BUSINESS OF WINE
What to do when your ‘bundle of joy’ is actually a case of pinot... Confessions of Sonoma County ‘Wine Moms’
Inside: Tech Talk · Corner 103 Farmhouse Inn · Keller Estate SVB Wine Report · Only In Marin
March 2024
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March 2024
49 YEARS OF BUSINESS INTELLIGENCE
March 2024 • Volume 49 • Number 3
LEAD STORY 18 STATE OF THE WINE INDUSTRY
Jason Walsh
A deep pour over Silicon Valley Bank’s annual vino report
WORK/LIFE 13 WINE 14 CRYPTO 15 CONSUMER FEATURE STORIES 26 Shifting paths
18
Jessica Zimmer How local wine companies are dealing with daunting market challenges 36 Confessions of Sonoma County ‘Wine Moms’ Mallorie Deming When the combo of motherhood, memes and merlot goes too far… 48 Pollinators in the vineyards and beyond
Vicki Larson
Butterfly habitats bring a ripple-effect of good vibes to nature
36
Helping grow your business isn’t just something we do... it’s all we do!
48
March 2024
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60
58
65
COLUMNS 11
DEPARTMENTS 8 LETTERS 58 DINE WISE Jason Walsh Farmhouse Restaurant in Forestville 60 GREAT TASTES Alexandra Russell Keller Estate Winery in Petaluma 62 WHAT’S HAPPENING Upcoming North Bay events 65 BIZ SCENE Marin Builders Association crab-feed fundraiser 66 BEYOND THE BOARDROOM Rosie Padilla Lloyd Davis of Corner 103 tasting room in Sonoma
PUBLISHER’S FORUM Lawrence Amaturo Supply and Demand—from wine country to NATO
16 ECON 101 Robert Eyler
How big is the state budget problem?
17 VINE WISE Adam Lee Ingredient labeling not so easy after all 25 NAPA INSIDER Christina Julian Sign, signs, everywhere a sign! 35 TECH TALK Michael E. Duffy Theft in the age of digital shopping 47 ONLY IN MARIN Bill Meagher
How many units should be in Northgate housing project?
57 IN THE KITCHEN John Ash Butternut Squash Soup
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NorthBay biz (ISSN No. 1542-3549: USPS 097-770) is owned and published monthly (plus three bonus issues annually) by North Bay Media Group, LLC. Editorial offices are at 3392 Mendocino Ave., Santa Rosa, CA 95403 USA: (707) 528-4434. Sub- scription price is $35 per year. Periodicals Postage Paid at Santa Rosa, CA 95402 and at additional mailing offices. Copyright 2022, NorthBay biz. Reproduction of this issue in whole or in part is strictly forbidden without written permission by the publisher. POSTMASTER: Send address changes to NorthBay biz, 3392 Mendocino Ave., Santa Rosa, CA 95403 USA.
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March 2024
Entries are open for the 2024 North of the Gate Wine Competition!
The NOTG Wine Competition presents an opportunity to have wines from between the Golden Gate Bridge and the Oregon border evaluated by some of the most respected judges in the nation.
More Information at Sonoma-MarinFair.org Enter Online: enofileonline.com (707) 283-3247 | EntryOffice@Sonoma-MarinFair.org
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March 2024
NorthBaybiz 7
Letters
Publisher
Lawrence Amaturo
Editor-in-Chief
Jason Walsh
Letters to the Editor Food to learn by In response to NorthBay biz announcing its August 2024 issue would focus on education and career training: Can we have a food education story? If so, I highly suggest interviewing these four powerhouse females: Sheana Davis with Epicurean Connection; Julie Schreiber, who teaches mushroom foraging classes; Laci Sandoval, owner of Wind & Rye in Penngrove; and Michelle Wood of Dim Sum & More. —Emily Marsh, Sonoma County
From restaurants to recipes, all the North Bay stories you’ve hungered for! Our Food Issue Is Served…
Associate Editor
Rosie Padilla
Contributing Editor
Bill Meagher
Design Director
Anne Schenk
Administrative Assistant
Jodi Pasquini
Marketing Consultant
Lori Rooney
Inside: Cattlemens · Soul Food, Marin-Style Viva Mitote! · Shifting Gears · Flavored Butter Sula Restaurant · Pax Wines · Saul Gropman
Writers Janet Perry Jason Walsh Jessica Zimmer Mallorie Deming Rosie Padilla Columnists Adam Lee Alexandra Russell Bill Meagher Christina Julian Jason Walsh John Ash Michael E. Duffy Robert Eyler
June 2023
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What time is it?! In regard to NorthBay biz’s Best of the North Bay contest voting going live: Time to vote!!!! —Rohnert Park Chamber of Commerce
Photographers Duncan Garrett
For more recent NorthBay biz issues, check out northbaybiz.com . Email comments, complaints and witty observations to jwalsh@northbaybiz.com. Please include name, address and phone number. Letters will be edited for length and clarity.
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March 2024
Experience the ultimate celebration of Louisiana’s French Kreole culture in Sonoma County’s backyard!
MAY 11, 2024 • 12pm - 6pm
On May 11, 2024, the highly anticipated Kreole & Krawfish CommUNITY Gathering will return to SOMO Village Event Center in Rohnert Park, CA, A truly inspiring event that aims to raise funds for the “Are You Ready To Learn with Andre Thierry” children’s and family music program. Indulge your senses in the mouth-watering flavors of Louisiana’s cuisines and refreshing drink specials at the full-service bar while entertained by lively French Kreole La La, Zydeco, and Accordion Soul Music. This outdoor event is excellent for families and dance enthusiasts alike! Plus, it’s free for children under twelve, and plenty of free parking is available. Join us and enjoy the musical traditions passed down from generation to generation as we share the heART of the French Kreole culture!
Our multicultural events, projects, and programs share world music with inspirational rhythmic experiences, benefitting our local and global communities. info@poweredbymusicllc.com.
March 2024
NorthBaybiz 9
Books Are Portable Magic Remember being read to as a child?
My mother read aloud to me, and one of my favorite books was Charlotte’s Web by E.B. White. But what I remember most was the sound of her voice, the rhythm of the words and what it felt like leaning into her, while she read aloud to me. The pages of those books she read transported us to faraway places—real and imaginary—and taught me about life and opened my mind to all the possibilities. So when I became a mother, I began reading to tmy kids. And now I’m reading to my grandchildren every chance I get. As for my mom, now a great-grandmother, she still takes great joy in reading to the kids whenever she visits. Remember to take time every chance you get—eat, play, read. Reading helps build language and thinking skills, develops a child’s imagination and empathy for others, achieve better in school, and it’s a great way to spend time together. And best of all, reading aloud to your child makes memories that will stay with you for a lifetime. That’s what my mother was doing years ago when she took the time to read aloud to me.
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Publisher’s Forum
U.S. wine consumption, put simply, is down.
Supply and Demand—from wine country to NATO By Lawrence Amaturo
W hy not take the day off real soon for a little anywhere else on the planet. Isn’t our North Bay going to win that taste test eight or nine times out of 10? I believe so, and so does the American buying public. Indeed, some of the best and brightest people in our three- county community are executives, marketers, advisers and consultants in the wine industry. But, sheesh, these folks have a huge problem to overcome: acquiring new, younger wine consumers. As you’ll read this issue in Jessica Zimmer’s well- researched story, “The baby boomer generation is aging out of high-end consumption while millennials, and Gen Z consumers are concerned about their mental and physical wellness. Consumers of all ages are also taking part in stints of abstention, from detox diets and dry Januarys to [religious] holidays like Lent.” U.S. wine consumption, put simply, is down. The all-alcohol experiment? Blindfold yourself and grab six random bottles of nearly any variety produced in Sonoma and Napa and compare them to an equally random sample of the same varieties from market is also expected to shrink in the next few years. The fine- wine market, our counties’ primary focus, has thankfully grown (on a dollar basis), in the last few years, but not at the rate of grape harvest and production. This is a supply/demand trend that rarely lasts before a major producer “blinks” and floods the market with reduced-priced goods. Has Treasury Wine Estates, home of so many superb labels including Beringer, Stags Leap, Penfolds and Sterling Vineyards, already begun this recent process? Its recent onslaught of “60% Off Now!” promotions sent to my email box leads me to believe so. But let Jessica fill you in on the details; her research is far more substantial than my anecdotal histrionics!
Ukraine & NATO Is European leadership as focused on what’s going on in Ukraine as our American politicians and citizens seem to be? We hear the demands Europe keeps making of U.S. taxpayers to spend more money to repel Putin and his Russian forces from Ukraine. We hear from so many of our own politicians that this war must be funded with tens, and soon hundreds of billions of U.S. dollars. But why is Russia’s invasion so unimportant to Europe that most countries aren’t even meeting their own NATO investment pledges that 2% of their gross domestic product (GDP) would go toward military defense? Yet, more than half of this membership has ignored this pledge for years and continue to do so. As Anders Corr, head of Corr Analytics and “equipped” with the perfunctory Ivy League undergraduate and doctorate degrees, so poignantly describes in his recent commentary, 17 European countries and Canada (out of 31 NATO members) have not even met their annual commitments much less exceeded them! He cites the most recent study, conducted by Newsweek magazine, that shocked me: France, Holland, Norway, Germany, Spain, Belgium, Italy and Denmark, are on this list for 2023. The Norwegian Sovereign Wealth Fund, fueled by its OPEC oil revenues, exceeds $1.7 trillion; Norway’s GDP is $435 billion. Yet Norway can’t find a reason to make its $8.7 billion pledge and doesn’t think that its next-door neighbor is a threat that money and/or arms can’t fix? Bulgaria and Albania also have not lived up to their 2% of GDP NATO commitment either yet would be defenseless against Russia’s menacing army without its support. I simply don’t get it. If you do, please enlighten me. As I’ve written before, sometimes asking the right questions is the way to seek the best feedback from others with a different perspective. I welcome yours. g
Always good to hear from you…even when you point out my misunderstandings…. So send me a note at Lawrence@Northbaybiz.com.
Ignore Google’s Gemini AI. In a heavy-handed attempt at equity, its “garbage in, garbage out” programming portrays Pacific islanders as Scandinavian Vikings, East Indian women as former popes and Asians as Nazi SS Agents. It’s just not ready for prime time.
Visit our NorCal coastline in between all the rain; unbelievable vibrancy.
Watch the 1923 series (Paramount+) with a caution as to its unnecessarily violent scenes and broadbrush characterizations of historical events. But wildly entertaining!
March 2024
NorthBaybiz 11
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Work/Life Wine America’s one- sided love of European wine
W v hen the United States and the European Union finally buried the hatchet in a long-simmering dispute over government subsidies to Boeing and Airbus in June 2021, wine lovers in the U.S. may well have opened a bottle of Bordeaux to celebrate. While that may sound strange, after all what does wine have to do with airline subsidies, it actually makes perfect sense. Wine was one of the products caught in the middle of a tit-for-tat tariff fight that saw the Trump administration put a 25% levy on certain European food and drink items, including wines from Germany, Spain, France and the UK. Those tariffs were suspended half a year later in a broader bid to improve transatlantic relations which had cooled notably during Trump’s time in office. As the accompanying chart shows, America’s love of wines from Southern Europe, with France and Italy especially coming to mind, is a one-sided affair. According to Eurostat data, the U.S. imported more than 5 million hectoliters from France and Italy between Aug. 1, 2022 and July 31, 2023—worth roughly $4.5 billion. While Italy was by far the biggest exporter to the U.S. in terms of volume, France is leading in monetary terms thanks to its more pricey grapes. Meanwhile, By Felix Richter
Europe’s five largest wine producers imported little more than 300,000 hectoliters of wine from the U.S., choosing instead to get high on their own supply, to borrow a quote from the movie Scarface . Germany is the notable exception among
Europe’s major wine producers, as it is the only country among the top 5 to import more wine from the U.S. than it ships back across the Atlantic.
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Work/Life Crypto
By Jason Walsh C rypto investors are used to volatility—with values of the non-corporeal currencies rising and falling almost constantly in real time— but the doubling and at one point tripling of Bitcoin in the past six months caught a lot of attention, especially given the waning euphoria over the asset since its languishing under $17,000 (per coin) at the start of 2023. But Bitcoin rallied to match its previous price peaks above $60,000 in February—and suddenly what Warren Buffet dismissed last year as a “gambling token” even has his own Berkshire Hathaway folding crypto-friendly companies into its interests. Bitcoin’s surge is partly down to the Securities and Exchange Commission’s approval in January for some investment companies to offer bitcoin exchange-traded funds (ETFs), allowing investors access to diversified funds that include portions of cryptocurrencies without having to buy directly into the crypto itself. But what’s really got the bitcoin-curious excited is this spring’s quadrennial “halving” of the currency—the automatic reduction of new coins entering circulation that occurs every four years. The halving of bitcoin is a built-in feature of the currency intended to curb inflation and further imbed a scarcity of the coins (there will only ever be 21 million coins in circulation, according to the bitcoin model). The first time bitcoin halved in 2012, its value spiked by 30,000% (you read that correctly). In 2016 it gained 800%; in 2020, 700%. (Of course, crypto’s volatility is such that it lost most of its 2020 gains by the end of 2022.) The next halving is expected to take place mid-April. Let the euphoria begin. Bitcoin—too clever by half!
5 top cryptocurrencies
It’s not all about bitcoin—here are the most valuable cryptos at the beginning of March 2024, based on the total value of all coins in circulation: 1. Bitcoin $1 trillion 2. Ethereum $385.5 billion 3. Tether $98.1 billion 4. Binance $58.6 billion 5. Solana $46.8 billion
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Work/Life Consumers
Business ‘overcharging’on the decrease, according to consumer report
By Rosie Padilla
D espite how your according to the 2023 Marin County Consumer Protection Report presented March 5 before the Marin County Board of Supervisors. The findings, compiled by the Marin County Department of Agriculture, pocketbook might be feeling, the number of businesses overcharging customers last year was down. At least that’s Weights and Measures (AWM), showed that last year 71% of businesses complied with price-accuracy requirements— an increase of nearly 13% from 2022. It was also reported that 4.2% of consumer items inspected were rung up as overcharged at registers—an improvement from the 4.5% overcharges in 2022. County Assistant Agricultural Commissioner Scott Wise, however, said the report wasn’t all good news for local consumers. “Despite that trend, we’ve noticed that retail stores in underserved, lower-income areas fail their pricing inspections more often than business in more affluent neighborhoods,” said Wise. “We have increased education and outreach efforts with these businesses that cater to lower-income patrons to gain compliance.” The businesses that fail price inspections are re-inspected monthly until
13,524 inspections of prices and devices, a 7.3% increase from 2022, to ensure accuracy of charges to consumers. Inspectors made 395 price verification visits at 221 unique businesses during the 2023 calendar year, an increase from 307 visits at 216 establishments a year earlier. Other key comparisons (note: more inspections were made in 2023 than in 2022): • Notices of violations issued to businesses: 329, up from 226 in 2022. • Items found to be overcharged to customers: 477, up from 467. • Items found to be undercharged to Consumer Complaint Form if they have any concerns regarding a Marin business. These complaints usually revolve around retail overcharging, allegations of gas pumps “shortening” customers on fuel, or credit-debit card skimmers. AWM inspectors urge consumers to shop with care, pay attention to posted prices and promotional offers, and always retain and check their receipts to ensure the correct price was paid for merchandise and services. For more information go to marincounty.org/depts/ ag/consumer-tips-trust-but-verify . customers: 325, down from 332. Patrons are welcome to fill out a
Always cross reference your receipts, North Bay residents.
they are compliant by state law, county officials explained in a press release. Continued violations would likely result in a fine. Businesses with a further lack of compliance would eventually be referred to the District Attorney’s Office for enforcement action through its Consumer Protection Division. In all, Marin’s inspectors performed
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NorthBaybiz 15
ECON 101
How California collects taxes is critical in its exposure to prolonged budget deficits.
The State of the State Budget: A classic tale of ‘tail effects’ By Robert Eyler
G ov. Gavin Newsom on Jan. 10 put forward his fiscal year 2024-25 budget. The budget had a large deficit (approximately $39 billion. California’s Legislative Analyst Office (LAO) predicted a much larger deficit. LAO’s subsequent budget analyses had caveats about California’s ability to solve the budget deficit without significant legislative and practical changes to state government. California’s projected (and current) state budget deficit signals substantial issues. The revised budget in May 2024 will consider
employment growth and equity market outcomes. To close projected deficits, California’s state government must also think creatively about expenditures while still maintaining services. State-level government services will likely seek changes that employ more technology, such as artificial intelligence (AI). Labor unions throughout the state and nation are deeply concerned about such a fate. Many jobs may not be easily replaced by a chat service or machine-learning technology, but there are substitution threats from AI, robotics and combinations thereof. It is in labor
some of these issues, but it is essential to see the budget deficit lasting a few years at a minimum. How California collects taxes is critical in its exposure to prolonged budget deficits. Personal (household) income taxes remain the essential way taxes are collected in California. Slower jobs and wage growth tend to slow down income tax revenues. The boom-and-bust cycle of equity markets generates capital gains
costs where California’s state government faces its most significant expenses. Decisions may shift current liabilities to pension- system liabilities as one outcome, trading one cost for another. The figure at left is from the Legislative Analyst’s Office on Jan. 23. Regarding budget deficit predictions, it shows approximately a $10 billion difference between the LAO and the California Department of Finance.
The California Legislative Analyst Office has different budget projections than the Governor’s office.
tax fluctuations. State government revenues suffer when the stock market stagnates or initial public offering (IPO) activity slows. Corporate income and sales tax are large tax generators also, where property tax revenues are more localized. The federal delay in tax form submissions and payments to October delayed some tax collections and heightened revenue uncertainty as yet another factor. In 2024, collections will be more standard, but the national economy moving more slowly will also affect
And this is just year one; the next few years depend significantly on the evolution of tax revenues. Notice in the figure from LAO that the difference between the blue and green columns depicts the estimated revenue problem. g
Dr. Robert Eyler is professor of economics at Sonoma State University and president of Economic Forensics and Analytics in Sonoma County.
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Vine Wise
“For every complex problem there is an answer that is clear, simple and wrong.” —H. L. Mencken
T oday, I want to write about nutritional and ingredient labeling as it relates to wine. These issues have been discussed for almost 20 years. In 2005, the Alcohol and Tobacco Tax & Trade Bureau (TTB) sought comments from the public about nutritional and ingredient labeling on wines—deciding at the time not to take any action. In 2008 Bonny Doon Vineyard in Aptos began listing its own version of ingredients on the label, with Ridge Vineyards following. Since then, a handful of other wineries have followed suit. The current interest in nutritional and ingredient labeling The true cost of ingredient labeling By Adam Lee
yeasts” as an ingredient in that wine—and a winemaker’s yeast choice is certainly something that wine lovers want to know. However, if you look at the tech sheet on the wine you will see that the wine was “pad filtered at bottling” meaning that the yeast was filtered out. No longer is that yeast an ingredient in the wine. There are many other similar examples. The problem is not that Ridge Vineyards (or any winery listing ingredients) is being dishonest. They are incredibly well meaning. However, summarizing 12-24 months of winemaking in the tiny spot provided on a label is difficult. It necessitates taking
is being driven by new EU requirements on wine being made or sold in the European Union. Subsequently, in February of 2024, the TTB opened hearings and public comments on nutritional and ingredient labeling requirements on wines produced in the United States. From the outside it seems like a simple subject with those who favor such labeling as “the good guys” and those who oppose it as “the bad guys.” In reality, it is a good bit more complex. To fully understand the situation, it is important to note the differences between nutritional information and ingredient labeling. Nutritional information includes listing the calories, carbohydrates, fat and proteins in each wine along with, possibly, sugars and alcohol (which is already
short cuts and omitting some information in favor of other information. Add to this that wineries need to print labels months ahead of time and submit them to the TTB for approval and you could easily see a situation where a winemaker decides to make a last-minute addition to their wine prior to bottling to improve the wine and the label is no longer accurate. Another factor: wine is not regulated simply by the federal government. Thanks to the wording and interpretation of the 21st Amendment, states have authority to regulate the importation of alcohol. It is not difficult to imagine the neo-prohibitionist movement in certain states placing further requirements on labeling or even prohibiting importing wines with certain ingredients listed.
required). It most likely also includes listing any allergens in a wine. Ingredient labeling involves listing the actual ingredients in a wine and, perhaps, the list of additions made to the wine. Let’s begin by looking at one component—calories in wine—something you would think would be simple. Most calories in wine come from alcohol. Lower alcohol (12%) wines contain around 120-125 calories per serving while higher alcohol (15% wines) contain around 180-185 calories per serving. That’s not a huge difference but perhaps one worth noting. That is, until you realize that current FDA guidelines allow for 20% leeway when calculating calories. Knowing that, it seems that virtually every wine could label itself as having 150 calories and be legal. Carbohydrates and proteins in wine are so small and allow for a similar 20% margin of error that listing them would also seem to be useless—and wine doesn’t contain fat so that is most definitely unnecessary. What would it cost a winery to provide this useless information? Currently, ETS Labs charges $400 per sample for this testing. For a single wine that doesn’t seem to be ridiculously expensive, but one of the endearing aspects of the wine business is the mom-and-pop winery that produces small lots of varying wines in their garage winery. When I owned Siduri Wines and made wine in a warehouse, I produced upward of 40 different wines with production as small as 50 cases. 40 wines times $400 adds up to $16,000, and that hits hard. Ingredient labeling is surprisingly complicated. The very word “ingredient” is defined by online dictionaries as a “component part or element of something.” That seems simple. Ridge Vineyards on its Estate Chardonnay, for example, lists “indigenous
Having said this, I do believe there is a solution to these issues, and it was provided to us by COVID. During the pandemic, many of us became accustomed to using a QR code. Rather than letting the federal government mandate an expensive and sometimes meaningless solution, wineries could use QR codes that take consumers to a page where all additions and ingredients are fully listed. There a winery can be as detailed as it wants to be about its winemaking, describing for consumers not only what it did, but why it did it. This proactive solution would allow winemakers to make changes to the wine until the last minute and would eliminate the potential involvement of state liquor agencies. California wineries are already having to change their labels by adding redemption value (CRV) information on or before July 1, 2025. It would benefit us all if we could come together as wineries and tell the TTB that we are going the route of the QR code and placing that on our labels at the same time. Being proactive now might save us all a huge headache later.
Adam Lee co-founded Siduri Wines in 1994, selling it to Jackson Family Winery in 2015. He now produces and owns Clarice Wine Company, and consults with numerous different wineries, including Rombauer Vineyards on their Pinot Noir project.
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SVB’s annual wine-business report makes emphatic plea for industry change W ine businesses must adapt to changing consumer habits, or go the way of the wine cooler, warns industry watchdog Rob McMillan. McMillan’s the founder and executive vice president of the Silicon Valley Bank Wine Division, which produces its annual State of the U.S. Wine Industry report, an influential overview of the coming year’s economic trends for industry markets, consumers and producers. As it has in recent years, the 2024 report homes in on a few concerning market trends: decreasing Gen Z and millennial consumers, post-COVID downturn in overall sales, and the drop in demand for discount wines. By Jason Walsh State of the Grape
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Yet this year McMillan takes on a particularly foreboding tone in his introduction to the report, likening the need for wine industry reinvention to the Darwinian theory of evolution: Those wine businesses which don’t adapt to changing circumstances will be selected out. McMillan begins the report with one of The Origin of Species’ greatest hits: It is not the strongest nor most intelligent of the species that survives. It is the one that is the most adaptable to change. And if that little nugget—routinely attributed to Darwin, but actually a paraphrase of natural selection made in a 19th century speech to American businessmen—doesn’t drive the point home, McMillan lays it out a bit more bluntly: “Waiting for a fictive cohort to age sufficiently to discover wine or believing that our strategies ‘have always worked before’ is toxic to adaptation when the context driving demand changes,” says McMillan, before adding: “That is something the weakest businesses will do. Their lack of adaptation will cause a predictable outcome.” And for those who think that “predictable outcome” is one of thriving success, we’ve got some shares of Underground Cellar we’d like to sell you. Here’s a brief overview of the 2024 State of the U.S. Wine Industry report, NBb-style… Alcohol, Demographics & Health While this topic falls as chapter 8 of the report, we’re moving it to the top because it’s the topic that deserves the most attention from the industry—younger consumers aren’t as
Rob McMillan, of the Silicon Valley Bank Wine Division, is raising a red flag about age-related shifts in the alcohol-consuming market.
into wine as their older counterparts. “There is no clear trend for most age bands except the youngest,” writes McMillan, who points out that beginning around 2000 spending among those under 25 began to shift away from wine toward other beverages, goods and services. While variable factors are involved in the ongoing downward trend—greater choice in beverage options, health consciousness, rising cost of living and the mainstreaming of cannabis among them—this could be the single-greatest threat to the industry: Those who will have the most money to spend in the coming decades may not be spending it on wine.
: Wine is facing rising competition from other alco’ options like spirits, craft beers and seltzers.
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Even if one removes non-alcohol factors from the equation, consumers overall are still leaning toward spirits and beer over wine. U.S. shares of the global alcohol market in 2023 found spirits and beer garnering 42% each of the total revenue share, with wine checking in at 16%, according to a February report by the Distilled Spirits Council of the United States. Of particular concern to McMillan is data showing responses to a survey question asking: What (alcohol beverage) would you most likely bring to share at a party? While wine and beer fared best among options including spirits, flavored malt beverage, hard seltzers and ready to drink (RTD) beverages such as ciders and alcopops, wine only separated itself from the pack as something to bring to a party with the 65-and-older set, 58% of which would bring wine to share. Wine’s numbers hovered around 30% for people aged 35 to 64—and finished fifth for those aged 21 to 34 at 16%. McMillan highlights this as an important data point. “The bottom line is for every consumer over 60 who stops consuming wine, they are replaced by younger consumers with a mindshare of wine half that of their elders.” Adds McMillan: “Time is not on our side.” He says the selling and marketing of wine must be better than it is today. “We understand the issues. However, we have been reluctant to change our tried-and-true methods,” he writes. “Success will come when we put more effort into attracting new consumers, promoting the various occasions where wine can be enjoyed, improving the number of occasions existing younger consumers consume wine, and
adapting to consumers with different values than the over- 60s crowd.”
Demand and consumption in U.S. and abroad The United States isn’t alone in seeing a decrease in wine consumption—worldwide wine consumption has been on a steady downward trend since 2017. As a result of that, vine acres are being pulled to reflect the lower demand. Hopes in the early 2000s that the burgeoning Chinese market would balance the scales failed to materialize when, “a [government] crack-down on displays of wealth in the early 2010s began a decade-long decline that continues today,” writes McMillan. The report points out that consumption trends are partly a story of the changing old-world versus new-world drinking patterns. Between 1960 and 2014, France, Germany and Italy reduced alcohol consumption by 41%. The new-world countries of Australia, New Zealand, Canada and the U.S. increased consumption in that span by 16%. Unfortunately, today the countries growing in consumption are not making up for the decline in the rest of the world, McMillan says. With birth rates and alcohol consumption on the decline in the largest-consuming nations, McMillan writes, perhaps wine marketing would have its best success in the nine countries expected to hold half the world’s population by 2050: India, Nigeria, the Democratic Republic of the Congo, Pakistan, Ethiopia, the United Republic of Tanzania, the U.S., Uganda and Indonesia. In the United States, meanwhile, wine-sales growth is forecasted to continue its decline further by volume,
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NorthBaybiz 21
Younger drinkers are increasingly choosing beer and spirits over wine, especially at social events.
according to almost every data source, the report says. McMillan concedes that “wineries are in a quandary because they can’t ignore their best older consumers, yet they must simultaneously change positioning for younger consumers.” He offers two solutions: Either the industry as a whole should collaborate on marketing to expand and diversify its consumers and wine occasions, or be more effective as individuals “fish(ing) for the same consumers in the same pond.” Again, he warns about the dangers of ignoring the changing trends among younger drinkers. “The younger demographics consume wine differently, on dissimilar occasions compared to the past… success will favor those who adapt.” You get what you pay for Consumer purchases of wine bottles under $9 have been in decline since 2013, with purchases in the $9 to $12 range hitting a sweet spot with wine drinkers over that time span. While the Two Buck Chucks of the wine aisle (not to mention the Three- to-Nine Buck Chucks) have been on a downward trend, premium wines—in all price categories ranging from $12 to $100-plus have seen steady growth since 2013. Last year, the greatest grown of any price category was in the $12 to $15 range for a bottle. That said, the rate of growth in premium wine sales slowed last year, leaving McMillan to question whether bottles over $12 would also slide into the same pattern of decline as cheaper wines. He describes it as “concerning,” but says it’s too soon to consider the trend a permanent shift. “The premium wine segment, by any measure, is better positioned… at present,” he concludes.
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March 2024
“Waiting for a fictive cohort to age sufficiently to discover wine or believing that our strategies ‘have always worked before’ is toxic to adaptation when the context driving demand changes.” —Rob McMillan
Sales channels As direct sales from premium wineries have grown over the recent years, sales to wholesalers and restaurants have declined, says the report. In the past 10 years alone, the percentage of an average winery’s sales to restaurants has dropped from 31% of total sales to 11%—and the cause is largely down to the restaurant industry. McMillan chalks it up to restaurants’ shift from book-like wine lists to one- page beverage lists where wine selection shares space with spirits, cocktails, beer and other beverages. Plus, restaurant owners are more cautious about carrying large inventories of pricey wines and may be hesitant to buy any wine that doesn’t yield a quicker return. Restaurant markups continue
Big Wine McMillan observes that larger wine companies—E&J Gallo, the Wine Group, Constellation Brands, Trinchero Family Estates, among others—are taking action to bolster revenues. Some by investing in or acquiring new brands; others by shifting focus to more promising products, such as spirits, Mexican beer or cannabis. Some in the wine business decry the latter move as demonstrating a lack of leadership in the industry; McMillan, however, sees it as merely adapting to a changing consumer. For those hoping Big Wine will focus on providing new wine products and launching national advertising to promote wine, he says: Don’t hold your breath. “Hope is not a strategy—we need a path,” McMillan says. Bad mood rising The report also addresses “wine industry sentiment” using the Michigan Consumer Sentiment Index methodology to gather insights into the “mood” of those in the wine business. “Sentiment is low this year, the weakest it’s been during the past five years,” says the report. The biggest mood-lowering concerns are the economy, labor and consumers shifting to substitute beverages such as spirits, sports drinks and soda. Of particular concern is that younger consumers are switching to cannabis, which among that demographic is considered healthier than wine. Bottle pricing To put a bandage on declining consumer demand and rising costs, some wine companies raised prices in 2023—a move easier for premium wines, whose purchasers were less concerned over a few dollars here, a few dollars there for their brand of choice. Overall, and especially for non- premium brands, raising prices proved difficult when consumers were already facing rising costs of living and increasing alternative beverage options. A $1 difference on a previously $8 bottle equates to a 12.5% price change—which would likely not go unnoticed to consumers in that range. In the direct-to-consumer (DTC) channel, however, bottle prices are actually rising. This is due partly to the fact that during the pandemic, when on-site tastings and purchases were interrupted, wineries offered major discounts to encourage purchases through DTC. Post-COVID, wine lovers flocked to wineries and tasting rooms, and DTC pricing dropped the discounts, and prices have risen to pre- pandemic norms.
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to increase, he adds; now a glass of wine in a restaurant is more than twice as expensive as spirits. Devaluing wine by the glass is “not the best formula to stimulate wine demand in restaurants,” he writes. A depletion problem Depletion—the amount of a beverage sold from distributors to retailers—has been on a downward swing ever since business normalized after the pandemic. While wine depletion has seen negative growth for several years, it’s not the only beverage industry suffering slower sales at the corner liquor store—the spirits industry began a downward trend beginning in 2022 and its depletion has fallen about 13% since. “It’s become clear that the depletion problem in wine is really a depletion problem with beverage alcohol,” writes McMillan. Unfortunately, falling depletion is currently coupled with a big oversupply. Coming out of COVID, alcohol producers “got busy making more” but overestimated subsequent demand, says McMillan. “Until demand improves for your brand, conservative sales
forecasts should be the norm for all wineries selling into grocery and restaurants,” concludes the report.
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In reflecting upon the litany of challenges faced by wine businesses, McMillan asks if the industry should go it alone, collaborate or “try something else”—and borrows a quote from Jeremy Rifkin in his book, The Empathetic Civilization : “Darwin came to believe that survival of the fittest is as much about cooperation, symbiosis and reciprocity as it is about individual competition and that the most fit are just as likely to enter in cooperative bonds with their fellows.” Competition within a group or species is a net zero- sum game, asserts McMillan—”I win. You lose.” However, successful adaptation “is more likely to occur when the challenged group works together to find solutions.” The question, McMillan ultimately poses, is: “Will we?” g
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Picayune—it’s bigger than you think— and an allegory to Claire Ducrocq Weinkauf’s approach to life.
By Tim Carl M eaning “a little bit” in old French dialect, Claire Ducrocq Weinkauf pays homage to her roots with her wine brand, Picayune. More than a label, it also serves as an allegory for her approach to life. While seeking balance in all things, she feeds from her many travels and flux of eclectic input. “Wine is an important part of my story, but it’s only one part,” she says. “Family, community, friends and connection with nature and pursuing my dreams are all intertwined.”
Claire Ducrocq Weinkauf, owner, Picayune. [All photos courtesy of Tim Carl Photography]
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March 2024
Napa Insider
My rendetion would have read: Very, very, expensive retail therapyt awaits!
The signs they are a-changin’ By Christina Julian
T he longer I live here, the easier it has become to get sucked into what I like to call, “town talk.” Those virtual, social media, convos-while-sipping-wine-at-a-party discussions that seem innocuous enough, but can spark heated commentary quicker than my 10-year-olds can raid the candy cabinet. Some of the more recent “hot topics” have been all about reading the signs, which in this case, have nothing to do with dating or astrological signs and everything to do with literal signage. While toting those same candy swiping tweens to school before the holidays, I first spotted new signs on the approach to St. Helena that read: “Foodies Welcome,” “Sip & Stay Awhile,” “Amazing Awaits Ahead” and, my favorite, “Retail Therapy Ahead.” If I were the copywriter of said signs, my rendition would have read: Very, very, expensive retail therapy awaits! These signs state the obvious, give me a laugh when I need it, and admittedly did cause me to slow down and take notice when they initially appeared. The campaign evolved in response to an Urban Land Institute report on downtown revitalization, which led the city to consider ways to plug not only the city’s fruit-forward assets, but its culinary and retail wares. It’s hard to know whether this campaign will succeed in bringing more traffic to an already clogged up St. Helena strip, but what it has done is get locals talking and in some cases venting about the purpose, necessity and price to execute the campaign. In other billboard-inspired news, the iconic Napa Valley Welcome sign between Yountville and Oakville also got lips flapping when NBC ran a buzzy story about the sign being relocated due to safety concerns. The piece mentioned that more than 5 million people point and click at that spot every year, and announced that city and county officials, together with the Napa Valley Vintners and the Napa Valley Vine Trail Coalition, were at work to find a more suitable (aka path of least resistance) parcel for the storied sign. The Love This Town St. Helena Facebook page promptly blew up with comments that ranged from staunch opposition to “who cares”—to gripes about potholes and diatribes about tipsy tourists racing across the highway to score a selfie at the scenic spot. The Vine Trail has been facilitating the discussions through a series of closed-door meetings in January and February, followed by open community meetings. The Vine Trail, which is steadfastly at work on the Calistoga- to-St. Helena leg of the highly anticipated bike path, has gotten in on the signage game by placing numerous “pathway closed” notices along paved sections of the trail—which, by my account,
have been largely ignored, as people pedal and run by regularly. (This is something that will likely continue until the leg officially opens to the public, which is expected to happen this summer.) Fair ground After years of debate on the fate of the Napa County Fairgrounds in Calistoga, the Napa County Board of Supervisors unanimously voted in January to sell the 70.6-acre property to the City of Calistoga for $2 million. A monumental move that could easily qualify as a deal of the decade because, really, what 70.6-acre Napa Valley parcel could ever be procured for such a price? It’s extra impressive given the same property was sold to Napa County for $40,000 in 1938; and in 2022, the Calistoga City Council approved a purchase-and-sale agreement for that same property for $16 million. The deal died when voters shot down a measure for a special tax that residents would’ve had to pay to subsidize the purchase. A clause of the newly anointed deal stipulates the county will retain repurchase rights, at the equivalent price, in the event of zoning changes or when the city seeks to sell or lease the property. As a Calistoga resident, the prospect of a resurrected fairgrounds—and all the junk food, fun and racetrack roaring that goes with it—my household crowd is cheering. Latin grooves The producers of BottleRock plan to shake up the ground we walk on with the inaugural Latin music festival, La Onda, taking place June 1-2 at Expo Napa Valley, just one week after Pearl Jam, Stevie Nicks and Ed Sheeran hit the stage for BottleRock over Memorial Weekend. La Onda will headline with Maná, Fuerza Regida, Alejandro Fernández and Junior H, and feature other major Latin touring artists, DJ sets, local and regional Latin cuisine and specialty drinks. Similar to BottleRock, festivalgoers can enjoy elevated, shaded lounges and viewing options and immersive experiences including a spa, dance club and silent disco. As someone who was raised in a home where the word diversity was never spoken or abided by, I am grateful to live in a place where we are embracing our multi-cultural community and taking steps toward becoming a more inclusive place to wine, dine and connect. g After years in the technology and advertising trenches, Christina Julian traded city life for country and unearthed a new philosophy—life is complicated, wine and food shouldn’t be. Her debut novel, a romantic comedy called The Dating Bender , is now available. Learn more at christinajulian.com . You can reach her at cjulian@northbaybiz.com.
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