SVB wine report 2020: The wine business is hurting, and things are going to get worse before they get better
How upside down is the wine world? This week, during the annual Silicon Valley Bank state of the wine industry webcast, one of the panelists said something that was almost unprecedented:
“We need to pay better attention to consumer demand.”
Which, as regular visitors here know, is the opposite of what we’ve heard for decades, and especially since the end of the recession and the growth of premiumization. The wine business knew best, and sold us what it said we needed, and not necessarily what we wanted.
Because that’s how we ended up where we are today, with decreasing wine sales, decreasing demand, and decreasing interest in wine among younger consumers. Which, not surprisingly, was the theme during this year’s wine industry webcast. Rob McMillan, the executive vice president and founder of the Silicon Valley Bank wine division, put it bluntly on Tuesday morning: The wine industry has to change the way it does business and focus on what makes wine worthwhile. It can no longer assume that consumers will drink wine because they always have.
And, reinforcing just how different things are from where they were just a couple of years ago, McMillan said it was time for wine to reconsider its objection to nutrition and ingredient labels. Because, of course, that’s what consumers want.
The rest of the webcast was depressingly familiar for anyone who has been paying attention to something other than wine scores and premiumization for the past decade:
• A price bubble exists for California’s best quality grapes, as prices continue to increase while demand doesn’t.
• Retail wine sales, measured by volume, have declined to where they were in spring 2015.
• The amount of bulk wine on the market is at record levels, which is a key gauge of wine industry health. More bulk wine means less demand, which means lower wine prices, which means wineries make less money.
Will the wine business take its head out of the sand and act on the report? McMillan isn’t necessarily optimistic. I talked to him this week, and he said that there is still tremendous denial among producers, save for the very biggest. Big Wine, he says, “is looking for ways to change the industry,” but it’s about the only ones.