A new estimate says the Napa County wine industry sustained about $80 million in damages from the Aug. 24 magnitude 6.0 earthquake, a blow to its bottom line but not as severe as originally feared.
Silicon Valley Bank prepared the estimate in the aftermath of the earthquake’s devastation, and says in a Sept. 5 report to the Napa County Board of Supervisors the damage estimate is conservative and is likely to grow as more damage reports trickle in.
It also put a range on the overall estimate of $70 million to $100 million. Original estimates by the U.S. Geological Survey in the days after the quake said Napa County as a whole could have sustained up to $1 billion in damage, but those were based on models. The estimates have been revised down since.
The report says the worst damage to wineries and warehouses was in the Carneros, Mount Veeder, Yountville and Oak Knoll regions, although warehouses fared much better than wineries because of modern building standards and recent construction.
The bank estimates that 60 percent of the county’s more than 450 wineries sustained some level of damage, although only 25 percent experienced moderate to severe damage.
The report classifies losses of more than $50,000 as moderate, but it noted that some individual wineries sustained upwards of $8 million in damage or lost revenue. The Hess Collection winery on Mount Veeder, for example, has estimated it lost $4 million in retail value due to thousands of broken cases or spilled gallons of wine.
In the analysis, researchers say wineries sustained damage to their buildings, equipment, inventory, barrel storage, and private bridges or wastewater ponds. They also lost revenue because of closures to their tasting rooms and the loss of wine from their wine libraries.
Vineyard owners also experienced an estimated $10 million to $20 million in damage, which is part of the overall damage estimate. They had damaged machinery, supplies, and irrigation and piping infrastructure, while the quake delayed harvest for some vineyards and that’s expected to cost them revenue this year.
For warehouses and wine storage, the quake is estimated to have caused several million dollars in losses, according to the report. They were not significant enough to include in the overall damage estimate, the report says.
Silicon Valley Bank based its estimates on a survey of about half of Napa County’s wineries, and knowledge of the wine industry’s market, inventory and production capacities, according to the report.
The Napa Valley wine industry is estimated to produce $50 billion in economic impact on the U.S. economy, according to a 2012 report commissioned by the Napa Valley Vintners.
Despite the wide-reaching effects of the industry’s economic might, the bank says the blow from the earthquake’s damage will fall heaviest on local vineyard operations, smaller wineries near the epicenter, and employees who live and work in Napa County.
Larger wineries owned by publicly traded companies were reticent to provide details on damages they sustained, so the bank’s analysts had to do rough estimates based on where they were located and what kinds of production capacities they have, according to the report.
Other wineries and custom-crush facilities were still taking stock of damage and cleaning up from the earthquake, and were therefore unable to provide a good damage estimate to the analysts.
The report says the majority of wineries who reported damage said they lost bulk wine inventory, less valuable than bottled wine that commands a higher price to retailers.
But ultimately, the report considers any finished Napa Valley wine that was destroyed in the quake as irreplaceable, because grapes from another appellation cannot substitute for wine from estate-grown grapes.
“Napa Valley wine carries a worldwide reputation, and wine produced at any winery is specific to the soil,” the report states. “Business losses will continue through the next several years as wine is sold.”