Napa’s Grape Crusher at the gateway to the valley.

Every year, Silicon Valley Bank puts out a highly anticipated wine report. This year’s news is cautionary at best, with only a few positive highlights.

On the bright side, the report predicts that fine wine sales will continue to grow, and overall sales in dollar terms are expected to increase—but only slightly. On the more sobering side, Silicon Valley Bank predicts that 2016 will see the first decline in U.S. per capita wine consumption in 20 years, and that wine sales are likely to remain flat for the fifth year in a row.

Because wine fared relatively well during the recent Great Recession, many in the industry believed that continued growth was nearly inevitable. But the report highlights that baby boomers, born between 1946 and 1964, fueled the recent wine boom, but now they are beginning to drink less.

The Generation Xers (born in the early 1960s to late 1970s) and millennials (born between the early 1980s and mid-1990s) do not seem to be making up the difference, according to the report: “While retaining the largest demographic footprint for wine consumption, baby boomers are now beginning a slow decline in consumption, which will accelerate in the next six years as the median-age boomer reaches retirement age.”

For the last few years, the wine industry has anticipated the millennial generation would replace the baby boomers. The belief was that this large new generation would consume wine regularly and also be willing to pay high prices. But this widely held belief may be wrong, with many millennials trading in wine for beer and spirits, more likely to buy a $5 craft beer instead of a $15 bottle of wine.

Why? Perhaps because the millennials lived through the Great Recession and came out of the recent recovery with an unprecedented estimated $1.3 trillion in college loan debt.

I have lived through many economic boom-and-bust cycles. Each time, there have been winners and losers, and each time there have been changes to the Napa Valley.

Some will remember 1980, when inflation was 13.5 percent and the economy was stagnant with high oil prices, and the unemployment rate in California hovered around 10 percent. If that were not enough, at that same time an almost microscopic sap-sucking insect, phylloxera, had found its way around a widely used rootstock called AxR1 that had been developed to thwart the insect that had decimated both American and French vineyards in the past.

For many Napa Valley farmers, it was a perfect storm: They were unable to afford ripping out their vineyards and replanting with phylloxera-resistant rootstock and then wait years for any return on their investment in what was an unstable economy. Instead they folded, forced to sell their land to those who could reinvest.

Only a few years later, by the mid-‘80s, the economy had stabilized, inflation was down and the unemployment rate dropped. Those who lost their land had been unlucky, but for the Napa Valley there seemed to be a silver lining. New investors who had come in brought with them new ideas and, often, very deep pockets. They planted vineyards using the newest rootstocks, tighter spacing and orientation to the sun to balance both sides of the vine with equal amounts of light. Quality began to improve.

There was a minor recession in the early ‘90s, but the Napa Valley powered through, still refining and defining itself within the world of wine.

In the ’90s, the price for Napa cab and merlot grapes both hovered around $1,500 per ton and had done so for years. At that time, merlot was receiving press coverage that was nearly as good as cab’s, and vineyard owners (and many wineries) started betting on merlot as the future of Napa Valley.

Stratospheric pricing for Napa cabernet is a recent phenomenon. And although Joe Heitz and many others helped push those prices higher in the late ’70s and early ’80s, it’s arguably Screaming Eagle Winery and Vineyards and wine reviewer Robert Parker Jr. who ushered in the era of ultra-expensive Napa cabernets.

The Screaming Eagle vineyard in Oakville had been purchased by Jean Phillips in 1986. For the first few years, she sold her fruit to various wineries but eventually hired relatively unknown winemaker Heidi Barrett to produce cabernet from only 1 acre (about 80 vines) of her vineyard. The first vintage (1992) was released in 1995 for $75 per bottle. Parker scored that wine at 99 points, and the same bottle now can sell for more than $10,000.

By the mid 1990s, the influential Parker had become a household name. His 100-point rating system for wine had caught hold of the public’s desire for an easier way to understand wine, and through the use of his uncanny memory and vivid, but simple, descriptions, Parker’s reviews became the de facto litmus test for buyers looking for high-value wines.

The economy was soaring in the mid-‘90s, and wines had become a way to show both economic vitality and an ability to suss out “cult-status” finds: Parker had cracked the code to allow busy, successful people the ability to purchase exclusive luxury items with a simple way to collect and share wines with confidence.

At about the same time, many Napa Valley grape farmers were beginning to complain that their merlot and cabernet grape prices had remained flat for years while their costs had continued to rise. But those farmers who had planted cabernet would not have to wait for long. Those who planted merlot were a different story.

Starting around 1995, prices for Napa cabernet sauvignon grapes surged ahead at a fantastic rate, growing from about $1,500 per ton in 1994 to nearly $6,000 per ton in 2014. During the same period, merlot grape prices stagnated, reaching around $3,000 per ton.

Because of this dynamic, you might imagine that most grape farmers have been ripping out anything that is not cabernet and replanting their land with cabernet sauvignon. And if you did, you’d be correct.

The Napa Valley wine industry has witnessed many changes, most of which were not expected or easily anticipated. Often, they were fueled by economic cycles.

In the future, will changing demographics, economic cycles and evolving consumer tastes have an impact on Napa Valley’s wine persona? Time will tell, but if history is any indication, the answer is likely a resounding “yes.” Even so, in the short term you can count on there being plenty of Napa Valley cabernet grapes for sale to anyone who can afford them.

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