Napa wine industry crisis deepens as vineyard values plunge

California’s battered wine industry is spiraling deeper into crisis as vineyard values across wine country plunge, buyers vanish, and experts warn the pain could drag on for years.

At an AWG Wine Advisors conference in Santa Rosa on May 21, industry insiders called this downturn one of the toughest in decades. Vineyard owners are now rushing to sell land in a market crowded with sellers and very few buyers.

“It’s like catching a falling knife,” Sonoma-based agricultural land appraiser Tony Correia said of the collapsing vineyard market. “The market’s moving faster than the appraiser does.”

Correia said vineyard owners across Sonoma, Napa Valley, Mendocino, and Lake counties are all feeling the squeeze as grape demand weakens and buyers gain leverage.

“If you’re going to sell in today’s market, you need to face the reality,” he warned. “There’s lots of sellers, and there’s very few buyers.”

Vineyard values in Mendocino County have dropped sharply outside the high-end Anderson Valley pinot noir and chardonnay area.

Lake County has also suffered after years of heavy cabernet sauvignon grape planting, according to The Press Democrat.

“That demand just fell off the side of the bed and has not come back,” Correia said. Sonoma County hasn’t escaped the carnage, either.

“All of Sonoma County, if you have to sell today, the prices are going to be less than they used to be, and the demand for grapes is still a crapshoot,” Correia said.

Even Napa Valley’s usually stable luxury wine market is starting to show problems outside its top cabernet vineyards.

“At the bottom tier, perhaps a third of the category are struggling, maybe a third in the middle is just treading water,” Correia said.

He warned that more financially troubled sales are likely as lenders put more pressure on vineyard owners who owe money.

“That typically translates to selling off an asset, and those assets will likely be sold at very low prices,” he said. “We think we’ll stabilize, but it’s not this year.”

The bleak outlook comes as analysts say the nationwide wine industry is shrinking fast amid changing drinking habits, economic strain, and competition from cannabis, gambling, and low- or no-alcohol beverages.

“I think that by the time we get out of this downward slope, we’re going to be coming back to an industry that is going to be about a third [smaller than] it was at the high-water market,” said Mario Zepponi, managing director of BMO Capital Markets’ beverage alcohol team.

He said younger consumers, especially millennials, are turning away from wine altogether.

“The problem has been the millennials,” Zepponi said. “They’re not interested right now to engage in wine.”

Zepponi predicted the industry’s painful correction will likely drag on for years, with no quick rebound in sight.

“I personally think that the horizon starts to look better in 2028,” he said. “It’s not going to be a V-shaped recovery.”

The industry has also been rocked by oversupply, distribution chaos, and collapsing merger-and-acquisition values.

Zepponi described the unraveling of major distributor Republic National Distributing Company in California as “cataclysmic,” while warning that wineries and vineyard operators now face a brutally competitive market with fewer buyers and lower prices across the board.

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