Silicon Valley Bank: Consumers will pay more for U.S. wine

Premium wine sales expected to grow 10 to 14 percent

ST. HELENA — Silicon Valley Bank has released its annual State of the Wine Industry Report. The 16th annual report combines SVB’s expertise in the U.S. wine business with proprietary research to deliver forecasts and predictions for the year ahead in wine.

Highlights from the 2017 report show strong market conditions overall and identify notable trends that may signal adjustments in consumption patterns and segment prices. Here are a few of SVB’s predictions for the year ahead:

• Wines sold between $12 and $25 will grow in demand, as will high-end luxury wines with an established brand. SVB expects to see small price increases in these segments, with volume and price drops for bottles priced under $9.

• Sales growth is predicted between 10 to 14 percent for the premium wine segment. The confluence of better retail conditions, strong consumer demand and good supply will deliver improving industry performance.

• Overall supply is balanced with shortages of high-quality Pinot Noir and Cabernet, but excesses are evident in certain non-core varietals and for grapes destined for lowerpriced wine.

• Farm labor supply and costs will be the dominant concerns in the wine business in 2017.

“We foresee a strong year ahead for the wine industry, particularly in the premium wine segment, with small price increases in the $12-25 bottle and luxury wine categories,” said Rob McMillan, founder of Silicon Valley Bank’s Wine Division and author of the report. “However, critical labor issues will be the dominant concern this year. The reality in the wine business today is that the labor force is inadequate in every growing area, which is leading to increased costs and more incentive to mechanize.”

Additional findings and predictions for 2017:

• Import growth in lower premium price points is expected, due to a strong and strengthening U.S. dollar, available foreign supply, foreign in-country marketing support and willing millennials.

• Millennials are beginning to affect the lower price range of premium sales. Their presence is most visible in the $8 to $11.99 red blend category, but they will gradually move away from blends and into varietal wines or imports as their incomes improve.

• Total harvest in California for 2017 is predicted to be 3.95 million tons crushed, 7 percent above 2016.

Founded in 1994, SVB’s Wine Division offers financial services and strategic advice to premium vineyards and wineries. The Wine Division has offices in Napa and Sonoma counties and primarily serves clients in the fine wine producing regions along the West Coast of the United States.

Read the full report at www.svb.com/winereport/