2012-2013 Predictions on the Wine Business

#winebiz:

Each year I take out my crystal ball, put on funny clothes and after my eyes roll into the back of my head for a sufficient amount of time, write Silicon Valley Bank’s State of the Wine Industry Report and make some predictions. I am a most fortunate soothsayer to be able to see so much of what is largely a private industry. Silicon Valley Bank has it’s own data base of financial information, I produce various surveys throughout the year with more than 500 respondents, have direct contact with clients, prospects, suppliers to the wine business, relationships with distributors and large scale farmers, academia, media and I’m sure I’m missing an angle or two. That all helps to clear up the cloudy crystal ball.
One observation we made in the spring was the wine business is going through a rapid evolution. Our prediction was the change would soon place the function of selling wine on par in importance with managing costs, especially grape, bulk wine and production costs. Why that prediction? With grapes trending to shortage, the wineries who have better cost controls and who manage their contracts the best will have better options competing on price for the best grapes.  We made several observations and predictions beyond that and thought it would be a good week to restate them, and see how accurate we have been thus far.

This is what we predicted last spring, absent the economic predictions which you can read by clicking on the report linked above:

  1. Wine inventories evolving into a state of shortage that will last for some time domestically
  2. Increasing prices for grapes and bulk juice as growers finally start to see recovery
  3.  Increasing difficulty for négociants to find wine of consistent quality for their price point
  4. Fewer private labels on the shelves
  5. More transitions, sales and mergers taking place than at any time in memory
  6. Continuation of new mergers in the wholesale networks
  7. Increasing plantings to feed the looming grape shortage
  8. Imports taking on larger market share compensating for lacking domestic supply
  9. Bottle price increases, but not a return to those prior to the recession
  10. Increasing difficulty for those third-party marketers who have sold with a culture of discounting
  11. Functional evolution of digital options creating a Fifth Column; a cobbled together group of wine businesses partnering with producers to sell direct and replacing the theoretical role of the wholesaler in a fully functioning supply chain.
  12. 2012 sales growth rates of 7-11 percent, a slight drop from the prior year
  13. Declining wine quality for the price paid, pushing consumers to decide if they are willing to drink lesser quality domestic wines, or pay higher prices, or find foreign substitutes 

Certainly #1 is the dominant change in the business this year. How’d we do otherwise? Anything you think was a miss on the predictions? I’m predicting someone will have something to add. (I just rolled my eyes in the back of my head to come up with that one.) 

Please join the community and weigh in on your views. SVB on Wine

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