Several weeks back I posted a blog article titled “The Wine Industry is Changing” (March 18, 2020). The article did not paint a rosy picture of the wine industry then or in the future. Along comes the coronavirus pandemic and things have gotten worse.
Before I get into the current Napa Valley situation let me share a couple of interesting facts with you. The numbers I am sharing are from 2018, a little behind, but not much.
Behind the wine industry, tourism is the second largest employer in Napa County. Tourism employment reached 15,872 people in 2018 with a combined payroll of $492 million.
Above all, wine is and will continue to be the main attraction for those folks who visit Napa Valley. It is reported that 97% of the Valley visitors stopped by a winery on their trip and 73% visited at least one tasting room.
As of today, all the tasting rooms and restaurants in Napa Valley are closed, and tourism is almost nonexistent. The wineries have laid off some employees, not all. The wineries have shifted from on-premise sales (tasting rooms) to off-premise and online sales or Direct to Consumer Sales (DTC).
I spoke with Kelly Peterson founder/partner at Switchback Ridge wines this week and her response to the question of “what’s happening in Napa Valley” was interesting. They have had to close their tasting room and are pushing DTC sales via the internet. They just pushed out a special on their 2014 wines and it was a huge success even with the 25% purchase discount.
Kelly further commented that wineries across the country that have relied on sales to distributors are really struggling without a DTC sales program in place. She also said that grape sales from their family vineyard are a concern. Some long-term buyers are asking for payment terms, and in some cases, less grapes.
She commented that autumn should be an interesting time, especially if the harvest is large and if wine sales continue to decline.
I have also been talking with our Glenwood Cellars winemaker Bruce Devlin at Ballentine Vineyards in St. Helena. We have 2019 wines to blend and 2018 wines to bottle. Coordination is a big item to contend with during the pandemic. We are still hoping to bottle our 2018 Adler’s Blend and our 2018 Glenwood Cellars Merlot in May at the winery. Unfortunately, I will not be able to travel to Napa Valley for the bottling and will have to postpone the wine blending of our 2019 wines until later in the year when it is safe for me to travel.
Good friend, Sean Larkin of Larkin Wines, reports much the same. His sales are off dramatically, and the future is very unclear for Larkin Wines. His efforts at DTC have been helpful.
WineBusiness.com just posted an article with the headline “U.S. Wine Losses from Covid-19 Could Reach $5.94 Billion.” The article estimates this is the loss for the country’s 10,000-plus wineries and wine grape growers in 2020.
Despite the large growth in DTC sales this spring and the increase in sales at grocery stores and other outlets, the closing of tasting rooms and projected declines in direct-to-consumer sales will offset the short-term sales gains made during the first part of the pandemic. This pandemic is altering consumers wine buying habits in ways that may not be clear for a long time to come.
Most of the wineries in the U.S. (6,420) produce less than 1,000 cases per year. These wineries are going to experience revenue losses as high as 66%. It will be very difficult for these wineries to survive in the future.
It appears that the wine industry is in for some major adjustments in the future. I suspect that our wine buying habits will change in many ways. As I mentioned in my last article, 2020 may be filled with some great deals on wine. Be on the lookout for them.
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Look Forward To These Happy Things:
Upcoming LEX 530 Events!
Mother’s Day Brunch – Sunday, May 10, 2020 — CANCELLED
LEX 530 Wine & Dinner Club Dinner – Wednesday, May 20, 2020
LEX 530 Wine & Dinner Club Dinner – Friday, June 26, 2020
LEX 530 Wine & Dinner Club Dinner – Wednesday, July 22, 2020
LEX 530 Wine & Dinner Club Dinner – Friday, August 21, 2020
LEX 530 Wine & Dinner Club Dinner – Friday, September 25, 2020
Oktoberfest Dinner – Tuesday, October 27, 2020 — with Elkhart’s Iechyd Da Brewing Company
LEX 530 Wine & Dinner Club Dinner – Friday, November 20, 2020
Important Wine Holidays
May 1 – International Sauvignon Blanc Day (This Friday!)
May 9 – World Moscato Day
May 21 – International Chardonnay Day
May 25 – National Wine Day
June 26 – International Rosé Day
June 21 – Lambrusco Day
August 1-5 – International Albariño Days
August 4 – National White Wine Day
August 18 – International Pinot Noir Day
September 3 – International Cabernet Day