No mention here of the elephant in the room……health issues from pesticides in the environment and the rising cancer, leukemia, autism, asthma rates in wine growing regions. See Dr. Laura Morgan and Padi Selwyn’s research paper:
”There’s a “need to replace baby boomers with younger consumers, and tech will be vital in that,” said Torkelson, president and chief operating officer. (Let’s get more generations addicted to alcohol? )
The industry needs to do more to drive up the per-capita consumption further, “and food is a good way to connect with consumers,” he said……….” (Restaurant owners, the wine industry wants to push you out of business! )
The industry has been riding on the “wine is good for you” trend since the early 1990s, but “negative” press about alcohol is growing, said the CEO of one of the largest U.S. wine companies on Thursday.
Brian Vos, top executive of The Wine Group, ranked No. 2 by Wine Business Monthly with 53 million cases sold annually, was the keynote speaker before about 350 attending North Bay Business Journal’s 18th annual Wine Industry Conference, held at Sonoma State University in Rohnert Park.
A 1991 story by CBS News’ “60 Minutes” program on the “French paradox,” suggesting red wine could be good for you, drove up consumption. But in more recent years, the industry has paid scant attention to growing bad publicity, Vos said.
Just recently, he said, a United Kingdom media story was headlined, “One glass of wine a day can shorten your life.” Stories like that splash on the scene, but any counter to them — factually or from experts — rarely gets the same press attention.
He cited this “drip, drip, drip” of negative attention, reminding the audience of the public perception and regulatory shift in attitudes toward tobacco from 20 years ago to today.
It is all about “rapid change” he said, but “changes that can be seen as small when you are in the middle of it, can turn out to be huge later.”
On another hot-button industry challenge, labor, Vos said the industry is well-aware of the issues for vineyard workers but has paid less attention to the challenges and opportunities on the manufacturing side, such as bottling.
“It isn’t sexy” and is a job that people consider “something you have to do to get by,” he said. As a result, people are getting overworked and the industry loses good people, Vos said.
On the conference panel “The Wine Growth Cycle: Are We at the Peak?” were Tony Correia, a North Coast vineyard appraiser; Dan Leese of V2 Wine Group in Sonoma; Jon Moramarco of BW 166; JoAnn Wall, a Central Coast vineyard appraiser; and Carl Stillman, an Oregon vineyard appraiser.
Talking about the North Coast, Correia, principal and owner of The Correia Company, said the prices for grapes in “premium” areas of Napa have been largely unaffected by economic conditions and continue to rise while the prices for grapes in “secondary” or “outlying” areas and trended “up and down.”
Concerning the California Central Coast, Wall, owner and principal appraiser for Above and Beyond Real Estate Services Inc. in Templeton, said Monterey County is heavily invested in chardonnay and pinot noir plantings. Wine competes with row crops for the valley floor, but areas like the Santa Lucia Highlands appellation are popular. A recent transaction involving a vineyard replanting sold for $73,600 per acre.
She said there are physical limitations to expanding vineyards in the region, even though the area has good water options. Given the limitations on vineyard acreage and good water situation, she sees the county vineyard market continuing to gain strengthen.
Continuing down the Central Coast to Paso Robles, what had been an historically zinfandel area has moved to cabernet sauvignon ($15–$25 bottle price), Wall said. Grape prices have been climbing, exampled by an April sale of a vineyard went for $72,000 per acre. She described Paso Robles as among the Central Coast locations “ripe for consolidations.”
“This trend, which has been ongoing, will likely continue, with larger wineries purchasing medium-sized brands,” Wall said. “Land is now legally restricted from being developed through a net-zero-water-usage ordinance. Long term, this will put pressure on land and vineyard prices.”
Even further south, the Edna Valley — a hot spot for luxury chardonnay and pinot noir — has lacked vineyard sales.
“Small wineries may not survive next generation transfer,” she said.
Santa Barbara, “ground zero for pinot noir for the masses,” has seen limited sale activity and prices between $40,000 to $85,000 per acre.
Dan Leese, co-founder and CEO of V2 Wine Group, talked about the increasing challenge for smaller producers to bringing wines to consumers. The top nine suppliers have an almost 70 percent share of the U.S. wine volume. Meanwhile, there has been an explosion in wineries across the U.S. from 1,800 in 1985 to 9,872 in 2015.
For those wineries wanting to use distributors to get their product on shelves, there’s been a sharp decline in distributors — from 3,000 in 1995 to 675 in 2015. He said three top distributors control 61 percent of the market.
On the Oregon wine business, Stillman, whose Salem-based Stillman and Associates, Inc., appraises and consults on rural real estate, said it has gone from “very small” to “small.” Wet weather in the fall and spring play a role in limiting production. Total acres planted have grown from just above 5,000 in 1990 to about 30,000 as of 2016.
Stillman focuses on the large Willamette Valley appellation in the northwest corner of the state. Regulatory controls over establishing new vineyards are much less in Oregon than in California, he said.
Looking at the big picture of winery shipments and retail sales was Jon Moramarco, managing partner of BW166, LLC, and producer of the Gomberg Fredriksen Report on industry analytics.
For years, baby boomers have been driving most of the wine-sales growth. That means, 60 percent of the legal-drinking-age growth soon will be in the 70-and-older category, which could slow growth.
Like Vos, he also warned that consumer concerns about the health risks of alcohol may hinder growth.
On the conference panel “The Drive to Premiumization” were Jeff O’Neill of O’Neill Vintners & Distillers, Judd Wallenbrock of C. Mondavi & Family, Kevin Phillips of Michael David Winery and Bob Torkelson of Trinchero Family Estates.
There’s a “need to replace baby boomers with younger consumers, and tech will be vital in that,” said Torkelson, president and chief operating officer.
The industry needs to do more to drive up the per-capita consumption further, “and food is a good way to connect with consumers,” he said.
Wallenbrock last year was named president and CEO of C. Mondavi & Family, home to the brands Charles Krug, Purple Heart and CK Mondavi. Speaking about the trend to move consumer tastes to more expensive wines – or “premuimization” — he said “consumers are choosing to buy up.”
He pointed to this example: Tastes have moved from brewing coffee out of a 1-pound can to buying a cup for $5 at Starbucks.
The company offers a “value” wine, C.K. Mondavi, with a suggested retail price for a magnum (1.5-liter bottle) of around $10, as well as the “flagship” Charles Krug Napa cabernet for $36 a bottle. Wallenbrock said channels for buying wine will need to change. That includes exploiting the opportunities to sell wine online or tapping into social media even more, as friend-to-friend recommendations on which wine to buy become even more important.
He outlined how the Lodi area continues to grow in importance in the wine industry, with good grapes being growth and sold “for reasonable” prices. The area is on track, he said, for million-case production and still has only planted a small slice of the area ripe for vineyards.
The expansion of the area for growing premium winegrapes has been driven by the “better margins” for companies, spinning off revenues that can be plowed into marketing and increasing sales staff, Phillips said.
Jeff O’Neill is the founder and CEO of O’Neill Vintners & Distillers, which started in 2004 making wine and drinks for other producers but in recent years has been acquiring its own brands, progressively moving upscale.
The wine market is dealing with a consumer-driven need for quality and authenticity, O’Neill said.
“Premiumization is happening at virtually all price points,” he said.
Consumers will always move up if they can, spending disposable income, O’Neill said.
Read in-depth interviews with the conference speakers at nbbj.news/wine18qna.