The price of wine is expected to fall to its lowest levels in five years, according to a new report.
The State of the Wine Industry report from Silicon Valley Bank says low prices are due in large part to an oversupply of grapes in California and Washington, coupled with low demand.
“Grape and bulk prices will fall to lower levels than we’ve seen in the past five years,” wrote the author of the report, Rob McMillian, the founder of the bank’s wine division. “It will be well beyond 2020 before we see grape prices stabilize.”
McMillian says part of the problem is that Millennials aren’t engaging with wine as industry leaders had hoped.
“They lack financial capacity, having been slow to get into their careers after the financial crisis,” wrote McMillian. “They have a current preference for premium spirits and craft beers. Cannabis demand skews to younger males today, and that is also likely playing a small role in the cohort’s delayed appreciation for wine.”
McMillian says it will probably take more than three years to clear the market’s excess in Napa and Sonoma if demand stabilizes.
The report says wine priced below $11 is in jeopardy of joining the below $9 segment and declining in both volume and value.
“Grape pricing will stabilize at much lower levels compared to the past five years,” wrote McMillian.
Click here to read the full report.