Bottoms up: Wine’s going to cost less in 2020

Wine down Wednesdays could be a lot more budget friendly this year.

A State of the Wine Industry report from Silicon Valley Bank says wine growers are facing an “acute oversupply” that will result in lower prices in 2020 and likely for several years to come.

“Acute oversupply will allow for better-quality juice in lower-priced bottles, which will improve value and may provide an incentive for some millennials to become more consistent wine buyers,” said Rob McMillan, executive vice president and founder of Silicon Valley Bank’s wine division, as well as the author of the report.

That surplus comes right as wine consumption is waning. Last year saw the first wine volume decrease since 1994, according to the IWSR, which tracks beverage alcohol consumption in America. Still, wine sales were down 1.5%, falling to their lowest levels since 2016.

Those shortfalls came due to the industry’s failure to connect with millennials and boomers, McMillan says. While the quality of wine has never been better, winemakers and marketers are missing the mark with consumers.

“Current oversupply in California and Washington isn’t due to speculative overplanting,” he wrote. “It’s due to the wine industry’s growing miss in not providing consumers what they want. … The U.S. wine industry needs to adapt and change its focus and direction.”

Those missteps might lead to an industry consolidation as well. McMillan predicts vineyard removals as wineries try to balance supply and demand. And vineyards that don’t have strong management teams could find themselves in jeopardy.

“The past 25 years was an era where the rising tide of consumer demand lifted the boats of everyone in the wine business,” he said. “We consistently saw increasing volumes and prices for premium wine during that period, and throughout it, every business model seemingly worked. But as we evolve into this new era where the tide is slack or receding, all boats won’t float, and we will have winners and losers.”

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