Wine in Crisis: Navigating Prohibitionist Waves and Market Shifts
By Dan Berger
NAPA VALLEY, Calif. — The California wine industry today faces a dual crisis that it has never faced before: two competing challenges that together appear to be so strong as to denote the imminent death of wine as we now know it. However, all “sky-is-falling” predictions are completely inaccurate; the industry will survive. But analyzing this predicament calls for us to look at a bit of history.
Roughly four decades ago a Yale University expert on drug policy issues published a report that showed that prohibitionist movements in the United States come along in each generation, and such drives typically last for about six to eight years before the neo-prohibitionists lose their fervor and the crusade dies for lack of interest.
Dr. David Musto appeared as a speaker in 1988 at a Los Angeles conference sponsored by California wine industry leaders to discuss the then-current crisis. At the time, the industry faced a campaign launched in 1985 by the Joseph E. Seagram company that promoted the concept that “a drink is a drink.” The wine industry was aghast at this ad campaign, which basically said, “Whether you drink 12 ounces of beer, 5 ounces of wine or 1 ounce of liquor, you are consuming equal amounts of alcohol.”
Musto said that historically such neo-prohibition movements collapse precipitously in a few years, mainly because the 1919–1933 Prohibition “great experiment” was a complete failure, exemplified by the chaos and crime it spawned. Its repeal was inevitable because of the massive problems it had created.
In fact, in the 19th century, President Abraham Lincoln pointed out that the imposition of prohibition in this country could do harm to the forces of temperance.
Today the U.S. wine industry faces yet another prohibitionist movement similar to ones that existed during the Civil War, in the 1880s and several other times since. Those regularly occurring movements all died of ennui, not to mention the supporters’ use of false information, which today would be termed alternative facts. (Such as: The difference between use and abuse, which has rarely been pointed out by those advocating abstention.)
The California wine industry now is in freefall. Sales are down, wine companies are firing people so fast they haven’t got the staff to announce the layoffs and no one is talking about it. Part of the challenge is due to a new wave of prohibitionism led by people who believe that complete abstention from all alcohol will cure most of the ills of society and is more healthful than even moderate wine consumption.
This attitude includes statements from the World Health Organization that suggest no level of alcohol consumption is healthy.
In order to survive the current storm, however, the wine industry also must deal with the fact that it now faces an equally imperious challenge — new adult-beverage consumers who are so eclectic in their tastes that they are happy to consume all manner of new, modern beverages that have been designed to steal them away from fine and commodity wine. Most of the new products never existed in 1988, when the last major prohibition campaign was launched.
Not only does the beverage industry now offer us hard cider, hard seltzer and wine in cans as well as alternative containers, but now there is a new movement afoot called “natural wine,” which has no legal definition. Also, we now see flavored wines, low-alcohol wines, ready-to-drink cocktails, nonalcoholic gins and vodkas and craft beers of every imaginable flavor. And specialty waters! The result has been a serious downturn in sales of all wines, everything that sells for $2 all the way to $2,000.
Statistics released in March showed that overall U.S. wine sales in 2023 dropped dramatically. Experts now say the first quarter of 2024 should expect sales to continue to slow. Wine shelves at discount stores today are completely filled, and discounters’ wine sections are being expanded. Restaurants are firing sommeliers and trying to reduce their wine inventories.
Wine advertising has essentially dried up. After four decades of fine wine journalism, Wine & Spirits magazine publisher Joshua Greene said last week that the publication would cease printing, though its website will remain active.
The seeds to the wine industry’s downturn were sown roughly 13 years ago. On. Aug. 29, 2010, I wrote a column that said, “American wine consumption is at a critical crossroads, and the direction it goes depends greatly on how the current generation reacts to what we call fine wine.” I spoke of analyzing wine-buyers by age groups — baby boomers, Generation X, Generation Y, millennials. The transitions from one buying group to the next usually are relatively seamless. That is, chardonnay for one set of buyers is not radically different from chardonnay for the next group.
But what we didn’t know 13 years ago was that the alcoholic beverage industry would fragment into so many different and disparate subdivisions that it would become a maze made of a thicket of thorns. It has become confusing. Most analysts never imagined that all the dissimilar parts would actually be competing against one another.
I certainly never imagined in 2010 that hard cider, peach-flavored sparkling wines and flavored water additives would turn out to be serious competitors for chardonnay. But even then the signs were there. In researching that article in early 2010, I called several industry analysts and learned that the most popular chardonnays being sold at the time were unoaked and/or sweet chardonnays. If the American public was slowly shifting its appreciation for alcoholic beverage alternatives, sweet chardonnay certainly was a precursor to the later categories that began to edge into the public consciousness.
One of the most popular styles of wine today is red wine blends in which the grape varieties used are absolutely immaterial. And many of these, including some of the most successful, are actually a little bit sweet. Lots of these wines are being produced from almost every region of California. In most cases the wineries do not tell the consumer which grapes are being used. It is the sweetness and softness that popularize this category of wines, and that relates, directly or indirectly, with some of Napa Valley’s most iconic wines, cabernets.
Many of these wines are relatively huge (high alcohols are ubiquitous), soft, sweet and oaky. They have virtually no affinity for the dinner table, which once was a mandatory trait for cabernet. However, they carry one very important attribute: They are eminently drinkable when they are young. In spite of excessively high pricing, many of these wines continue to be sold, even though their likelihood of aging is zero. Aging red wine is no longer even a cogent thought among the buyers.
Although pricey cabernets still are selling, a significant weakness in their sales was beginning to show itself as early as 2010. No longer were people swooning at the mere sight of a label. “The younger generation seems to be unimpressed,” I wrote, about iconic labels. “Are these young people smarter than their forebears?”
Wine professionals all over the country told me in 2010 that millennials had minds of their own. Wine merchants from California to the East Coast said millennials demanded wines that were not extensions of their Gen-X and Gen-Y forebears. I wrote then of chats I had with several sommeliers. Most said they saw a major shakeout occurring. Two of them feared that they would be out of work within the next few years.
Another factor in the downturn in wine sales may well have been consumers’ declining interest in huge alcoholic wines. In 2010 there seemed to be a curiosity by younger buyers for unusual wines and wines with characteristics that once were shunned by earlier generations. High alcohols were no barrier. And what was evident to me was that several retailers and restaurateurs never saw most of the major changes in beverage consumption coming. Sales of high-alcohol wines began to slow.
COVID-19 had a devastating effect on wine inventories, starting about five years ago at retail and restaurant locations. And the industry, both domestic as well as overseas, continued to produce wines without knowing that a downturn was coming or that it would be so steep. Without knowing what was ahead, wholesalers, retail shops and restaurants increased wine inventories beyond what could eventually be sold.
Today wine-buyers for restaurants and retailers are hastily trying to deplete stocks. The rules for stocking and selling wines have changed, especially in cafés, most of which have extremely limited space to store wines. Restaurants have already reduced their inventories as much as they can and now carry a lot less volume in each common variety.
At the same time, more attention is being paid to grapes such as grenache, Beaujolais, torrontes, Nero d’Avola and others. High-end wine shops that once regularly stocked expensive chardonnays, cabernets and other cult wines now are experiencing stagnant sales in those wines — and not only because most prices are too high. Part of it may be chalked up to younger buyers who are bored with sameness.
The major problem with many of the gatekeepers, who have lived for decades on sales of cult wines, is that some of their savviest consumers no longer are happy to buy a case of this and a case of that. Some are buying just a couple of bottles of each wine, knowing that the aftermarket is also extremely soft. It may well be more practical to buy an older vintage in the aftermarket than to spend the same amount of money on today’s current releases.
Suffice it to say that the wine industry is going through a difficult transition. The new prohibition movement has just begun, and if history repeats itself, it will take a few years before it peters out. It does not appear as if the alternative beverages are disappearing. And predictions about which subgroup is buying which category of alternative beverage has yet to be efficaciously parsed by artificial intelligence. Your guess is as good as mine.
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Dan Berger has been writing about wine since 1975.
The Napa Valley wine industry has institutional barriers to the expansion of the wine consumption demographic dynamic: 1) tastings by appointment that inhibit spur-of-the-moment decisions to go wine tasting by young people. 2. Excessive tasting fees that exclude young people from exploring the wine tasting experience. 3) Corporate-sized wine tasting facilities with hundreds of pre-poured glasses of wine that dampen the personal wine tasting memory. 4) Wine and food pairing at prices that are astronomical for potential younger tasters. 5) The prohibition of wine tasting at small production vineyards that personalize the wine tasting experience that are memorable and worth sharing with other people in the dame age demographic. 6) Massive crowds of tasters that inhibit the personal memory of the wine tasting experience. 7) Stunningly excessive hotel rates that limit guest to the older age demographic with disposable income.
The Save-the-Family Farm organization (comprised primarily of small growth vineyards without wine production facilities who have their grapes custom-crushed and bottled), encountered stiff opposition from the corporate wine establishment, and was forced to struggled mightily to get a micro-winery ordinance passed for small growers containing structural and financial barriers that have resulted in only an isolated few obtaining a micro-winery permit that allowed tastings at their vineyards.
Young people revere personal experiences they can readily share with their peers which can exponentially result in the education of new generations of wine lovers. Napa Valley needs to embrace entry-level tastings at small vineyards to ensure its livlihood in the future.
Downsize and personalize.
John D. Murphy
Preserve Lodi Lane
Sang-Froid Vineyards
AVA St. Helena
I think people with no education in viticulture or making and marketing wines will stop going into the business as an investment. When profit is not high enough the romance will be over