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Are Vintage Years Ahead for the California Wine Industry?

As Baby Boomers age and decrease their wine consumption, the stage is set for the “passing of the glass” to Millennials.

| BY Donald Liebenson

Are vintage years ahead for the California wine industry? Or will it wither on the vine in the face of scarce water, global competition, the rise of craft beers and an aging Baby Boomer customer base?

Despite these challenges, everything’s coming up Rosé , with an estimated 10 wineries a week opening all over the state, according to Robert Smiley, professor and dean emeritus of the UC Davis Graduate School of Management, which conducted tandem surveys of wine executives and industry professionals.

“Wine industry leaders are keenly aware that this is a time of great change for California wineries and related business,” Smiley said in a statement. “The industry professionals surveyed indicate that they are prepared to meet these and other challenges by adjusting their brand composition, adapting new technologies and becoming more efficient in their use of water.”

This is the 23rd year of Smiley’s survey of California wine professionals, which collected the opinions and forecasts from the heads of 26 wineries in conjunction with the 13th annual Wine Industry Financial Symposium in Napa, California. About 60 percent of those wineries are located in the Napa or Sonoma valleys, while most of the others are in the Central Coast and North Coast regions, and in California’s northern interior, Central Valley and Sierra foothills. One winery is in Washington.

As Baby Boomers age and decrease their consumption, the state is set for the “passing of the glass” to Millennials. “They’re adopting wine at a faster pace, and they’re a different type of consumer than we’ve seen in the past,” one survey respondent said.  How to reach millennials, how to engage them and build brand loyalty with them is … more complicated than with the boomers.”

Another challenge facing the wine industry, survey participants noted, is the increasing popularity of craft beers. Craft beer production grew 9.6 percent to capture 7 percent of the total beer market, up from 5.5 percent in 2011, according to a 2014 report by Technomic, a market tracking firm.

“I’m thinking craft beer actually expands the market for us and offers an opportunity for Millennial exploration and entry into the market, which then will progress up to wine,” one surveyed wine executive said.

Along with competition from imported international wines, the wine industry must also contend with climate change and water scarcity, survey respondents said. California, along with Nevada and Oregon, is in the grip of a “D4” drought, the most extreme drought situation. Many report already implementing several strategies, including using imaging technology to minimize vineyard water use, recycling winery water for use in vineyard irrigation, and changing winery equipment and procedures to use water more efficiently, the report states.

Other key findings:

  • Over the next three years, the strongest white varietals will be chardonnay, followed by sauvignon blanc and pinot grigio.
  • The strongest reds will be cabernet sauvignon, pinot noir and red blends.
  • Wines in the $14-$20 per bottle price range will be the best sellers

About the Author

Donald Liebenson

Donald Liebenson writes news and features for Millionaire Corner. He has been published in the Chicago Tribune, The Chicago Sun-Times, The Los Angeles Times, Fiscal Times, Entertainment Weekly, Huffington Post, and other outlets. He has also served as a marketing writer for Chicago-based Questar Entertainment and distributor Baker & Taylor.  

A graduate of the University of Southern California, he is married with a college-age son. He also writes extensively about entertainment.