Producers of fine wine in the North Coast could benefit from stronger sales growth foreseen for this year after an overall decrease in growth in the past three, but higher costs of grapes and wine in recent years is squeezing the bottom line and increasing demographic shift away from the key group of consumers higher-end wine will moderate industry growth, according to Silicon Valley Bank's annual industry forecast, released Thursday morning.
Sales of fine wine are projected to grow 6 percent to 10 percent in 2014, the first increase in growth in four years for this segment of the wine business, according to the report. That would be upward movement after 6.3 percent growth for the fine-wine segment through September of 2013, 7.7 percent in all of 2012 and 12.2 percent in 2011, based on the San Jose-based institution's "peer group" database of financial data for about 100 wineries that are and aren't clients.
A year ago, the St. Helena-based wine division of the institution predicted 4 percent to 8 percent sales growth in 2013.
Meanwhile, direct sales of wine are growing, the report said, citing recent industry statistics. Such sales grew 8 percent through November last year from the same months in 2012, according to Symphony IRI and Wines & Vines. ShipCompliant, a high-tech transactional clearinghouse for wine-shipping regulations, reported direct sales topped $1.5 billion for the 12 months ending in September, a new record.
"On the bad news side of the ledger, the higher-cost inventory from the short 2011 vintage couldn't be passed on to the consumer in price once again, and that lowered gross profit and pretax profit for the industry slightly," said the report, written by Rob McMillan, executive vice president and founder of the St. Helena-based wine division for the bank, and Bill Stevens, division manager.
Gross margin for the bank's fine-wine peer group was 52.6 percent for three-quarters of last year, down from 53.4 percent in 2012, 53.2 percent in 2011 and 53.7 percent in 2010. Pretax profit was 5.4 percent through September of last year, a drop from 6.9 percent in 2012, 6.1 percent in 2011 and 6.7 percent in 2010.