Latest / Best of: Features / What or who can save California’s $84B wine industry?

Transcript

What or who can save California’s $84B wine industry? · Best of: Features

• 0:05
  What or who can save California's eighty-four billion dollars wine industry? Written
• 0:11
  by Andrew Pridgeon. This article is being read by an automated voice
• 0:15
  generated by Everlet. California's eighty four billion dollars per year wine
• 0:21
  business is struggling across the board. Boutique and family owned labels, mid
• 0:26
  sized independent grape growers, large scale corporate enterprises are all deciding whether
• 0:31
  to pull their vines and pursue another cash crop, and economists and
• 0:35
  experts agree that it's been generations since the industry outlook has been
• 0:39
  this bleak. But even in one of its darkest moments in nearly
• 0:43
  a century there is still hope from those closest to the Pisanus
• 0:47
  that this is also the time when opportunities arise. The reality, however,
• 0:51
  is many may not make it to the turning point. One example,
• 0:56
  the McManus Family Winery, which is currently on the market for 77.95
• 1:00
  million. Founded in nineteen ninety, the family run business is located in
• 1:05
  the northern San Joaquin Valley, mostly in and around Ripon, Clarksburg, and
• 1:10
  Lodi. It has been heralded for helping bring sustainability, credibility, and wine
• 1:15
  enthusiasts to a previously mostly overlooked region. Awarded the California Green Medal
• 1:21
  for Sustainable Wine Growing in twenty sixteen, and another Green Medal for
• 1:24
  its work in its community in twenty twenty two, McManus has an
• 1:28
  award winning portfolio of wines. From Pinot, Grigio to Merlot, they have
• 1:33
  been some of The most highly sought after variatals from the region.
• 1:37
  But now nearly untenable economic headwinds, including a Canadian boycott of American
• 1:42
  wines triggered by the Trump administration, have combined with other factors and
• 1:46
  industry trends, to put the winery and associated vineyards on the market.
• 1:51
  The winery's exports to Canada fell by seventy five thousand cases between
• 1:55
  july twenty twenty five and july twenty twenty six, the Sacramento Bee
• 1:59
  reported. The winery sold just one thousand cases to Canada during that
• 2:03
  period, a massive drop. McManus declined to comment for this article. But
• 2:08
  it's not just McManus that is feeling the pinch. According to the
• 2:11
  Wine Institute, a policy adovcacy group which represents the interests of California
• 2:16
  wineries, the Canadian ban cost winemakers three hundred fifty seven million dollars
• 2:21
  in twenty twenty five, with those losses continuing to add up this
• 2:25
  year. Tariffs raise many input costs and also lower wine prices because
• 2:30
  retaliation causes retaliatory trade barriers. Canada used to be the top destination
• 2:34
  for California bottled wine, but that ended 20 months ago with the
• 2:38
  threats and talk about the 51st state. Dan Sumner, an agricultural and
• 2:42
  resource economics professor at UC Davis, who specializes in the economy of
• 2:46
  the wine business, told SF Gate via email. The wine industry is
• 2:51
  in an unfamiliar ravine, he said in a follow up call this
• 2:54
  week. He had to go back to Prohibition to draw parallels, noting
• 2:58
  that even then it was somehow able to bounce back. Let's be
• 3:02
  clear here, in the US we went through a massive temperance movement
• 3:05
  that led to a constitutional amendment, he explained, and the Great Depression
• 3:10
  wasn't great in general even though alcohol was made available for people
• 3:14
  again. Then he paused and acknowledged this moment for California wineries and
• 3:18
  grape growers. This is a really bad one, he continued. It certainly
• 3:23
  is. And I will say anyone who will say it's at the
• 3:25
  end and it's turned around isn't speaking from data. We don't have
• 3:29
  any real evidence. Data tends to lag what's happening. San Luis Obispo,
• 3:35
  county based real estate agent David Crabtree has been selling ranches and
• 3:38
  wineries in and around Paso Roe Bulbs since 1090. In the nearly
• 3:43
  four decades of doing business here, he's seen the region go from
• 3:46
  the place you stop for gas from the north or south to
• 3:49
  a destination. For people coming from the north or south. It transitioned
• 3:53
  from growing the
• 3:54
  grapes to making the wine, and the you started to see some
• 3:57
  of the corporate players coming into the region. Crabtree told SF Epgate
• 4:01
  via phone this week. There have been a tremendous amount of boutique
• 4:04
  wineries. Paso got some top scores worldwide. The food scene followed, the
• 4:09
  wine scene. Entertainment, outdoor music, etcetera kind of followed. That made it
• 4:14
  a destination. So that's attracted a whole different demographic of buyers from
• 4:19
  when I started. As the region continued to explode in popularity in
• 4:23
  the nineteen nineties through the pandemic, growers couldn't make wine fast enough,
• 4:27
  Crabtree said. Wine consumption, spirits. Consumption went through the roof, he said
• 4:32
  of early Covid times. Happy hour around the world started around eleven
• 4:37
  A.M. But in the years that followed things began to shift dramatically,
• 4:41
  inflation and labor costs refused to ebb, wine and overall alcohol sales
• 4:46
  decreased, especially for Gen Z, the next generation of drinkers. Gen years
• 4:51
  decided they had a secret meeting somewhere, and said, We're going to
• 4:54
  consume less wine. And not just wine but hard spirits. It kind
• 4:58
  of changed the dynamic, Crabtree said with a chuckle. So it was
• 5:02
  kind of like you got hit with an oversupply and under consumption.
• 5:05
  People were basing long term projections off historical numbers, they got hit.
• 5:10
  Crabtree
• 5:11
  acknowledged a handful of other winery closures that have befallen The region
• 5:15
  in the last few years. The once enormously popular Chronic Cellars shut
• 5:20
  down its tasting room Paso Robles this past April. E and J.
• 5:24
  Gallo shut down its courtside cellars and laid off forty seven workers
• 5:27
  in San Miguel last fall. And even the popular wine bar Region
• 5:30
  SLO, an offshoot of Region Sonoma, shut its doors for good on
• 5:34
  the ground floor of Hotel SLO in July. Crabtree is currently representing
• 5:39
  sellers in a couple of large wine estate offerings. The biggest is
• 5:42
  Locatelli Vineyards and Winery. Located in San Miguel, the listing of the
• 5:46
  renowned family winery that's been operating here since nineteen ninety six features
• 5:51
  thirty seven point five zero plus or minus net vineyard acres producing
• 5:55
  premium varietals, including Cabernet Sauvignon, Merlot, Petite Syrah, the listing says. All
• 6:02
  97 total acres can be yours right now for 5.5 million. He
• 6:07
  is also representing a six bedroom, seven bathroom, five thousand two hundred
• 6:11
  and seventy seven square foot home with fifty one acres of Cabernet
• 6:15
  Sauvignon, Petite Sierra, and Sauvignon Blanc Grapes, which are contracted out to
• 6:20
  a local winery, with an additional twenty one unplanted acres on the
• 6:24
  market right now for four point eight million dollars. In this, during
• 6:28
  a market dip that he'd admits is among the toughest he's ever
• 6:31
  experienced, Crabtree sees opportunity. I was talking to somebody about a different
• 6:36
  asset class earlier today. Any time you can buy something for less
• 6:40
  than it costs to produce it, it's a good buy, he explained.
• 6:43
  It may not feel like it at the time, it is because
• 6:45
  it's not sustainable. Right now you can buy a winery for a
• 6:50
  vineyard for less than it costs to build it. Crabtree said if
• 6:54
  someone were to come in and buy an empty piece of property
• 6:56
  where and install wells, irrigation, rootstock, it could cost about thirty to
• 7:01
  fifty thousand dollars an acre. Right now, existing producing vineyards are selling
• 7:06
  for about that amount, which means the and is free. Both Crabtree
• 7:11
  and wine industry Professor Sumner acknowledged That’s money is still coming into
• 7:15
  the industry from both LA and the Silicon Valley, which they say
• 7:18
  is buoying the region and driving much of the next generation of
• 7:21
  wine business speculators right now. There's always small wineries owned by a
• 7:26
  dot com millionaire, Sumner said, so they can afford to lose a
• 7:30
  million bucks. What they've really bought, I won't call it a hobby,
• 7:35
  but some diversified place where they've invested some of their money. In
• 7:39
  the end, Sumner said he sees rays of hope. We all try
• 7:43
  to invest in a long term thing. That's why people buy a
• 7:45
  house and hope to live in it for a very long time.
• 7:48
  That's the way farmers and winemakers tend to be, he concluded.