SVB Predicts Sales Growth in 2010 Fine Wine Sales

Company News  | 

 ST. HELENA, Calif. — November 18, 2009 — Silicon Valley Bank, a leading provider of commercial banking services to the wine industry, released preliminary findings for its annual State of the Wine Industry Report  for 2010-2011 today. Based on in-house expertise and ongoing research among West Coast wineries, the report reiterates the prior prediction that the market will be slow to fully recover, predicts year over year sales declines for calendar year 2009, but also forecasts modest growth at the producer level in 2010. The growth prediction is tempered by observations of continuing economic softness and demographic shifts that are creating headwinds against a quick return to the business conditions that were considered normal prior to Q3 2008.

"Our current research is showing that the wine businesses continue to be pushed in this economic environment, and there is no expectation that what was normal for the past decade will return in short order," said Rob McMillan, founder of Silicon Valley Bank's Wine Division and author of the report. "Defining a new normal and acting on that is more prudent than waiting for the old normal to return."

Emerging demographic shifts in particular will impact sales and marketing strategies for fine wines as target consumers change spending patterns, and potentially exit the market altogether.

"For that segment of Baby Boomers who have seen their net worth drastically reduced and who have been the prime target of wine marketing for nearly 20 years, a $50 bottle of wine is now permanently out of the question for a normal purchase," McMillan said.

Early reports for Q4 2009 sales suggest improvement over the same period in 2008, an expected down year for the full year 2009, but positive growth in the fine wine business in 2010. However, the report continues, true recovery will take time due to lasting, negative economic changes in housing, consumer wealth, consumer credit, business spending and restaurant sales.

"Not all the changes we're seeing and expecting during an ongoing correction and recovery will be permanent and it's not all doom and gloom, but everyone in this business should expect that the future will be quite different than the past decade in fine wine," McMillan said.

Silicon Valley Bank's Annual State of the Wine Industry Report due for release in the spring captures trends and addresses critical issues facing the U.S. wine industry. Given the state of the economy and the need for wine businesses to think critically about their strategies, these preliminary findings intend to offer data, trends and observations that businesses can use during their 2010-2011 planning.

  • To receive an invitation to participate in Silicon Valley Bank's annual on-line survey and thus receive survey results, please e-mail Penny Northrop (PNorthrop@SVB.com)
  • To be added to Silicon Valley Bank's report distribution list, contact the author, Rob McMillan (RMcMillan@SVB.com)

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 Napa, Sonoma, the Central Coast 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), with SVB Analytics, SVB Capital, SVB Global and SVB Private Client Services. More information on the company can be found at www.svb.com.

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