The Long Haul: Evolving Alongside Wine’s Changing Tastes and Trends

California’s wine grape growers are facing several challenges, from a longer harvest this year to shrinking wine sales and changing consumer preferences. Our wine and grape analyst, Chris Bitter, joined the From Farm to Table podcast in late September to discuss these challenges and share how growers can remain competitive in an evolving industry.

Today’s Trends

The most important trend right now in the wine industry, Chris said, is falling wine consumption, which is occurring both in the U.S. and globally. “U.S. wine sales have been declining steadily since the pandemic ended, particularly at the lower end of the market, which means bottles priced at below $10 or so,” he stated.

As to what’s driving the decline in wine consumption, Chris said it is partly an economic issue. “We have economic uncertainty and inflation, and that's caused wine consumers to pull back a little bit,” he said. “But there are also a number of other factors involved.”

Among the factors Chris listed are demographic change, competition with alternative alcoholic beverage categories (like canned cocktails), and a broader trend of consumers cutting back on their alcohol consumption more generally.

Slowing wine sales have translated to a sluggish grape market in a couple of ways, Chris noted.

“If wineries are selling fewer bottles, they need less fruit to sell them. So they've been cutting back on their grape purchases,” he explained. “This means it's been a tough year for growers to sell fruit, and there are still uncontracted grapes that are out there looking for homes at this point.”

Implications for Sonoma County

Speaking specifically to Sonoma County, Chris noted it hasn’t been immune to these broader industry trends. He highlighted that for Sonoma County appellation wines, retail sales, direct-to-consumer sales and winery visitor counts are all down relative to last year. “The grape market in Sonoma County has been sluggish as well due to these factors,” he added.

Despite these soft spots, Chris pointed out many attributes that make Sonoma County wineries and growers well positioned with respect to market trends.

“Sonoma County has great name recognition, and it produces mostly premium and luxury wines,” he said. “And these are the segments of the wine market that are holding up better than the lower end.”

In all, Chris presented a positive outlook for Sonoma County’s growers: “While it's going to be a challenging environment for many growers in the near term, the longer-term outlook for Sonoma County is still bright.”

Near-Term Outlook

Looking ahead to the next five years, Chris identified some of the trends that growers will want to pay particular attention to.

“The slip or drop in wine consumption is expected to continue for the foreseeable future, which means it's going to be a competitive grape market going forward,” Chris said. “And there's likely to be less price appreciation than there's been in the past.”

...Regions that are producing higher-quality grapes should be better positioned than those producing commodity grapes for the mass market.

This means the higher end of the market will have an advantage: “The premium and luxury segments of the market should continue to hold up better than the lower price tiers; there should be some growth there, which means regions that are producing higher-quality grapes should be better positioned than those producing commodity grapes for the mass market.”

Going forward, Chris said, consumer preferences and behavior are going to continue to evolve over the next five years.

“The baby boom generation is shrinking, and the younger generations are starting to play a bigger role in the wine market,” he said. "They seem to have different preferences than the boomers: They're more interested in sustainability; they prefer fresher and more natural wines with lower alcohol content; and they've been gravitating toward white and sparkling wines, in particular.”

Ahead of the Cuvée

What can growers do to keep up with these challenges and changing tastes?

“First, this seems obvious: Strive to produce the highest-quality grapes possible,” Chris said. “The higher up you go in the quality spectrum, the more demand and less competition there's going to be.”

“Second, I would say that growers should also try to stay in step with these evolving consumer preferences. This might mean planting varietals that are in demand, such as Sauvignon Blanc today, or seeking organic certification to give them a leg up in the market.”

“Finally, I would say it's important to try to continue to focus on improving operational efficiency. As grape prices grow more slowly, growers are going to need to find ways to control costs in order to maintain their profitability. This could range from things like adopting automation technologies in the vineyard to finding cheaper sources of capital to fund their businesses.”

For more of Chris’ insights on the wine industry, including his latest Quarterly Outlook, visit our Grapes & Wine page.