“Rabobank cites a report that 3,540 bonded wineries operated in California in 2011 but within five years, the number of wineries had risen 31%, to 4,653. A majority of these wineries are small, with an eye toward visitors to their tasting rooms. Not only competition, but the recent spate of raging wildfires have tamped down visitor traffic. Rabobank cites 39% of wineries surveyed that focus on DtC indicated sales have declined rather than increased as one might expect. That’s not because there had been fewer DtC sales; it’s because the number of California wineries competing for consumer dollars keeps growing. “
A 31% Increase In Number Of California Wineries Makes Financial Success That Much Harder
The global investment firm Rabobank November 2018 Wine Quarterly included a few important takeaways from the Wine Industry Financial Symposium held this autumn in Napa, California.
In its introduction to the report, the bank got my attention with this about California: “Wineries of all sizes need to find new owners.”
Rabobank was not recommending California wineries sell out to investors, or to anyone else for that matter. The bank was talking about the need to create a sense of brand ownership by the consumer. To back up the premise, Rabobank says, “The strength of the economy, strengthening direct-to-consumer (DtC) sales, and ongoing premiumisation [sic] create a strong foundation for future growth.”
According to the bank, the urgency of addressing the way consumers view a winery can be found in one word: competition. With hundreds of thousands of wine brands spanning the globe, competition is fierce, whether through the three-tier distribution method or through Direct-to-Consumer (DtC) sales, and for wineries large or small. Rabobank says 58% of large wineries and 40% of small wineries claim “…brand proliferation as a drag on revenue and profitability.”