Wine supply is moving into unknown territory, writes Rob McMillan, senior vp and founder, Silicon Valley Bank Wine Division in the latest SVB on Wine. “We have now reached the point where we have a large and unhealthy excess in grape supply in all price segments,” he says. “Creating this is a unique set of circumstances we’ve not experienced before.”
From a demand perspective, there’s negative volume growth in those regions that produce wines that are positioned below $9 at retail. That’s an issue that’s been well documented.
More recently though, volume in higher price point regions has shown zero to minimally positive growth rates, and luckily still modest positive growth in sales dollars. On a volume basis, the industry is close to hitting slack. Negative volume growth hasn’t been seen since 1994, he says, “but we are very close to that today.”
“It would be great if we had short bulk supply, empty storage tanks, and we were looking at a light harvest. But talking to brokers and vineyard managers over the past 6 weeks, there is unanimity of opinion that even on the North Coast, we will leave fruit hanging on the vine this harvest. Not everything is contracted. And the early consensus for yield is we are picking out at average, to average-plus yields. It’s probably not a surprise given those facts that we are seeing much lower prices paid for uncontracted grapes – if there is a buyer for those grapes. That mirrors price drops on the bulk market too. There just aren’t enough buyers,” he says. Read more here.