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Silicon Valley Bank Predicts Consumers Will Pay Slightly More for U.S. Wine in 2017

Company News  |  January 17, 2017

Premium Wine Sales Predicted to Grow Between 10 to 14 Percent   

ST. HELENA, Calif. – January 18, 2017 –Silicon Valley Bank (SVB)released its annual State of the Wine Industry Report today. The 16th annual State of the Wine Industry report combines SVB’s expertise in the U.S. wine business with proprietary research to deliver forecasts and predictions for the year ahead in wine.

Highlights from the 2017 report show strong market conditions overall and identify notable trends that may signal adjustments in consumption patterns and segment prices:

  • Wines sold between $12 and $25 will grow in demand as will high-end luxury wines with an established brand. We expect to see small price increases in these segments, with volume and price drops for bottles priced under $9.
  • Sales growth is predicted between 10 to 14 percent for the premium wine segment. The confluence of better retail conditions, strong consumer demand and good supply will collide to deliver improving industry performance.
  • Overall supply is balanced with shortages of high-quality pinot noir and cabernet, but excesses are evident in certain non-core varietals and for grapes destined for lower-priced wine.
  • Slightly higher per capita consumption can be expected if economic conditions continue to improve despite retiring, wine-loyal baby boomers being replaced by less affluent millennials who are ambivalent about their alcoholic beverage of choice.
  • Winery acquisitions to remain active through 2017.
  • Farm labor supply and costs will be the dominant concerns in the wine business in 2017.

“We foresee a strong year ahead for the wine industry, particularly in the premium wine segment, with small price increases in the $12-25 bottle and luxury wine categories,”said Rob McMillan, founder of Silicon Valley Bank’s Wine Divisionand author of the report. “However, critical labor issues will be the dominant concern this year. The reality in the wine business today is that the labor force is inadequate in every growing area, which is leading to increased costs and more incentive to mechanize.”

Additional findings and predictions for 2017: 

  • Import growth in lower premium price points is expected, due to a strong and strengthening U.S. dollar, available foreign supply, foreign in-country marketing support and willing millennials.
  • Millennials are beginning to affect the lower price range of premium sales. Their presence is most visible in the $8 to $11.99 red blend category, but they will gradually move away from blends and into varietal wines or imports as their incomes improve.
  • Total harvest in California for 2017 is predicted to be 3.95 million tons crushed, 7 percent above 2016.

McMillan is discussing the annual report and the state of the wine industry in a live videocast online today at 9:30 a.m. Pacific time with Amy Hoopes, chief marketing officer and executive vice president of global sales at Wente Vineyards, Dan Leese, president of V2 Wine Group, and Paul Mabray, vice president of social media and reputation management at Avero. A replay of the discussion will be available after the event.

Read the full report here:
http://www.svb.com/wine-report/

To participate in Silicon Valley Bank’s annual Wine Conditions Survey in the future, contact the author Rob McMillan at rmcmillan@svb.com or on Twitter @SVBWine.

 

About Silicon Valley Bank

For more than 30 years, Silicon Valley Bank (SVB) has helped innovative companies and their investors move bold ideas forward, fast. SVB provides targeted financial services and expertise through its offices in innovation centers around the world. With commercial, international and private banking services, SVB helps address the unique needs of innovators. Learn more at svb.com.

Silicon Valley Bank’s Wine Division

Founded in 1994, SVB’s Wine Division offers financial services and strategic advice to premium vineyards and wineries. With one of the largest banking teams in the country dedicated to the wine industry, SVB’s Wine Division has offices in Napa and Sonoma counties and primarily serves clients in the fine wine producing regions along the West Coast of the United States. Learn more at www.svb.com/winedivision

Silicon Valley Bank is a member of SVB Financial Group. ©2017 SVB Financial Group. All rights reserved. Silicon Valley Bank is a member of FDIC and Federal Reserve System. SVB>, SVB Financial Group, and Silicon Valley Bank are registered trademarks.

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