Wine Country On Sale

Elin McCoy over at Bloomberg has an article out this week about French investments in American wineries. Neatly tucked into her article is a startling little nugget: 

"A recent SVB survey found that almost 50% of Napa and Sonoma wineries consider selling a possibility in 2021. For some regions, including the Sierra Foothills, a zinfandel haven east of Sacramento that was once the epicenter of the gold rush, it’s 80%."

The SVB referred to there is Silicon Valley Bank, the wine division of which is a fixture of financing in the wine industry, but perhaps better known for its annual publication of the closely watched State of the Wine Industry. 

It has been a rough couple of years for the domestic wine business, but those numbers are astonishing. Depending on how you count, Napa and Sonoma are each home to around 400 wineries, so even if just a fraction of that 50% actually transact, 2021 could be an insane year of turnover. Where so many acquirers would come from is a mystery, too.

Just a few weeks ago, I reflected on how I've (wrongly) prognosticated a correction in the northern California wine industry, but do these numbers indicate an acceleration in that direction? Or merely a changing of the guard?

Elin's piece echoes some themes written about here on Imbiber's Journal, which are so multifaceted and complex as to cloud my crystal ball, which was opaque already. As an armchair economist, the combination of factors at play today are, to overuse and overused word, unprecedented. They are also too much to decipher and extrapolate for this aging brain: 

  • The pandemic's favoring of larger producers and distributors
  • The tariffs' effects on European brands, their domestic representatives, and the competitive consequences thereof
  • The void created by shuttered restaurants
  • Under capitalization
  • The surge in direct to consumer sales
  • Over supply
  • Fires
  • Under supply
  • Changing consumer preferences
  • Increasing competition from craft beer and spirits
  • Legal weed
  • Alienating pricing practices

Can you make enough sense of this to predict how 2022 will look? If so, drop me a line. I'm stumped.