Annual Wine Report Notes Many Obstacles to Bottle Price Increases
ST. HELENA, Calif. –– January 15, 2013 — Silicon Valley Bank, a leading provider of commercial banking services to the wine industry, released its Annual State of the Wine Industry Report in a live broadcast from SVB TV studios today. The report captures trends and addresses current issues facing the U.S. wine industry, offering unique data and observations that help wine business owners and managers think critically about their strategies.
Key findings and predictions:
- The general financial condition of the wine industry continues to improve at a slow and steady pace.
- 2012 produced the rarest of events: large yields coincident with outstanding quality across all Western US growing regions.
- Sales growth in fine wine is predicted to be in the range of 4-8 percent in 2013, which is a lower rate of growth than in the previous three years.
- Wine businesses expect to increase bottle prices slightly; however, SVB believes that will prove difficult in 2013.
- Winery gross and net profit will be negatively impacted in 2013 due to higher grape costs.
- Inventory is balanced; yet grape planting will be restrained compared to the same point in prior cycles.
- The purchase volume of wine grapes and grape pricing will largely be flat compared to 2012.
- Mergers and acquisitions of vineyards and wineries will continue at a record pace in 2013.
- Massive bulk imports will continue to dominate the lowest price point wine categories.
- Planting in grape growing regions is and will continue to be more restrained versus prior cycles.
- Direct-to-consumer sales will continue as the largest growth channel for most wineries.
Based on its in-house expertise, ongoing research and a survey of 450 West Coast wineries, Silicon Valley Bank continues to believe the fine wine segment is early in a long-term, steady growth phase, despite ongoing headwinds, increasing pricing pressures and global economic uncertainty.
"It's another good-news, bad-news year in fine wine. While we are quite optimistic about the future prospects in the US wine business, a combination of events will continue to hold back robust growth in 2013," said Rob McMillan, founder of Silicon Valley Bank's Wine Division and author of the report. "Economic uncertainty, slowing domestic GDP, lack of economic leadership worldwide, aging Boomers, and a heavy 2012 harvest provide headwinds against forecasting higher growth. Forces helping consumer demand start with improved hiring and better housing markets, which are critical to accelerating aspiring and mass-affluent consumer purchases. The first half of 2013 will prove more difficult than most expect, but the back half of the year should see improvement."
McMillan is discussing the report and the state of the industry in a live broadcast with Paul Mabray of VinTank , Tony Correia of The Correia Company and MJ Dale of KLH Consulting at an online event today at 9:30 a.m. Pacific time. A replay of the discussion will be available by January 18, 2013.
To participate in the Silicon Valley Bank's annual Wine Conditions Survey and receive the full data set and restricted participant analysis, contact the author, Rob McMillan rmcmillan@svb.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.