Decline in US and California Wine Sales Contrast with Growth in San Diego Region Chris Lehoux, May 15, 2024 A fresh publication from the San Diego winery industry association puts forward positive information for wineries situated in San Diego County: During 2023, both sales and hiring observed year-over-year increases. This includes a total of 166 wineries, dispersed across urban neighborhoods within San Diego such as Point Loma and Mira Mesa, including cities like Lakeside and Escondido, and also extending to the rural areas of Julian, Ramona and Santa Ysabel. In particular, Ramona is the location of more than 50 wineries, of which over 40 are members of the Ramona Valley Vineyard Association as per Ginny Boney, the RVVA’s vice-president. These ventures have largely recovered from the unpredictability brought about by the COVID-19 pandemic and some are even in the process of expansion. 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 May 8 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 to 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: A rosé picture 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. Consumption in the U.S fell by 2 to 4 percent and it fell even more drastically in California, yet the consumption here increased by 11 percent. It was observed that the increase was mainly due to more wine being sold rather than an increase in pricing. The previous year witnessed a surge in tourism in San Diego, from which all the wineries benefitted significantly. Vasquez noted the efforts of these wineries as they have started focusing more on organizing events and amplifying their marketing strategies. Given the convenience of QR codes and apps for contactless purchasing, vineyards are also making sizable investments in customer-facing tasting room staff. At wineries, engagement and storytelling have a potent effect on sales. Interaction with staff members, acquaintances with owners, and gaining knowledge about the winery’s history add up to the selling skills, Vasquez added. Vasquez credits the role of staff engagement as a vital part of the winery experience. Boney of RVVA confirmed the same. “Often, guests have the opportunity to meet the winemakers at these small, boutique wineries and even see the vineyards,” she commented. “If visitors are eager to learn, we are more than happy to educate them.” However, she addresses some unique challenges experienced by the Ramona wineries due to their size. “Unlike larger zones in the county like Temecula, which offer facilities like hotels, spas, and other attractions, we lack these amenities in Ramona,” Boney points out. The importance of outdoor areas have been accentuated during the pandemic. These spaces are now being re-purposed for holding events and weddings. While most Ramona wineries are not hosting weddings — and live musical entertainment is temporarily on hold until local ordinances can be revised — outdoor spaces are still be used for a variety of events. “Some of the events are centered around wine, such as wine pairings and wine education,” Boney said. ra,ramona Other events held at wineries might focus on local wildlife, special lunches or dinners, history or talks by local experts, she said. .The report pointed to one macroeconomic condition that contributed to a strong year: Businesses can get what they need to make and sell wine. “Supply chain challenges are no longer a significant issue or a meaningful issue for wineries here,” Vasquez said. The survey, which received 38 responses from 166 licensed current and prospective wineries, excluding satellite tasting rooms, showed a drastic year on year decline in concerns about sourcing materials. In 2022, 81 percent of the respondents were anxious about sourcing glass; 19 percent had no supply chain issues. In 2023, these figures reversed: 19 percent were anxious about obtaining glass, and 81 percent had no worries about supplies. However, prolonged inflation did lead to escalating costs, the report indicated. Buzz kill Even though wineries are building rapport and drawing customers, the report also surfaced some areas of concern. Smaller wineries are facing a tougher climate. “Revenue growth in 2023 was mostly driven from the new and expanding large wineries in the region adding significant jobs and sales activity. Most of the smaller wineries are either experiencing another year of flat or declining sales or making modest increases in sales,” the report says. In Ramona, Boney believes inflation bears a lot of the blame for the lower numbers. “I seriously think inflation is starting to hit people, and they have less disposal income. If you’re in California, a lot of people spend their income on gas, energy and groceries,” she said. Another challenge is reduced access to affordable insurance. Most surveyed wineries cut back brush and created defensible space and some invested in firefighting equipment on their sites in 2023. Still, nearly a quarter of those surveyed were denied coverage and 60 percent saw their rates increase. Faced with denied coverage and raised rates due to wildfire risk, a greater percentage of wineries surveyed turned to Fair Access to Insurance Requirements (FAIR) Plans, which are pricey and considered insurance coverage of last resort. Boney said that the insurance problem in Ramona is no different than any other part of the state, and combined with the added burden of liquor liability, “finding affordable insurance is still difficult here.” San Diego’s vineyards exist under the shadow of not only Temecula, but also artisanal beer. Has there been anyone in San Diego, or elsewhere like Arizona or Chicago, who hasn’t come across Stone Brewing? To maintain a stance, local vineyards need to spread the awareness, both Weber and Vasquez believe. More wine festivities, more cooperative work, more marketing. Boney shared that wineries in Ramona frequently encounter the problem of “people not being aware of our existence.” “There’s somebody every week who not only wasn’t aware of any vineyards in Ramona, but they had no idea about the number we have here,” said Boney. To tackle the widespread unawareness, the RVVA is focusing on multiple promotional campaigns to enhance consciousness. Together with the RVVA, the majority of the wineries are also active on several social media platforms. A lot of these have escalated the number of events that they conduct, and generally maintain the expense minimal to attract a larger crowd, she mentioned. “We participate in a variety of events to create brand awareness, such as wine pourings at Temecula and various other places within the county. We host the Holiday Wine Trail and the Summer of Rosé from June to August,” Boney stated. Here’s a thought: Wineries “are located everywhere, from the coast of San Diego to the desert and the boundary,” Vasquez expressed. In regions like Napa and Temecula, they’re concentrated together. However, in the case of San Diego, one doesn’t need to travel a long distance to sample a local wine. 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