Amid shift in wine consumer demand, California Wine Country cautioned to prepare for ample grape supply

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The North Coast wine business on Thursday received another wake-up call about gathering storm clouds that could dampen consumer demand for premium wines and the grapes from which they’re made.

A day after an influential forecast for the fine-wine business warned of more challenging times ahead because of changing demographics of wine consumers, a gathering of wine grape growers and related professionals in Santa Rosa heard experts lay out how this and other shifts in consumer behavior is rippling through the supply chain.

While the ranks of millennials ultimately are set to rival that of baby boomers, the youngest millennials aren’t reaching for wine as enthusiastically as the pace of boomer retirement. That’s what Lulie Halsted, CEO of London-based market-research firm Wine Intelligence said at the 28th Sonoma County Winegrowers Dollars & Sense Seminar and trade show.

“We’re proportionally losing some wine drinkers,” Halsted told them.

Last year, 21 percent of U.S. wine drinkers who imbibe regularly were over 65 years old, compared with 16 percent in 2015, she pointed out. But the ranks of regular wine consumers at the front end — ages 21-24 — are decreasing, down to 6.5 million in mid-2018 from 7.5 million three years earlier.

The growing proportion of aging wine consumers follows the general demographic trend of the growing ranks of retirees, because about 40 percent of the U.S. adults are wine consumers, Halsted said. The youngest of the boomers are reaching retirement age.

And the wave of aging wine drinkers is rolling around the world, holding to a similar trend in Australia, the United Kingdom and elsewhere, according to Halsted.

“It feels like from the information and insight we have that we have kind of reached a sort of plateau and a peak in terms of growth in the number of drinkers we have in the marketplace,” she said. Wine Intelligence studies consumer behavior and attitudes in 38 markets worldwide.

Her firm’s findings about this leakage of the youngest legal wine consumers, what she called “millennial retreat,” echo the warnings from Silicon Valley Bank premium wine division founder Rob McMillan in his annual State of the Wine Industry report, released Wednesday.

A key reason McMillan posited for slow adoption by millennials is an “indulgence gap” — income not rising as fast as in past generations or as fast as experiential aspirations. And two reasons Halsted suggested are lower levels over the past three years in wine knowledge and confidence. Her firm scores consumers according to a “knowledge index” — knows facts such as growing regions, major countries of origin and grape varieties — and a “confidence index,” or how easily they order or talk about the beverage.

In asking millennials about this change, the Wine Intelligence researchers heard that craft beer and spirits as well as cocktails are “exciting” and “interesting.”

“It feels to them like there is more choice available, and maybe wine isn’t quite up there in their consideration set,” Halsted said.

As McMillan noted from data compiled by the Gomberg-Fredrikson Report, shipments from California warehouses started ebbing in 2016, and imports to the U.S. of bulk wine were down 14 percent.

Sales of wines retailing for $11 to over $25 a bottle grew at 4.1 to 9.2 percent in the 52 weeks ending Dec. 1, according to Nielsen figures presented by Glenn Proctor, partner of Novato-based Ciatti Co., to the Sonoma County grower group. However, wineries secured grape contracts in 2015–2016 based on expectation of 10 to 15 percent annual growth, bulk-wine and grape broker, he said.

“We were seeing a decline in demand,” Proctor said. “That was before we were talking about millennials and demographics.”

The slackening of demand for grapes and excess wine appeared in force last year, he said. Then a combination of newly matured grapevine acreage and even growing seasons brought bountiful harvests, including what’s thought to be a record-breaker for California and, perhaps, Sonoma County. The first official tally is set for release in early February, barring delays because of the federal government shutdown.

Statewide tonnage is projected to be 4.4 million–4.5 million for 2018, topping the 2013 record, and Sonoma tonnage is figured to be 252,000 tons, a high point since 2014 but below the 270,000 tons of 2012.

The 2018 Sonoma County cabernet sauvignon haul is projected to have been 47,000–55,000 tons, perhaps the biggest crop for the variety in Sonoma County, and the crop for pinot noir is thought to have been of equal size, also pushing records.

So a big crop came at a time of high grape prices and potentially slower retail sales growth. “It’s not surprising that there’s hesitancy in the market,” Proctor said.

From the grape seller’s market of 2016 and early 2017, wineries weren’t out looking to put grapes into longer-term contracts last year. Today, grape buyers are looking at a market headed toward oversupply, Proctor said. What is making the buyer pool for Sonoma County grapes more challenging is the run-up in pricing in the past several years had more vintners shifting brands to lower-cost appellations outside Sonoma County, and wineries are now looking for buyers of excess grapes they have contracted to purchase.

“It’s a new market,” Proctor said. “It’s a new reality.”

Vintners he talked to say they are looking to buy fewer tons of the major Sonoma County varieties this season and about the same volume of cab, but they expect to produce more cases of wine. They expect prices for 2019 cab, pinot noir and zinfandel will decline. Proctor thinks vintners will be looking to cancel purchase contracts, so they can buy more grapes on the spot market, or will be renegotiating prices.

“We have been through this before,” Proctor said. Solutions for these kinds of market conditions include seeking out producers of Sonoma County appellation brands to form long-term relationships, managing costs related to farming and adjusting assets through methods such as replanting older, lower-yield vineyards.

Another looming challenge for the marketing of wine, the second of eight noted by Halsted of Wine Intelligence, is lower wine-confidence scores for women, particularly in the U.S., even though knowledge scores are at parity with men.

“When we’re thinking about communications with consumers — we’re thinking about how to talk to them — actually, there are differences at … an average level in terms of how men and women approach the category,” she said.

That’s particularly important in on-premises sales such as at restaurants, Halsted said.

She recounted a personal experience that could shake a woman’s wine confidence: While hosting a dinner for industry clients at a high-end London restaurant, a sommelier gave the wine list to a male client at the table then ignored her when she took the list and said she was going to order. The sommelier returned to the table when she handed the list back to that client, she said.

“Having gender in wine and making assumptions is something that, as an industry in this day and age, we probably need to think harder about in what we do,” Halsted said.

Another speaker at the Sonoma County Winegrowers seminar was Eric Hemer, senior vice president and director of wine education for Southern Glazier’s Wine and Spirits of America Sales, one of the country’s largest adult-beverage wholesalers. He noted that the company for the 12 months ending Dec. 17 sold 3.9 million cases of wine with the Sonoma County appellation on the label, about the same amount as a year before.

However, of that volume, sales of red blends increased 49 percentand wines classified as sustainable, Biodynamic or organic, 68 percent. Among the those designated sustainable, etc., whites grew 75 percent; reds, 59 percent; and rosés, 1,064 percent, according to Hemer.

Contact Jeff Quackenbush at or 707-521-4256.

CORRECTIONS: Eric Hemer's name was misspelled. Sales growth for 2018 of 4 to 9 percent came from Nielsen, not Silicon Valley Bank’s report. Eric Hemer clarified that the growth for white, red and rose wines was among those classified as sustainable, organic or Biodynamic.

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