California Wine Industry:
Strong and Getting Stronger
It was announced TODAY that despite long-term concerns about climate change and
regulatory pressures, California wine industry leaders are once again quite
bullish about the wine business, according to two new surveys conducted by the
University of California, Davis.
wine industry, by and large, has weathered the worst of the economic downturn
of this decade,” said Robert Smiley, professor and dean emeritus of the UC
Davis Graduate School of Management.
CEOs and professionals who participated in these surveys expressed a growing
confidence in the future of traditional brands and optimism for the expanding
global market,” he said. “And, to varying degrees, they are interested in
exploring new products to meet the demands of the millennial generation and
increasing their use of social media in their marketing strategies.”
has surveyed wine executives for each of the last 12 years and winemakers for
22 years. The surveys examine global and national trends in the wine industry.
They complement other wine research and teaching at UC Davis, home for more
than 100 years to the most comprehensive university wine program in the United
of wine executives
this 12th annual wine executives survey, Smiley gathered the opinions and
projections from the heads of 28 leading wineries.
that the economy is rebounding, brand and quality are having more of an impact
than price on consumer purchases, the respondents reported. They noted that
even during the more difficult economic years, many consumers who were
accustomed to the more expensive, higher-quality brands continued to purchase
those wines; they simply bought less of them.
the economy recovers, consumers will continue to make luxury wine purchases,
but those will be well reasoned, rather than “frivolous luxury” purchases, one
how firms are vying for the attention of the millennial generation, in light of
competition from craft beers and craft cocktails, the executives offered mixed
responses. Some reported that they or their competitors are developing new
products by adding flavors, carbonation or even spirits to regular wine.
a great opportunity to experiment with the millennials because they are focused
on things like authenticity and some integrity,” said one respondent. “They
love to discover things.”
respondents said they are not creating such “pop products,” but rather are
continuing to innovate in terms of how they source grapes and make wine, with
an emphasis on quality.
respondents voiced keen interest in international market expansion in a variety
of regions including Asia, South and Central America, Europe, Canada, Russia
and even Africa.
respondents reported that their firms are cautiously eyeing the massive Chinese
market, but with significant concerns about its stability. One executive found
Japan to be a far stronger market than China, noting that Japanese wine
consumers “have been buying Napa Valley wines for a long time and have a
preference for those luxury items... .”
the area of social media, the executives reported that their businesses use a
variety of services, including Twitter, Facebook, Yelp, Instagram, Pinterest
and Trip Advisor. Special online offerings include live tastings and streaming
video. And, they are training their employees on the importance of product
quality and customer service, especially in an era when consumers’ likes and
dislikes are so quickly and broadly shared with the online community.
hot topics for the next five to 10 years, the survey respondents said they are
most concerned about the effects of climate change; environment-related
regulatory pressures; and the availability and cost of labor, land and water.
of wine professionals
survey of California wine professionals, now in its 22nd year, gathered the
opinions of 110 wine industry leaders. Most of the survey respondents represent
wine companies; others are from operations that range from wineries to
grape-growing and wine-distribution firms to financial institutions.
survey respondents overwhelmingly predicted that the greatest opportunities for
the wine industry will be found in increasing direct sales to consumers;
followed by consumers “trading up” in terms of the price and quality of their
purchases, increased wine sales, and the new market that is evolving as the
millennial generation comes of age.
project that during the next three years, California wine sales will receive
their greatest boost from an improved economy and increased consumer
confidence, followed by rising direct sales to consumers, improvements in value
for price, and large or above-average wine-grape crops.
the other hand, they anticipate that the greatest hurdles for the California
wine industry during the next three years will be higher input costs and slow
economic recovery, followed by limited water availability and “margin
compression” -- a decline in the margin of revenues compared to costs.
respondents predict that over the next three years, the strongest white wine
varietals will be chardonnay, sauvignon blanc and pinot grigio, while the
strongest red wines will be cabernet sauvignon, pinot noir and red blends.
anticipate the strongest growth in sales will be among wines in the $10-$14
per-bottle range, followed closely by the $14-$20 range.
Labels: California Wine Industry is Strong, California Wines, Robert Smiley, survey of wine professionals, UC Davis Graduate School of Management