Posted by Tom Wark on Dec 5, 2017
Wine News in 2017 was big and varied. Lots of big changes and big events. Some of it was predictable. Other news, well not so predictable. Here are my Top 10 Wine News Stories of 2017. They are not presented in any order of importance and they tend to focus in part on California’s wine industry.
WINE COUNTRY FIRES DEVASTATE
The fires scarred everyone in Napa and Sonoma. The land will recover, but the personal, economic, and psychological toll will stay with us for quite some time. The massive fires have already impacted visitation to wine country, which in turn has impacted any number of industries. Additionally, expect this natural disaster to have a direct impact on the politics of the region for many years to come.
AMAZON WADES INTO WINE RETAIL WITH WHOLE FOODS BUY
The most disruptive company to emerge in the past 50 years really had no significant interest in wine or the wine industry. Its own AmazonWine effort was meager. However, with the purchase of Whole Foods Grocery Store Amazon puts itself in a position to have a truly disruptive impact on the realm of wine retailing if only because of its size and reach. Amazon is not and will not be an innovative wine retailer. But with its hundreds of Whole Foods wine retail licenses now in its back pocket, it’s girth alone could be highly disruptive to the wine industry.
The announced merger of Republic-National and Breakthru Beverage created the second wine and spirit wholesaling behemoth alongside Southern-Glazers. There are now two companies that control over 50% of the wine wholesaling business in the U.S. This kind of consolidation is good for the wholesalers’ largest winery clients as it creates efficiencies that save money. However, those kinds of producers can be counted on just a few hands and feet. The vast majority of wineries that aspire to have a national or regional brand are small and will be even more at the mercy of wholesalers with this merger. Finally, this is not the end of the merging. Expect even more acquisitions and mergers between America’s largest wholesalers in the coming two years.
CANNABIS AND WINE
The integration of cannabis into the sin industries moved quickly apace in 2017, especially in California where the weed’s legal recreational use is set to start in 26 days. Many in the wine industry and especially in California spent much of the year trying to understand the impact legal cannabis will have on its sales and labor market going forward. Some, like myself, have been looking closely at the degree to which cannabis will cannibalize sales from the wine industry.
AN INITIATIVE AIMED AT STOPPING NAPA WINE DIVIDES INDUSTRY
In Napa County, backers of an effort to stop the growth of the wine industry in the region spent the year working to successfully get a ballot measure on the coming June ballot that would essentially stop all vineyard development in a region of the county that is zoned “Agricultural”. This effort has already divided members of the wine and grapegrowing industry and could divide it further. The Oak Woodland Initiative places extraordinarily onerous restrictions on vineyard planting and appears to be only the first step by a small radical minority that has in its sights the direct to consumer sales culture of the Napa Valley.
DIRECT TO CONSUMER SALES JUMP TO OVER $2.33 BILLION
In January of 2017 Wines & Vines and ShipCompliant announced in their annual DTC Shipping Report that more than $2.33 Billion in wine had been shipped direct to the consumer. Moreover, the amount of wine shipped and the value of wine shipped in 2016 increased by about 17% over the previous year. Down the road, the $2.33 Billion DTC industry will seem small, as there is every indication the channel will continue to grow for America’s wineries who face a daunting distribution landscape controlled by two behemoth wholesalers poorly suited to address their needs.
LIBERATION DISTRIBUTION LAUNCHED
Liberation Distribution is both a traditional distributor and an innovation in wine distribution. Launched in 2017, “LibDib” allows small and medium-sized wineries, cideries, brewers and distillers to sell their products to retailers and restaurants via an online “book”. LibDib facilitates the transaction. For small, craft-oriented producers this is the way they can finally move from DTC sales to the retail and restaurant sales without putting themselves at the mercy of traditional wholesalers who have no interest in their success.
For years (decades?) retailers and restaurateurs have complained that the largest distributors have played fast and loose with tied house and sales laws, forcing them to buy products they don’t want as well as padding invoices. In 2017 Southern-Glazer’s was hit with a class action suit by a San Jose, California bar owner over just such alleged actions. Whether this suit reveals the extent of the kind of tactics listed in the suit, it is likely to not be the last such suit. These kinds of actions, when successful in other industries, often lead to positive changes. Time will tell.
RETAILER DTC SHIPPING ISSUES COME TO LIGHT
This year the issue of retailer DTC shipping issues came front and center. Common carriers, at the behest of wholesaler influenced state liquor agencies began enforcing the discriminatory anti-shipping laws of many states, leaving retailers able to ship to a mere 14 states including the District of Columbia. At the same time lawsuits challenging the anti-shipping laws were filed in Illinois, Michigan and Missouri with an eye toward moving a case toward the Supreme Court. Additionally, a new consumer-aimed organization, WineFreedom.org, that aids wine buyers in fighting back against such anti-consumer shipping laws was formed and will allow easy lawmaker outreach by consumers.
CONSTRICTING LABOR MARKET HITS WINE INDUSTRY
Ask any North Coast producer of what their top concern is going forward and they’ll cite access to labor for their vineyards and winery. A combination of factors including INS crackdown on undocumented workers and expansion of legal cannabis cultivation have put labor at a premium. On the North Coast, where the firestorm hit, the need for construction workers only added to the labor squeeze. The impact of this diminished access to labor is likely to mean higher prices for wine and mechanization of many aspects of winemaking that once required human hands.