State of the Wine
Industry 2017
Written by Rob McMillan, EVP and Founder
Silicon Valley Bank Wine Division
Contents
Introduction
No Lifeguard on Duty.2
Swim at Your Own Risk.Our Predictions in Review 42017 Summary Forecast 10Premiumization and 14
Restaurant SalesVarietal Demand 22Harvest Yield and Quality 26Bulk Wine and Imports 32Land and M&A 36Shifing Cohorts and 46
Improving EconomicsWinery Financial 54
PerformanceFinal Thoughts 62
Endnotes 64
About Silicon Valley Bank 67
Disclosures 69
Introduction
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We lead this year’s report with a reminder that while
market conditions appear strong in places, some market
components are weakening and dangerous, and still
others are overheating as currents of change gain momen-
tum. Once again, “average” is not a useful term when
describing the wine business. You need to look below the
surface because what you see on top belies risks that lurk
in the depths.
In 1975, the U.S. wine business was still considered
a backwater — quiet but soon to make some big waves.
It was the year before the historic Judgment of Paris1
that opened the eyes of the world to premium California
wines. News of that seminal event caused ripples through
all producing regions, rearranging the world view of
fne wine2 and setting the stage for unabated growth in
premium U.S. sales for decades to follow. 1975 was also
the year the blockbuster3 movie “Jaws” was released.4
Starring Roy Scheider, Robert Shaw and Richard Dreyfuss,
the flm was about the small vacation island of Amity
that seemingly had everything: clear skies, gentle surf
and warm water. People focked there every summer,
making it the perfect feeding ground for a marauding
great white shark.
With a little creative license, we are using the movie
“Jaws” as a metaphor to describe the ups, downs and hid-
den threats in the U.S. wine business. You might ask,
why would a serious business report use a popular movie
as a metaphor It’s something we do for fun to make a
long business report more readable. By reading, we hope
you catch a few ideas and avoid unforeseen business risk.
If there is blood in the water, we don’t want it to be yours!
We invite you now to make ready and cast of as we present
Silicon Valley Bank’s annual review and discussion of and
predictions for the U.S. wine business in 2017.
“There’s blood in the water!”
That ominous phrase strikes fear in swimmers throughout the world.
But in business, it means a market opportunity exposed by a changing
tide. That blood in the water could be a buyer’s market fooded with
predatory bargain hunters scheming to feast on the carcasses of the
weak. Or it could be a seller’s market bursting with schooling challeng-
ers, each vying for a few highly desirable assets. In either case, the
ensuing feeding frenzy leads to either exalt or demise for participants.
No Lifeguard on Duty.
Swim at Your Own Risk.
No
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