California’s Wine Crisis: Navigating the Challenges of a Grape Surplus

A surplus of grapes alongside dwindling consumer interest is forcing winemakers into difficult choices.

The wine industry in California is currently experiencing a downturn, facing three significant challenges: a decrease in consumer expenditure on wine, an excess inventory that is stuck in the sales pipeline, and an oversupply of grapes and bulk wine remaining from the 2024 harvest. The last point, the surplus of grapes, is particularly concerning. Numerous growers, even in esteemed regions like Napa, are finding it hard to sell their produce. Experts predict that tens of thousands of acres of vineyards may need to be removed to combat this oversupply.

“It’s certainly a challenging situation for our industry,” stated Glenn Proctor from Ciatti Company, a global wine and grape brokerage located in Novato, California. “We’re undergoing some crucial adjustments as we strive to figure out our future direction.”

Christian Klier, a North Coast grape broker for Turrentine Brokerage, which is also situated in Novato, concurred. “Significant transformations are imminent in this industry, with several elements set to shift in the next year or two.”

No firm illustrates the struggles faced by the industry better than Vintage Wine Estates, which declared Chapter 11 bankruptcy in July. Based in Sonoma, this company owned a multitude of California wineries, such as Clos Pegase, Swanson, and B.R. Cohn, all of which were sold to different buyers in September. The founder of VWE established the company through an aggressive acquisition strategy of underperforming wineries and wine brands, aiming to revitalize them. However, the challenges posed by the fluctuating COVID-19 situation, declining sales, and rising interest rates ultimately led to the inability to sustain the business.

The decline in the wine sector has been evident in recent years, although many within the industry remained oblivious. Wine consumption in the United States started to drop in 2021. Last year, sales volume fell by 2.8 percent to 319.2 million 9-liter cases, marking a decrease of over 9 million cases, as reported by Impact Databank, a sister publication of Wine Spectator.

“If you look at the period from the early 1990s until 2018, we were experiencing an average annual growth in overall consumption of about 2.5 to 3 percent,” said Proctor. Several factors began affecting the market starting in 2018, including the largest grape harvest in California’s history, which led to an oversupply of grapes. In 2020, the pandemic and wildfires in Northern California created conflicting circumstances for the industry. Demand surged as Americans stayed home, while at the same time, many producers faced significant losses of their 2020 crop due to smoke taint, resulting in a lower supply. “That somewhat disguised the reality of the situation,” Klier remarked.

This spring, the situation escalated as wine producers assessed their finances and began reducing their grape budgets. “It wasn’t just one winery; many wineries were doing the same. They said, ‘No, we’re not renewing any contracts, and can we reduce our fruit intake?’” recounted Kris Hicks, vineyard manager at Vimark Vineyard Management, which oversees 820 acres in Northern California.

Proctor and Klier noted that the most affected varieties were Sonoma Chardonnay and Cabernet Sauvignon, particularly from the esteemed Napa Valley. “You can’t even give away Zinfandel,” remarked Hicks, who had to let 25 tons of Zin fall to the ground this year.

“Napa Cabernet growers experienced the highest average district price in the history of the county in 2023—nearly $8,800 per ton. So no one anticipated such a rapid market shift,” Klier explained. “We had over 10,000 tons of Napa Cabernet listed for sale this growing season. In the last three years, I struggled to find any Napa Cabernet at all.”

In previous years, fierce bidding wars for Napa Cabernet were a common occurrence, reaching up to $10,000 a ton for valley floor grapes and as high as $20,000 a ton in renowned regions like Oakville and Howell Mountain. “This year, I know of fruit that will go unpicked in those AVAs, fruit that was sold for $15,000 to $20,000 a ton last year,” Klier added.

Mendocino and Lake counties, along with Lodi, are among the most severely affected growing areas. One grower Hicks collaborates with in Mendocino had to sell 210 tons of Chardonnay for merely $500 a ton. “He was fortunate to get that, because otherwise it would have just hung on the vine,” he said.

When Carla Forchini and her brother took charge of their late father’s 67-acre vineyard in Dry Creek Valley following his death in 2022, they were unaware of the challenges ahead. During the 2023 harvest, Carla encountered difficulties when it came to selling her Cabernet Sauvignon.

“Cabernet tends to be trickier to sell in Dry Creek Valley,” Forchini explained. “I spoke with several Napa Cabernet producers, and many are now sourcing from Sonoma because they can incorporate up to 20 percent of those grapes without having to disclose it. It’s a method for them to cut costs.” Unfortunately, after selling all of her Cabernet at a loss in 2023—“It was a dismal arrangement, barely covering the picking expenses”—she decided to lease the vineyard to Redwood Empire Vineyard Management for the 2024 season.

Typically, wineries look to the bulk wine market to offload excess production, but currently, it’s overwhelmed with unsold wine. At one point this year, Turrentine had 30 million gallons of bulk wine available, a significant jump from the usual 12 million to 15 million gallons. “When the 2023 harvest began,” Hicks noted, “bulk wine was fetching $30 to $40 a gallon, but now it’s down to only $10 to $15, if anyone even wants it.”

A growing number of growers are choosing to uproot their vineyards. Over the past two seasons, Hicks has removed almost 100 acres of old or diseased vines. Proctor estimates that in the last year alone, between 30,000 and 40,000 acres of vineyards have been taken out, particularly in Central Valley areas like Lodi. “I believe the trend of removing more acres will persist,” he remarked.

Turrentine anticipates that the market will start to recover by 2026 as supply and demand find a balance, according to Klier. In the meantime, consumers might begin to see some genuine bargains as producers lower prices to manage their inventory and implement other cost-saving measures. “This situation will benefit consumers, at least in the short term,” Proctor noted.

Klier echoed this sentiment. “An oversupply scenario implies there will be plenty of affordable, high-quality wine available for consumers.”

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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!