Wines & Vines Home
   
 
Welcome Guest
LOGIN |  CREATE ACCOUNT
 
 
February 2014 Issue of Wines & Vines
 
SUBSCRIBE   »
 

Fine Wine Sales to Grow But Profits Remain Depressed

 
by Paul Franson
 
 
svb fine wine report
 
Santa Clara, Calif.—On the heels of a good year for wine production and sales across much of North America, wine industry executives can look forward to continued growth, according to Silicon Valley Bank’s Rob McMillan. Releasing SVB’s annual State of the Wine Industry report in January, McMillan predicted that fine wine sales would grow between 6% and 10% this year—up from 4% to 8% in 2013.

The report, based on a survey of nearly 650 West Coast wineries and other research, indicated that winery profits and margins slipped in 2013, yet three quarters of wineries reported they were in good financial shape. Silicon Valley Bank, which focuses on smaller, fine-wine producers, found that wine supply is in balance. “Inventory is tight on the most expensive wines, while high-volume and very small estate producers report modest inventory surpluses,” McMillan said.

That means good news for the consumer: “Demand is up, supply is in good shape and pricing is stable,” he said. For the winery, however, grape costs and flat consumer pricing mean lower profitability. Based on SVB’s survey of premium wineries, profits dropped 1.5% on average in the first nine months of 2013.

Bottle pricing stable
The report indicates that 78% of wineries plan to hold the line or increase wine prices, but the bank forecasts that it will be challenging to raise prices.

McMillan stated, “Many wineries believe they can increase bottle prices this year, but bottle pricing will remain stable…. The wineries will likely be unable to pass increased grape and bulk wine costs along to consumers except in some higher priced luxury wines.” He added, “This will depress winery gross profits.”

Without raising the prices of individual wines, some of the predicted 6% to 10% growth in value will come from increased volume at the higher price points, and bottles in the $10 to $18 range are a good example, McMillan said. IRI data on off-premise sales tend to support this point if they continue as they did in 2013. Domestic wines at $5-$7.99 grew only 4% in value, while those at $11-$14.99 grew 15%.

2013 harvest total
The SVB report predicts that the 2013 harvest will total 3.94 million tons when the final numbers are in, making it the second-largest harvest on record in California, behind the
4 million tons harvested in 2012. The two recent harvests have left tanks full and inventory close to balanced. McMillan predicted that grape prices have reached a peak and could soften.

Nat DiBuduo, president of Allied Grape Growers, stated, “While the coastal regions are probably down in crop size, the interior regions are estimated to be as big as, or bigger than, in 2012. More new acreage has come into production this year, mostly in the interior.”

McMillan said that grape planting is restrained, however, compared to prior periods when supply was in balance. The SVB report found that wineries and growers are planting or replanting 21,500 acres to fine wine grapes in California. The total acreage of these premium grapes is about 135,000 acres of the 460,000 total acres of wine grapes.

Both Oregon and Washington also experienced record harvest years. The Oregon Wine Board reported that the 2013 harvest appeared to be larger than 2012—with a percentage increase possibly reaching the low double-digits. One knowledgeable winegrower believes the yield could top the 2012 record harvest of 50,000-plus tons by as much as 20%.

Washington wineries also brought in more grapes than they did in 2012, a record year with 188,000 tons. If local sources are correct in predicting 2013 production was up at least 10%, the Washington industry may have crushed 210,000 tons.

Industry metrics positive
Another view of the wine economy comes from Wines Vines Analytics’ Wine Industry Metrics for 2013, which were all positive.

Domestic wine sales grew 7% in both off-premise and direct-to-consumer channels. Retail sales grew from $6.8 billion to $7.3 billion according to IRI, while direct-to-consumer sales grew from $1.47 million to $1.58, million, based on numbers from ShipCompliant and Wines Vines Analytics.

Even more impressive was the 27% growth seen in the Winejobs.com Winery Job Index, reflecting a growing and confident U.S. wine industry.

M. Shanken’s Impact Databank stated that the U.S. market for all wines grew nearly 5 million cases in 2013, a slight slowing in growth to 1.5%, from 1.7% a year earlier. It reported that the volume was 329 million 9-liter cases, compared with 324 million cases in 2012. The slower growth appeared to stem mainly from slow restaurant and bar sales, according to Impact.

 
SHARE   »
Print this page   PRINTER-FRIENDLY VERSION   »
E-mail this article   E-MAIL THIS ARTICLE   »
Close
 
Currently no comments posted for this article.
 
CURRENT MONTH'S FEATURES INDEX »


 
Wines & Vines Home
 
866.453.9701 | 415.453.9700 | Fax: 415.453.2517
65 Mitchell Blvd., Ste. A San Rafael, CA 94903
info@winesandvines.com
Wine Industry Metrics
 
Off-Premise Sales » Month   12 Months  
January 2015 $623 million
7%
$7,912 million
5%
January 2014 $583 million $7,514 million
     
Direct-to-Consumer Shipments » Month   12 Months  
January 2015 $75 million
-3%
$1,818 million
15%
January 2014 $77 million $1,584 million
     
Winery Job Index » Month   12 Months  
January 2015 259
26%
233
15%
January 2014 205 203
     
 
MORE » Released on 02.13.2015
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Direct To Consumer
Wine Shipping Report
2015
 
Download full report »
 
 

Practical Winery & Vineyard Library
 
Search the PWV archive »
 
 

CALENDAR
  • March 4-6
     
    Michigan Wine & Grape Conference
     
  • March 12
     
    Central Coast Insights
     
  • March 13-15
     
    Women of the Vine
     
  • March 14
     
    Oregon Chardonnay Symposium
     
  • MORE »
 

READER COMMENTS
 
Article: Ancient Wine Technology »
 
Have a look at old anatolian küps (amphoras). You do not need to bury them...
Reader: Guest
 
Article: Scurlock joins wine hall of fame »
 
Congratulations David!
Reader: Guest
 
Article: Wineries Cautioned About Internet 'Ads' »
 
I guess my first question would be why is there a three tier system to...
Reader: Guest
 
Article: Wine on the Rocks »
 
Great potential! Mineralities are sought after and can be found in these rock formations with...
Reader: Bruce Coulthard
 
Article: 90% of U.S. Consumers Can Buy Wine Direct »
 
You say that 90% of the consumers can buy wine direct. Really? In most cases...
Reader: Guest
 
 


Directory/Buyer's Guide — Your Wine Industry Marketplace
 
 
WINERY SEARCH
 
 
Advanced Search »
SUPPLIER SEARCH
   by Product
 by Company Name or Brand
 
Browse by Category »
2015 Directory/Buyer's Guide
The Wines & Vines Directory and Buyer's Guide
 
 
EXPANDED ONLINE SEARCH INCLUDED WITH PURCHASE
 
ORDER NOW »
 
LEARN MORE »
 
 
Wines & Vines Magazine
 
 
LEARN MORE »
 
SUBSCRIBE »
 
Digital Edition Now Available!
Wines & Vines Digital Edition Now Available
 
LEARN MORE »
 
ORDER NOW »
 
 
The Wines & Vines Online Marketing System
 
The Industry Standard winery marketing application
 
FREE LIVE DEMO »
 
VIEW VIDEO »
 
 
 
 
Latest Job Listings
 Portfolio Sales Repres...
 Miami, FL
Sales and Marketing
 Tasting Room/Guest Rel...
 Sonoma, CA
DTC, Tasting Room and Retai
 District Manager - Ten...
 Nashville, TN
Sales and Marketing
 Florida Regional Manag...
 Southern, FL
Sales and Marketing
 Sales Manager
 West Greenwich, RI
Sales and Marketing
 Artisan Sales Consulta...
 Norton, MA
Sales and Marketing
 Wine & Beverage Sales ...
 Ann Arbor, MI
Sales and Marketing
 Tasting Room Associate
 Yountville, CA
DTC, Tasting Room and Retai
 Tasting Room Associate
 Sebastopol, CA
DTC, Tasting Room and Retai
 Wine Club Coordinator/...
 Sebastopol, CA
General Administration and
 
More Job Listings >>
Follow Us On:
 
 





Home  |  About Us  |  Editors  |  Subscribe  |  Print Edition  |  Digital Edition

Advertise  |  Site Map  |  Contact Us  |  Privacy Policy
 
 
Copyright © 2001-2015 by Wine Communications Group, Inc. All Rights Reserved.
No material may be reproduced without written permission of the Publisher.
Wines&Vines does not assume any responsibility for any unsolicited manuscripts or materials.