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Silicon Valley Bank Releases State of the Wine Industry Report

January 21, 2014

Silicon Valley Bank , a provider of commercial banking services, releases its Annual State of the Wine Industry Report in a live broadcast from the SVB TV studio. In a release, the Company noted that the report covers trends and addresses current issues facing the US wine industry. "Despite news to the contrary in recent months, wine supply is in balance heading into 2014 and we expect the highest rate of sales growth since the recession, despite a tough economy," said Rob McMillan , founder of Silicon Valley Bank's Wine Division and author of the report. "News is good for the consumer: demand is up, supply is in good shape and pricing is stable. For the winery, however, grape costs and flat consumer pricing means lower profitability. "While this year is ultimately expected to be a healthy one for US wineries, if we peer into the future 5-7 years, we believe the headwinds will increase significantly as more Baby Boomers retire. Fifty and 60-somethings purchase about half of fine wine in the US. As they retire, and their purchasing power declines, the younger generation can't pick up the slack immediately, due to lower income, and access and the proclivity to purchase more foreign wine. Astute fine wine producers will be adjusting their strategies accordingly." Findings: -Short-term: Continued growth in the demand for wine and limited pricing power for producers -Long-term: Baby Boomers' declining demand for wine will not be immediately replaced by Millennials' demand, impacting the ability for wineries to sustain their current rate of growth -Supply: Expect final numbers on the 2013 harvest to reach 3.94 million tons, which is the second largest harvest on record in California after 4 million tons harvested in 2012. -Sales Growth: In fine wine, sales growth is predicted to be in the range of 6-10 percent in 2014, which is the first increase in three years -Pricing: Bottle pricing will remain stable, increased grape and bulk wine costs are not being passed onto the consumer, therefore winery gross profits will be down -Demand: Luxury wines and $10-$18 bottles will see greatest growth in demand -M&A: Mergers and vineyard acquisitions will continue at a record pace ((Comments on this story may be sent to ))

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