California Wines Could Hit Their Best Value in Two Decades
Growers may have to rip out vines to curb profit declines.
We already saw the canary in the coal mine, and his name was Chuck. Last month, Trader Joe’s announced it was rolling back the price of its Charles Shaw wine—colloquially referred to as “Two Buck Chuck”—to its original $1.99, a value last seen in 2013. Though the company mainly attributed the move to packaging tweaks, another factor was a “huge jump in supply of grapes,” the grocer’s V.P. of marketing and product told the Los Angeles Business Journal. So while nostalgic millennials on a budget rejoiced, a larger story was swept under the rug. Lots of California wines may see their prices plummeting—possibly to values reminiscent of the turn of the millennium itself.
California is currently seeing an unsustainably large glut of wine grapes, according to the San Francisco Business Journal (SFBJ), citing a recent talk from Jeff Bitter, president of the marketing association Allied Grape Growers, who spoke at the Unified Wine & Grape Symposium last Wednesday. “We’re in a very difficult grape situation,” he reportedly said in a sentiment echoed by other speakers. “This year there were more grapes left on the vine than I’ve ever seen in my lifetime.”
The problem, as is often the case, has been a shift in the winds. As a number of reports from earlier this year pointed out, in 2019, American wine consumption dropped for the first time in about 25 years, driven in part by younger generations’ tendency to drink less than their parents did. However, as the SFBJ explains, grape producers were still planning for growth, by both planting more acres and improving techniques to maximize their yield. The result, lots of extra grapes: “We need to pull out some vines,” Bitter was quoted as saying. “We’re going to be 200,000 tons [of wine grapes] long each year if we don’t make this correction.”
On the bright side, excess supply is good for demand. As Eater points out, Silicon Valley Bank's State of the Wine Industry 2020 (SVB) suggested that consumers may see “the best value in 20 years” thanks to the lowest grape and bulk wine price drops since 2015. “Today, the wine supply chain is stuffed,” Rob McMillan, who authored the report, said upon its release last month. “This oversupply, coupled with eroding consumer demand, can only lead to discounting of finished wine, bulk wine and grapes. US wine consumers will discover unprecedented retail value in 2020 and should buy up.”
And buying up is likely good advice. These kinds of trends tend to be cyclical, and clearly, as Bitter’s talk demonstrates, the industry is aware of the problem and looking to adjust. Meanwhile, the SVB report also explains, “The large millennial population hasn’t yet begun to embrace wine, presenting the wine industry with its largest growth opportunity.” If millennials ever do come around to loving California vino, expect the current pricing discounts to evaporate rapidly.