State Of The Wine Industry

The purpose of this article is to show a few comparisons between past, present time and assess what could happen with the wine industry given the current trends, without pretentiously stablish correlations and causations.

I found the current SVB report somewhat engaging and a good conversation starting point for commercially invested in wine people. One thing that I did not like so much about it is that this year they show more of whats than whys.

I know I am ageing, I do not know why. I have an idea, but I do not know why it is happening.

Cut to the famous Shiller S&P 500 P/E ratio. You do not have to be (I am not one of them) a macroeconomics specialist, but by now you ought to know who Robert Shiller is and what he does. Please note the peaks and freefalls in the numbers circa 2000, 2008 and the current last number (https://www.multpl.com/shiller-pe). That is right, we are now logging the second highest Shiller P/E ratio ever. Before you assume I am blowing the end of the world trumpet, look at this other graph from the SBV presentation for premium wine sales. Does it look familiar in any way?

My point here is that we do have a lot of disposable income in this country (it took a pandemic to show americans and residents that saving was possible) and premium/expensive wine sector has been one of the winners in the process. But that also should be the harbinger of possible future outcomes when the tie goes down and we see who was swimming naked.

The report shows the wine sector is failing to gain young consumers and at the same time traditional steady loyal wine consumers are just ageing and getting out of the game. Boomers and Xgens are just not picking up the share one would hope or expect.

I have heard people get into wine business in California (the same applies to other famous places in Europe too) in order to reap huge profits with real estate and the wine would be a very welcome byproduct of that venture. They can afford to produce and sell few bottles of wine at (allegedly) high quality and (reportedly) extremely high prices.

The wine industry as is is doing a great job in selling premium wines, albeit at the expense of fewer consumers in the future and the more educated/savvy consumer (these guys according to one graph barely increased their purchases), who recognizes great value at much inferior price tiers. One the educated mature consumer ages and starts consuming even more (hello insulin resistance and diabetes), who will sustain the market for those $ 100 bottles of napa cabernet, Barolo, Brunello and Bourgogne?

What will happen once more consumers in more states learn they can have access to edible or drinkable thc or cbd compounds for a fraction of dollars and just get out of their minds in a (debatable) healthier way than alcohol?

Premium prices demand premium performances, be that also from a trophy wife, your favorite stock or that house in you want in Medina.

Super premium wines come ridden with inflated ego-trips, bogus stories to jack up prices, promises of heaven in bottle that seldom fly. Young consumers are much smarter than that. The wine tie will show before long who was swimming naked.