Any business that has endured the gamut of challenges that arose in 2020 has something to celebrate. The mere act of survival this past year is a testament to unbelievable tenacity, adaptability and a strong customer support system.
For those working within the Northern California wine industry, this past year has been especially daunting. Even before the pandemic hit, wine producers and grape growers were facing slowing demand exacerbated by oversupply and increased competition from a flood of new wine brands as well as alternatives such as hard seltzers and non-alcoholic options.
Then the COVID-19 shutdown ended most in-person wine events. The experience reinforced the idea that most people buy and drink wine not as a solo endeavor but instead as a means of being social. When Zoom tastings replaced in-person events, they often fell flat.
If the pandemic were not enough, numerous fires struck the region and resulted, for a tragic few, in the loss of life and infrastructure. Everyone has had to deal with ongoing power outages, increased concerns over smoke-tainted grapes, labor restrictions due to COVID-19 protocols and a further reduction of tourism in an already dismal year.
And yet, here we are: Quality wine is still being made, and businesses are just now beginning to lift their heads to peer into the future.
For the most part customers won’t notice the challenges in the wine industry in any overtly negative sense. In fact, for wine-drinkers the options for delicious and diverse wines has perhaps never been better. And once travel returns to normal it is reasonable to imagine that visitors will flock to beautiful places, such as the Napa Valley.
The following trends will affect wine professionals and imbibers in 2021. I have come to this list from countless conversations, research and personal experience in the wine industry over what has been a truly historic year.
The number of wineries in America has exploded over the last few decades. In 1970 there were 441, whereas today there are well over 10,000. In the Napa Valley it has been even more dramatic. In 1970 there were 240 wineries, but today — using the Department of Alcoholic Beverage Control (ABC) data — the number of Type 2 and Type 17 licenses (the type needed to sell wine) number more than 1,600. Yes, I know that Napa Valley Vintners has only 550 member wineries, but the ABC data points to many more wine producers out there who make the Napa Valley their spiritual homeland.
Quick history lesson: In 1889 the Napa Valley had more than 140 wineries and over 16,000 planted acres of wine grapes. However, because of the spread of a vineyard disease (Phylloxera), a global pandemic that killed a million people (the Russian Flu of 1889), economic insecurity (the market panics of 1893 and 1896) and changing consumer preferences (the temperance movement was on the increase), by 1905 only around 2,000 acres of vineyard and a handful of wineries remained.
Am I saying that what happened in the late 19th century might portent what the Napa Valley faces in the near future? Not necessarily, but I am pointing out that everything is subject to change. Those who claim that anything is 100% reliable and static either have a limited understanding of history or have their own motivations for telling such fairy tales.
Smaller wine lists at restaurants
Like the wine industry, restaurants have also been hit hard by 2020. As many restaurants shift from indoor dining only to adding outdoor dining and takeout alternatives, having extensive wine lists with hundreds of options has become both impractical and prohibitively costly. The result is that most eateries that sell wine are creating slimmed-down and focused wine offerings.
At the same time, distribution companies are being pressured by their largest wine producers. This practice pushes out smaller brands. Because smaller wine producers are either trying to sell direct or because they have a limited share of voice in the distribution channel, the result is that large restaurant groups and chains often end up with less-distinct wine lists, often full of the most widely distributed brands, whereas small restaurants are left to piece together their wine offerings.
On the surface, this dynamic might sound like a bad thing, but it may actually end up being a source of consistency for large restaurants and a driver of diversity and eclecticism in smaller eateries.
In the future there might be an opportunity for curated food-delivery options that allow for wineries and restaurants to join forces, creating food and wine experiences that are delivered with a coordinated effort.
More boxed wine
Wine in a box is nothing new and is gaining more acceptance. Thomas William Carlyon Angove, a third-generation Australian winemaker, is credited In 1965 with placing his family’s wine in airtight resealable plastic bags inside boxes to reduce shipping costs and breakage.
Since then boxed wine has had fits and starts of popularity in the United States, with the early 1980s a sort of heyday before it fell into near obscurity in the 1990s, when boxes were considered a sign of questionable quality.
That is changing, however, and by 2014 wine in a box represented about 7% of all wine sold in the United States by value and 17.5 percent by volume. Sales of boxed wine are even higher today, with revenues surging 45% in the first half of 2020.
The drivers of the new interest in boxed wines include convenience, ease of portability and storability, lower prices, consistent quality and an environment-friendly lower carbon footprint than that created by transporting heavy glass bottles.
Lots of discounted wines
Wine is known as an inventory-intensive business. Producers make wine in one year and then store it for sometimes up to three-plus years before it hits the market. This is especially true for red wines.
Another complication is that wine is not sold only into each channel at the same price. Wine can be sold directly to consumers (DTC) from a tasting room or online but is also sold to retail and restaurant accounts or through massive distribution channels, each of which has different revenue implications for the producer.
For example, selling wine directly to the end user makes a winery the most money per bottle, whereas selling to a distributor makes them much less. It’s quite common that a wine that sold for $100 at a tasting room is purchased by a restaurant for $66 or bought by a distributor for only $50.
That is one reason most small wineries prefer to sell DTC. However, money is not the only driver here. If a winery can build a relationship with a wine-drinker then they might build a lasting bond. In the past such lasting bonds were possible with restaurants, retail and distributors, but over the last decade — and turbo-charged by 2020 — the fluidity in the labor market and the turnover of businesses is mind-boggling. Having a customer that you can hold onto for more than a year or two is exceedingly valuable and increasingly rare.
The result of all this? Expect wineries to attempt to use discounts to reduce inventory within all channels but with an emphasis on building personal relationships with the end user. As one vintner recently told me, “I’d rather reduce my inventory by giving my club member a 50% discount than try and slug it out in what has become the brutal world of distribution.”
Smoke becomes more common but less threatening
When smoke and ash from a nearby fire adheres to grape clusters they can impart off-flavors to the resulting wines. Even just two decades ago this “smoke taint” wasn’t a concern, but since 2008 the Northern California wine industry has been dealing with it on a nearly annual basis.
Because smoke taint is a relatively new phenomenon, there are few — if any — standard best practices for dealing with it. Consequently, the response from the industry has ranged from sheer panic to defiance. A growing chorus of winemaking voices claim that smoke taint is easily and effectively treatable with enzymes or intensive filtration or flash detente — quickly heating the grapes to a very high temperature with the hope of extracting color and flavor quickly, while “blowing off” (volatilizing) any negative aromatics.
These defiant winemakers also point out that there is no evidence that such smoke is harmful in any way. Some also now claim that “thick-skinned” red varietals such as Cabernet Sauvignon are nearly “immune” to smoke taint and that there are some easy ways to deal with even the most ash-covered grapes right in the vineyards.
One vintner I know had his crew use leaf blowers to remove the ash from his vineyards this year. Afterward, they used a water sprayer to wash each vine from the top leaves down to each cluster just before harvest.
“It’s costly for sure, but the cost of losing an entire crop is worse,” he said.
Does it work? According to this same vintner early tests indicate that it is “very effective.”
As more vintners figure out how to deal with smoke taint — and scientists catch up with data supporting or refuting their claims — I imagine that wine reviewers, too, will find some new adjectives to positively describe what has likely become a new and persistent flavor component for many local wines. Expect some future reviews to include descriptors such as “smoky pine,” “toasted hay” and even “seared menthol” for those vineyards near recently burned eucalyptus groves.
Inexpensive Australian wines
Up until just recently, Australian wine producers have had a cozy relationship with what had been a fast-growing Chinese wine market. Driven largely by pro-Chinese policies, China had given favorable tax advantages for any imported Australian wines with the result that China became Australia’s biggest wine export market.
But that has changed. Just last month, citing that Australia had improperly subsidized its wine exports, China enacted a 200% tax on all wines imported from Australia.
In reality, this new tax was for two reasons: 1) After a decade of impressive expansion, wine production in China is struggling because of drought, mismanagement and infestations of various vineyard pests, and 2) because Chinese leaders were angered by Australia on a host of fronts, including signing onto a mutual defense treaty with Japan, Beijing’s strategic rival, and also because Australia joined other Asian governments and the United States in objecting to China’s claims to much of the South China Sea. This is one of the world’s most important trade routes.
Because of this new dynamic, look for Australian wine producers to flood their second-biggest export market — the United States — as a place to sell their wines, often at a steep discount.
The wine business will grow increasingly taxing
The wine tax war between China and Australia is not an anomaly. Taxes are increasingly being leveraged against wine (and other alcohols) worldwide, including an ongoing spat between the United States and the European Union. On the surface, these might appear isolated or misguided efforts by governments to exert power. However, there is also a growing worldwide temperance movement that has at its root the power of taxes to curb alcohol consumption.
In 2018 the World Health Organization (WHO) released its “harmful alcohol use” report. The word “harmful” had been footnoted in their 2010 report as “Harmful in this strategy refers only to public-health effects of alcohol consumption, without prejudice to religious beliefs and cultural norms in any way.”
The report says that 3 million people died from harmful alcohol use in 2016 and that three-quarters of those who died were men. Their key recommendation from the report called for more taxes to pay for alcohol-related health costs and consumption-reduction efforts. In the forward to the 2018 study, Dr. Tedros Adhanom Ghebreyesus, the WHO’s director-general at the time, wrote, “We have no time to waste; it is time to deliver on alcohol control.”
2021 will be great for wine-drinkers but tough on producers
Consumers will have slightly fewer local options from which to choose on wine lists and at their local retailers; however, they’ll likely hardly even notice due to additional imports and the offer of meaningful discounts.
For producers, on the other hand, 2021 looks to be as tough as 2020. Price wars, fewer outlets, export markets tightening, an uncertain short-term economic outlook and tax pressures will combine to make for another gut-churning roller coaster ride.
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Tim Carl is a photojournalist who often focuses on the human stories in Northern California’s wine and food industries. A Napa Valley native, his many careers have included being a co-founder of Knights Bridge Winery, professional chef, FAA-licensed drone operator, meditation and fitness instructor and scuba instructor. business consultant at McKinsey and Co., and Ph.D. scientist with a fellowship at Harvard. Contact him at firstname.lastname@example.org.