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Wine Industry in Transition: Adapting to Economic Shifts and Compliance Pressures

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Wineries face rising pressures on wages, a buyer’s market for grapes
and the looming cost of wastewater compliance 

By Laurie Wachter


A strong finish to a late harvest was good news for the North Coast wine industry as it gathered at the 11th Annual WIN Expo in Sonoma County, Calif. The annual post-harvest event is always a welcome opportunity to reconnect with colleagues and catch up on what’s happening in the industry. But the mood subdued as winemakers, growers and industry suppliers listened to Dr. Robert Eyler’s outlook on the economy, and heads nodded as wine brokers from the Ciatti Company reviewed the 2023 harvest. A concerned audience listened intently as a panel of experts explained the new statewide winery order on process wastewater. 

Challenges remain as recession concerns fade

Fears of a U.S. recession have receded for 2024. Interest rates are unlikely to rise, and the Federal Reserve Board may even start lowering interest rates in the second or third quarter of 2024. These reassuring economic insights came from Sonoma State University economics professor Dr. Robert Eyler at the 11th annual WIN Expo trade show and conference, which took place November 30 in Sonoma County.

However, Eyler cautioned, the U.S. economy is likely to move more slowly amid job losses and rising costs in wages and materials that will persist for years. These trends will also slow credit markets and investment in new or expanded winery spaces and vineyards. These same worries — and the falling personal savings rate — will drive wine drinkers toward lower-priced wines in 2024 (mirroring consumer behavior in late 2007, the start of the Great Recession) and may extend into 2025. 

Continuing labor shortages and rising pressure on wages as workers push for more will accelerate winery and vineyard adoption of technology to compensate for the labor gap. If remote workers remain a force in San Francisco and the savings rate remains low, travel to nearby North Coast wine country is likely to diminish. Together, these impediments will drive smaller restaurants and retailers closer to the edge of failure as 2025 approaches. 

Globally, Eyler noted a shift from China to India in the Asian economic growth engine, as the Chinese economy falters over the next 18 months. That means more competition from India in outsourcing and entrepreneurship, but also more demand from the rising Indian middle class for luxury products like wine.

Growers grapple with a buyer’s market

Greg Livengood, president of The Ciatti Company, agreed. “In addition to declining consumption in many countries, the big factor in the global [wine] market is the massive consumption decline in China, which is down 100 million cases of wine from 2017 to 2022.” 

In the United States, exports of higher-end wines held their value overseas, but the value level continued its steady decline from 50.8 million cases in 2015 to 32.5 million in 2022, and Livengood expects the percentage of California crop to continue dropping from 15% to below 10% in 2023. 

He added that The International Organization of Vine and Wine (OIV) expects 2023 to be the smallest world wine production in 60 years, which is “exactly what the market needed,” given the oversupply created by the large spread between global production and consumption. 

Ciatti’s Glenn Proctor estimated that the late North Coast grape crop reached 4.2 million tons on the vine by November, but at least half a million tons were rejected or uncontracted, netting 3.5 to 3.6 million tons crushed. Sonoma and Napa harvests rivaled 2019 numbers, with approximately 235,000 tons crushed in Sonoma, with large Chardonnay and Pinot yields, and close to 160,000 tons in Napa.

In general, wineries held to contract standards but weren’t buying overages, especially at contract prices. The buyer’s market meant local growers faced tough decisions about whether to harvest extra fruit, crush and process them or leave them on the vine.

New winery wastewater rules raise costs

Adding to wine industry worries is the January 20, 2024, deadline for the new California Statewide Waste Discharge Requirements (WDR). The Wine Institute estimates the new winery order will impact about one-third of California’s more than 6,000 bonded wineries. 

Wineries with a low discharge — below 10,000 gallons of process wastewater — are exempt. But those with a higher discharge — up to 15 million gallons —must meet this deadline with a five-year compliance plan. The remaining wineries must work with their regional water board on compliance, including those discharging more than 15 million gallons and those permitted by Napa County, covered by a Regional Board’s General Order, an individual WDR or a conditional waiver. 

The cost of compliance can add up quickly. A winery producing between 3.5 and 4.8 million gallons of process wastewater annually could spend $352,000 to bring its existing pond and groundwater wells up to compliance — or as much as $2 million if the pond needs a new liner. Ongoing annual costs would run $72,000 to $215,000. Even a smaller winery can spend a substantial amount. A winery discharging 600,000 gallons of process wastewater into a subsurface discharge system could pay $0.67 to $1.46 million to widen the discharge area and add a pretreatment solution and flow meters. Its annual costs would run about $30,000.

Upsides and downsides flowed through the information shared by these experts. However, there was a level of uncertainty in the forecasts that should keep the North Coast wine industry closely focused on what happens next. Adaptability will clearly be its greatest asset over the next few years.


Laurie Wachter
Laurie Wachter

Laurie Wachter

Laurie developed her love of analytics and innovation while advising consumer packaged goods companies, including Kraft Foods, PepsiCo and the Altria Group, on consumer and POS data analytics and direct-to-consumer marketing. Today, she writes about the wine, food and beverage industries for a global client base from the Northern California wine country.

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