evidence producers and sellers can take nothing for granted in the modern market.
“It’s a moving target where they buy, what they buy, the type they buy,” he said.