Exploring the Growth of Wine Sales in San Diego Amidst National Decline Chris Lehoux, May 10, 2024 “I feel sometimes like we’re the David who’s starting to really have a go at Goliath.” In this version, Goliath is Temecula and David is the San Diego winery scene. That’s the take of Mike Weber, the general manager of Orfila Vineyards & Winery and president of the San Diego County Vintners Association. A few times in a recent interview, he expressed bemused frustration that San Diego’s wineries are sometimes overlooked by local wine drinkers and revelers. This story is for subscribers We offer subscribers exclusive access to our best journalism. Thank you for your support. “I mean, they’re literally driving by 100 to 160 different wineries to go to Temecula,” he said. But a report published Wednesday by San Diego’s winery trade group suggests San Diego wineries have some encouraging findings: In 2023, sales and hiring were both up year over year at San Diego County‘s 166 wineries, which are scattered throughout urban San Diego neighborhoods like Point Loma and Mira Mesa, cities including Lakeside and Escondido, as well as in the backcountry of Julian, Ramona and Santa Ysabel. These businesses have largely bounced back from the turbulence of the COVID-19 pandemic. Some are expanding. That’s a striking contrast to how the rest of the U.S. wine industry is doing. According to Silicon Valley Bank’s State of the US Wine Industry Report, “Direct-to-consumer volume and value sales were lower in 2023 and tasting room visitation dropped for the second straight year.” That report says interest in wine is dwindling as other lures — beer, canned alcoholic beverages, liquor and cannabis — beckon, especially among key younger drinkers. California’s wine industry also is hurting. Consumption fell almost 9 percent in 2023, according to a report cited Wednesday in the San Francisco Chronicle. Trouble has been brewing for a while. “Who Will Save the US Wine Industry? Not California Boomers” reads one recent headline by Bloomberg. And Last September, Meininger’s International, a wine trade publication, wrote about California’s grape surplus amid falling demand. San Diego’s wine industry is a drop in the bucket — producing around $55 million, compared with California’s $55 billion. But its winemakers are doing a lot right, according to the San Diego wineries report, by the San Diego County Vintners Association trade group, which examined economic data and surveyed winemakers to piece together a state of the industry. The data tells a story of resilience and resourcefulness, said Vince Vasquez, the report’s author. “That is, I think, something that is a clear indication that wineries, at least in San Diego County, have found the solutions they need to be successful for serving existing and new customers,” he said. Some of the report’s findings: Vasquez, the policy and data analyst hired to conduct the research and author the report, said San Diego’s wineries have mostly rebounded from pandemic era disruptions and are finding ways to draw in more customers. While consumption fell 2 to 4 percent in the U.S. and more sharply in California, here it grew 11 percent. (The increase was due to more wine sold and less to higher prices, he noted.) Last year, San Diego experienced an increase in tourism, which all wineries took advantage of, says Vasquez. They are also emphasizing events, increasing their marketing, and investing in tasting room staff who interact directly with customers. In the current era, where QR codes and applications provide easy contactless ordering, storytelling at wineries becomes critical. This includes conversing with staff, meeting the owners, and learning about the winery’s history. Vasquez points out that staff’s engagement is often recognized as a crucial part of the winery experience. In the Covid-19 pandemic, the availability of outdoor areas was critical and these spaces are now being utilized for events and weddings. Orfila, a large winery and vineyard situated in the San Pasqual Valley, brought on an events manager last summer. “With over 70 acres of sprawling vines and mountain views, there is no shortage of breathtaking scenery,” says Orfila’s website under the photo of glowing vineyards nestled in the dusky landscape. Rather than focusing on weekend weddings, the primary objective seems to shift towards hosting corporate events running from Monday to Friday. Employing an event specialist made sense for the three-decade-old vineyard due to the surge in demand for hosting events as pandemic restrictions lifted, Weber explained. “We had been receiving a substantial amount of inquiries via phone and emails, but we weren’t actually prepared to accommodate,” Weber confessed. In recent times, he noticed, “we’re observing an escalating number of bookings.” One key economic indication the report highlighted was the ability of businesses to obtain the necessary resources for wine production and sales, which drove a prosperous year. “Supply chain challenges are no longer a paramount concern for local wineries,” Vasquez conveyed. According to a survey, which compiled 38 responses from 166 active and intending wineries, excluding satellite tasting rooms, there was a marked decline in concerns about materials acquisition when compared to previous years. Back in 2022, 81 percent respondents were apprehensive about sourcing glass while just 19 percent claimed not to have any supply chain issues. Fast forward to 2023, these numbers practically reversed with 19 percent expressing concerns about glass procurement, and a whopping 81 percent stating they had no worries about supply. However, this relief was somewhat offset by inflation driving up costs, as noted in the report. Another positive takeaway concerning the industry’s vitality was that only 11 percent of the wineries were seeking financial assistance or external capital in 2024, a figure that has held steady for the past three years. However, it is worth noting that 5 percent of the surveyed wineries are contemplating shutting down their operations within the coming six months, a rise from nil the preceding year. Despite the fact that wineries are establishing relationships and attracting customers, the study also identified some potential issues. Smaller wineries seem to be in a more difficult situation. “The increase in revenue in 2023 was primarily due to the emergence and expansion of larger wineries in the area, which added significant job and sales activity. Many smaller wineries either continued to see flat or decreasing sales, or recorded only a slight increase in sales,” the study stated. Another obstacle is the decreasing availability of low-cost insurance. In 2023, the majority of the wineries surveyed reduced brush and created defensive spaces, with some even investing in firefighting equipment on their premises. However, nearly one-fourth of those surveyed were denied coverage, and insurance rates increased for 60 percent of them. Wineries were confronted with increased costs due to wildfire risk and denied insurance coverage, leading to a higher adoption of Fair Access to Insurance Requirements (FAIR) Plans. These offer expensive insurance options, viewed as a last resort. Furthermore, San Diego wineries suffer from lower wages compared to other wine-producing regions within the state. Factors contributing to this include difficulties in hiring and retaining skilled labour, an increased reliance on lower wage beginners, the replacement of full-time staff with part-time ones, more boutique winery owners assuming extra tasks, and staff cuts. The report also suggests that the housing affordability issue in California, particularly in San Diego County, may be exacerbating the situation. Despite these challenges, Weber from Orfila states that San Diego isn’t losing its winery workforce to Northern California, an area noted for its higher industry wages. Instead, he claims the region is attracting workers from other locations. “Everything I’ve observed and heard is that it’s more the other way around. They come to San Diego, from other areas,” he said. Back to that David and Goliath story. “It’s funny that we still hear on a regular basis — people who are drinking or trying our wine at different events, saying ‘I didn’t know there’s wine in San Diego.’ Of course, we don’t really enjoy hearing that. It does just show a picture of what we’re up against,” said Weber. San Diego’s wineries live in the shadow of not just Temecula, but craft beer. Who in San Diego, let alone in Arizona or Chicago, hasn’t heard of Stone Brewing? Local wineries must increase their visibility through more wine events, collaborations, and marketing initiatives, according to both Weber and Vasquez. Vasquez pointed out that wineries permeate various geographic areas – they can be found from the coast of San Diego to the desert and the border. Unlike other regions like Napa and Temecula where wineries are clustered, San Diego’s distribution allows for ease of access to local wine. Local wines have started making their mark on prestigious platforms. San Pasqual Winery, for example, received multiple accolades at the 2023 San Francisco Chronicle Wine Competition which includes thousands of North American wines, as well as the Toast of the Coast International Wine Competition. Carruth Cellars, an urban winery and tasting room, is well-known for its award-winning wines made from grapes sourced from all over California. Particularly, its 2019 Kelly Napa Cabernet Sauvignon earned a gold medal at the 2023 Toast of the Coast Competition. “We’re making some inroads,” Weber said. “It always starts with the wine quality. Several locals who’ve been in the business for a very long time have made rather strong comments saying just what a wonderful incline, increase, in the quality of wine that’s happened in the county in the last 10 to 15 years. It’s remarkable. “I think if you lead with good wine, all the rest comes together,” he said. About the Author: Chris Lehoux Meet Chris Lehoux, an experienced wine connoisseur and dedicated blogger with a deep passion for all things wine-related. With years of expertise in the industry, Chris shares insightful wine reviews, valuable wine tasting tips, expert pairing advice, and captivating tales of vineyard visits. Join Chris on a journey through the world of wine, where every sip is an adventure waiting to be savored! Wine