Annual State of the Wine Industry Report Predicts Stable Year Ahead, and Future Headwinds as Baby Boomers Retire
ST. HELENA, Calif. –– January 16, 2013 — Silicon Valley Bank, a leading provider of commercial banking services to the innovation sector and the wine industry, releases its Annual State of the Wine Industry Report in a live broadcast from the SVB TV studio today. Based on a survey of nearly 650 West Coast wineries, in-house expertise and ongoing research, the report covers trends and addresses current issues facing the US wine industry. The report offers unique data and observations that help wine business owners and managers think critically about their business strategies.
"Despite news to the contrary in recent months, wine supply is in balance heading into 2014 and we expect the highest rate of sales growth since the recession, despite a tough economy," said Rob McMillan, founder of Silicon Valley Bank's Wine Division and author of the report. "News is good for the consumer: demand is up, supply is in good shape and pricing is stable. For the winery, however, grape costs and flat consumer pricing means lower profitability."
"While this year is ultimately expected to be a healthy one for US wineries, if we peer into the future 5-7 years, we believe the headwinds will increase significantly as more Baby Boomers retire," McMillan said. "50 and 60-somethings purchase about half of fine wine in the US. As they retire, and their purchasing power declines, the younger generation can't pick up the slack immediately, due to lower income, and access and the proclivity to purchase more foreign wine. Astute fine wine producers will be adjusting their strategies accordingly."
Key findings and predictions from SVB's Annual State of the Wine Industry Report
• Short-term: Continued growth in the demand for wine and limited pricing power for producers
• Long-term: Baby Boomers' declining demand for wine will not be immediately replaced by Millennials' demand, impacting the ability for wineries to sustain their current rate of growth
• Supply: Expect final numbers on the 2013 harvest to reach 3.94 million tons, which is the second largest harvest on record in California after 4 million tons harvested in 2012.
• Sales Growth: In fine wine, sales growth is predicted to be in the range of 6-10 percent in 2014, which is the first increase in three years
• Pricing: Bottle pricing will remain stable, increased grape and bulk wine costs are not being passed onto the consumer, therefore winery gross profits will be down
• Demand: Luxury wines and $10-$18 bottles will see greatest growth in demand
• M&A: Mergers and vineyard acquisitions will continue at a record pace
McMillan is discussing the report and the state of the industry in a live broadcast with Paul Mabray of VinTank , Mario Zepponi, Principal at Zepponi & Company, and Glenn Proctor, Partner at the Ciatti Company at an online event today at 9:30 a.m. Pacific time. A replay of the discussion will be available here later this week.
To participate in Silicon Valley Bank's annual Wine Conditions Survey in the future, and as such receive the full data set and restricted participant analysis, contact the author Rob McMillan at email@example.com or on Twitter @SVBWine.
About Silicon Valley Bank's Wine Division
Silicon Valley Bank is the premier commercial bank for emerging, growth and mature companies in the technology, life science, private equity and premium wine industries. Its Wine Division specializes in commercial banking for premium wineries and vineyards and the industries that support them. SVB has the largest team of commercial bankers dedicated to the wine industry of any bank nationwide. Founded in 1994, SVB's Wine Division has offices in Napa and Sonoma counties and serves clients in the fine wine producing regions of California, Oregon and Washington. By virtue of its dedication to the wine industry, Silicon Valley Bank is able to support its clients consistently through economic and growth cycles, and offer guidance on many aspects of their business, beyond traditional banking services. Silicon Valley Bank is a member of global financial services firm SVB Financial Group (Nasdaq: SIVB). More information on the company can be found at www.svb.com.
Silicon Valley Bank is the California bank subsidiary and the commercial banking operation of SVB Financial Group. Banking services are provided by Silicon Valley Bank, a member of the FDIC and the Federal Reserve. SVB Financial Group is also a member of the Federal Reserve.