Silicon Valley Bank Releases 23rd Annual State of the US Wine Industry Report

The 2024 report examines the latest consumption, pricing, sales data, and the most promising wine industry marketing strategies. It provides an in-depth analysis on the key trends impacting the US wine industry:

• While full-category wine sales by volume will be down for a third consecutive year;
• 2023 year-end premium wine sales will likely end with another year of positive value growth;
• Tasting room visitation was lower in the premium segment in 2023, but improvement is expected in 2024;
• Direct-to-consumer sales will grow again modestly in 2024; and
• Conditions for overproduction in the total wine category are present, but inventory supply is more balanced in the premium segment.

Full Report: https://shorturl.at/xHXY9

Napa 2023 could be the “Vintage of a Lifetime’

2023 is looking to be “one of the greats” according to the latest California Vintners Report.

Harvest began late throughout California, running anywhere from two weeks to a full month behind normal timing. Many varieties reached maturity simultaneously, leading to a compressed harvest. Some vintners expected to continue picking grapes into late November.

Did you know that California produces about 80% of the nation’s wine, making it the world’s fourth-largest wine producing region? More than 80% of California wine is made in a Certified Sustainable California Winery and over half of the state’s roughly 615,000 vineyard acres are certified to one of California’s sustainability programs (Certified California Sustainable Winegrowing, Fish Friendly Farming, LODI RULES, Napa Green and SIP Certified).

Winemaker and Winery Owner Comments on California’s Growing Season and Harvest

“The winter was unusually cold and wet, and we even got a rare 10 inches of snow,” said Christian Ahlmann, vice president at Six Sigma Ranch in Lower Lake, Lake County. “The soil moisture was restored while the vines were dormant, and they loved every minute of it when they woke up in spring.”

Despite the later start to harvest, Ahlmann said he was confident that the grapes would reach full maturity before the start of the rainy season. Best of all, he added, quality looks excellent — especially for Tempranillo and Syrah. “We feel great about vintage 2023,” he said.

For Renée Ary, vice president of winemaking at Duckhorn Vineyards, patience was key this year with grapes from Napa and Sonoma. “This is one of the coolest and latest vintages I’ve seen in the last two decades,” she said. “The rain was much needed and helped replenish the reservoirs and nourish the vines.”

The precipitation also brought extra canopy growth and led to 5% to 15% higher yields for most varieties. “The viticulture teams were diligent in thinning and doing crop adjustments where necessary,” she said. “This was key to achieving a balanced crop and promoting ripening in a very late year.”

This year’s Sauvignon Blanc shows bright and clean character, Ary noted, and Merlot is displaying early flavor development, balanced sugars and bright acids. Hearty tannins and complex flavors are hallmarks of this year’s Cabernet Sauvignon. “Our 2023 reds reflect the cooler vintage,” she said. “The wines are elegant and pure, with balanced alcohols and precise flavors.”

Alpha Omega in St. Helena experienced a similarly wet winter and spring, with cool to moderate temperatures.

“We did drop some fruit and got a bit more aggressive with leafing to expose the fruit to the sun to help counter the cool temperatures and promote ripening and green-character degradation,” said winemaker Matt Brain.

Fruit is showing deep color, complex flavors and aromas and good acidity levels, according to Brain. Yields varied from average-to-heavy in some areas. “I love the complexity of the vintage,” he said. “I think that the sub-AVAs will be quite distinct this year, truly revealing the appellation and soil type.”

At Benziger Family Winery in Glen Ellen, Sonoma County, grapes also matured at a slow and steady pace.

“You could almost hear a sigh of relief coming from the soil from the abundant rain this winter,” said Lisa Amaroli, director of winemaking. “The vines grew vigorous canopies, which took some management to tame, but it also set us up for a long growing season. We were able to cut back irrigation by 50% or more and not water some blocks at all.”

Harvest began on Sept. 21, which was the latest start for Benziger since 2011. Amaroli estimated that 60% of the expected volume came in during a condensed two-week window.
Fruit is showing great flavors, Amaroli said, along with concentration and balanced acids at lower sugar levels. “From Sauvignon Blanc to Cabernet Sauvignon and everything in between, all the fruit has been excellent,” she said. “One of the shining stars of the vintage for us is Merlot, which has been fruity, juicy and richly concentrated.”

As for the wines, she said, “We have seen elegance and boldness, but there is something beyond that this year. I’d call it grace.”

Steve Lohr, president and CEO at J. Lohr Vineyards & Wines in San Jose, noted that the growing season was similarly cool, wet and late for all his company’s vineyards, from Napa Valley to Monterey County to Paso Robles. J. Lohr picked its first 2023 grapes on Oct. 2.

“The thing that’s remarkably different this year is the sugars,” he said. “They’re coming up, but they’ve been really slow. And the pH is lower than it has been in previous years across the board. It’s been a nicely balanced year, and the quality has been so high. It has been really wonderful to see. The flavors are just off the charts,” particularly for Pinot Noir and Syrah, as well as Cabernet Sauvignon, Merlot and Cabernet Franc.

While there would normally be some berry shriveling by this time of year, Lohr said, that did not happen thanks to the lack of heat spikes. Yields are 20% to 25% higher than the vineyard team’s initial estimates, and grapes arrived in pristine condition.

“I think the wines are going to be really rich and flavorful with maybe a little higher acid than normal,” he said. “This vintage may be similar to 1997 and 2005, where you have really high quality and higher-than-normal yields.”

In Lodi, the winter rains presented some challenges in the vineyards. The wet weather continued through April, which resulted in increased mildew pressure, large canopies and crowded fruit zones.

“Those who were able to keep their vineyards clean, manage irrigation properly, control crop load and thin away poor fruit are being rewarded with superb fruit quality that is jumping out of the glass,” said Aaron Lange, vice president of vineyard operations at LangeTwins Family Winery and Vineyards in Acampo. “We owe a huge thanks to the vineyard managers, pest control advisors, tractor drivers and labor crews.”

Lodi’s harvest kicked off late and ran long into the fall. Lange continued picking until Nov. 13 — a record for the winery. Despite the delay, Lange was confident that all varieties would fully mature before the season ended. He is also expecting one of the best vintages ever.

“I am very optimistic about the wines from the Lodi and Clarksburg appellations — probably more bullish and excited than any other year in recent history,” he said. “The 2023 vintage has been a stark reminder of the grit required to be a winegrape grower.”

Hanna Linder, viticulture manager at Wente Vineyards in Livermore, also expressed confidence that all the winery’s Livermore Valley and Arroyo Seco fruit would achieve peak ripeness before the season’s end. The real challenge, she said, was physically getting all of the fruit off the vines in a condensed harvest period with higher-than-average yields.
“I think it should be a really great year for red varietals,” Linder said. “We have seen some great color and acid balanced with really awesome flavors. I am excited to see how the Cabernet Sauvignon and Cabernet Franc from Livermore turn out as well as the Pinot Noir from Monterey.”

Scheid Family Wines in Greenfield, Monterey County, began harvesting sparkling wine grapes in late August — just a week past the average start date — but overall, the season ran around three weeks behind. As of Oct. 16, the winery had picked just 40% of its acreage, compared to 80% at the same time in 2022.

“Mother Nature has been on our side and temperatures have been ideal during the past month,” said Heidi Scheid, the winery’s executive vice president. “With a late start, there is always the concern that we will get rains before harvest is complete.” To mitigate the risk, the winery dropped fruit in some late-ripening varieties.

This was one of the coolest growing seasons in recent history, Scheid noted, characterized by heavy winter rains that replenished soil moisture, leached salts from the soil and increased vine vigor. “Both quality and yields look terrific this year,” she said, “and a lot of that is due to the abundant rainfall in the winter.”

Thanks to extended ripening time, she added, the fruit is showing great varietal intensity, balanced acidity, lower alcohol levels and deep color for red varieties. “We are expecting standout cooler-climate varieties, such as Pinot Noir, Sauvignon Blanc and Chardonnay,” she said. “This feels like it’s going to be one of those perfect years where we get good yields and spectacular fruit quality.”

At Tolosa Winery in San Luis Obispo on the Central Coast, harvest began more than a month later than the previous year. “We started later than the day we finished harvest in 2022 for Pinot and Chardonnay,” said winemaker Frederic Delivert.
The growing season brought 150% of the region’s average rainfall, he noted, followed by a cool spring that delayed and extended bud break until early April. While the impacts of the rain were mostly positive, Delivert said the moisture resulted in high mildew pressure and erosion issues in some vineyards, along with wet soils that delayed tractor work and mowing. Due to large canopies, vineyard teams dedicated extra time to leafing and removing side shoots from the plants.

“This year reminds me of 2019, which was also a late vintage, but a great one,” said Delivert. “Pinot Noir and Chardonnay are expressing their coastal trademark — not the plush-and-lush style but showing finesse and elegance with more earthy and mineral touches. This will be a year when everyone can find a good wine in the style that they like from the San Luis Obispo coast.”

For Miller Family Wine Co. in Santa Maria, which owns vineyards in Santa Barbara County and Paso Robles, harvest began about a month later than in 2022. “Everything seems to be moving more slowly than usual, but we’ve been able to get really clean fruit off,” said Nicholas Miller, executive vice president and chief sales and marketing officer. “Our customers have been very happy with the quality.”

In Santa Barbara County, Miller added, “The rain washed away salts accumulated in the soil, allowing the vines to access previously tied-up nutrients.” It also delayed fruit development and pushed picking about a month behind schedule, leading to a compressed harvest. “The extended, mild season allowed for average berry size, significant color development and great flavor.”

Wine prices in Napa jump to over $100 / bottle

The latest Direct to Consumer Wine Report shows the average price of a bottle of wine from Napa Valley jumped $17 last year, and at the same time tasting fees increased 35%.

According to the report, the average bottle of wine from Napa costs over $108, which is considerably more than Sonoma County, which saw an average of $57 per bottle. Over 71% of the West Coast wineries surveyed said they planned to raise bottle prices again this year.

These numbers come from the 2023 Direct to Consumer Wine Report, which was previously conducted by the Silicon Valley Bank wine division.

While visitors to Napa Valley are still lower than they were pre-pandemic, the price of a tasting at a Napa vineyard is significantly higher than in the country’s other wine regions. A standard tasting at a Napa winery now goes for $81, $22 more than it did in 2021. A reserve tasting averages $128.

Compare those numbers with $38 for a tasting in Sonoma and $28 in Paso Robles. And to put that in perspective, tasting fees didn’t even exist until the middle- to late-1990s. They hovered around $10 for several years, but as more and more people began going to wineries, those prices began to climb. As recently as 2012, the price of a tasting in Napa was $22.

Wine, overall, is in a bit of a slump. The industry is in its second consecutive year of negative growth, and the SVB report says, “Swift action is required to turn the tide.” The audience is also getting older. While consumers over the age of 60 have continued to grow, people under that age are less interested in buying wine today, this report found.

Sonoma Valley Vintners & Growers Alliance announce appointment of Robyn Sebastiani as Executive Director

Sonoma Valley Vintners & Growers Alliance (SVVGA) Board President Tom Rouse announced on Friday the appointment of Robyn Sebastiani as SVVGA Executive Director.

“Robyn’s experience, passion, and deep understanding of our mission made her stand out as the perfect choice to guide SVVGA into a new era of growth and success. We firmly believe that with her dynamic leadership style and collaborative approach, she will build an even stronger commitment to serving our members and the greater wine community of Sonoma Valley,” Rouse states.

New Index “WB Stock Index (WBIX)” Tracks Performance of Public Wine Companies

A new tool rooted in publicly traded wine companies and offering insights into the health of the wine sector has launched on winebusiness.com.

The WB Stock Index (WBIX) is a composite metric representing a portfolio of 13 publicly traded wine companies, weighted by each company’s annual wine revenue. The index reflects the daily percentage change in stock price at the end of the previous business day according to the significance of each producer in the marketplace.

The baseline for the index is Jan. 1, 2020, a time of strong performance by other indices and well before the onset of pandemic disruptions. The index stood at 119.02 as of March 1, indicating that publicly traded vintners have seen fortunes strengthen during the pandemic. The market’s confidence in the sector as a whole remains high. The index is intended to provide a snapshot in time and help benchmark a company’s performance against its peers. Performance can vary depending on the interval chosen, meaning a comparison across several intervals can be helpful.

Some of the strongest performers have been the luxury wine companies LVMH and Pernod Ricard, which have both performed well as aspirational and discretionary spending remained strong over the past year. LVMH’s share price has increased 28% over the past year to $170.45 while Pernod Ricard’s increased 3% to $42.22. The gains continued in the latest three months, with LVMH up 14% and Pernod Ricard up 7%, underscoring the long-term momentum underpinning each company.

The least fortunate company among those tracked by the index has been Vintage Wine Estates, which has seen its share price fall 83% versus a year ago to $1.39, with much of the slide registered in the past three months after the company restated earnings for the first quarter of fiscal 2023, released preliminary numbers for the second quarter that projected lower than expected revenue and gross margins for the year, and withdrew guidance on expectations for the remainder of the fiscal year, which ends June 30. The company also made a change at CEO with founding partner Pat Roney moving to the role of executive chairman and Director Jon Moramarco assuming the role of interim CEO. Moramarco is also the editor of the Gomberg Fredrikson Report and founder of bw166. On March 10, the company announced it had sold a 42-acre vineyard in Napa Valley for $11 million to reduce its overall debt. Following the sale, Vintage reported it owns approximately 1,600 acres of vineyards and leases an additional 800 acres.

Vintage is significant enough to influence the index but not sway it. Two of the largest components are instead LVMH and domestic vintner Constellation Brands, which has increased 2% over the past year but fallen 11% in the latest three months as its most recent earnings report underwhelmed the investment community. This is in line with the challenges other public companies have seen.

While a value decline can indicate a lack of confidence by the markets, it also creates a buying opportunity for long-term investors. The Duckhorn Portfolio, for example, has underperformed the index with a 19% drop in its share price over the past year. Currently trading in the range of $14.99, its shares have ranged between $12.64 and $22.29 over the past 52 weeks. Despite a lower price, several analysts have maintained a buy rating on the stock, an expectation that its share price will increase and reward investors. Bank of America analysts are among them, while Barclays upgraded its rating on the stock because of its latest earnings report.

This is in contrast with response to shifts in Vintage’s stock price, where sentiment has shifted in favor of “sell” from a uniform “buy” rating a year ago. Canaccord Genuity Group is among the bears, noting that it had more questions than answers about the company’s financials and future.

When it comes to public perception, however, the market is largely in favor of the wine sector. WBIX has outperformed the S&P 500, rising nearly 4% over the past year as the S&P 500 fell nearly 7%. The latest three months have seen it increase 2%, or twice the growth posted by the S&P 500.

Link to Index:  https://www.winebusiness.com/finance/wbix

Source:  Wine Business