‘A different market going forward’: What’s next for California fine wine post-pandemic

Rebound of U.S. travel industry

55%: Proportion of firms surveyed in May that plan to resume domestic business travel this summer, up from 31% in May 2020. (Global Business Travel Association)

-21%: Level of total U.S. travel spending in May 2021, compared with May 2019. (Tourism Economics)

-72%: Domestic travel spending in May 2020, compared with the same month in 2019. (Tourism Economics)

The business of premium wine has fared well overall through the coronavirus pandemic, but even as the economy continues to reopen nationwide, vintners will find a much different market than a year ago, according to a key industry analyst speaking at a virtual North Coast business event Wednesday.

“The market is not returning to what was,” said Jon Moramarco, editor and partner of Gomberg Fredrikson, publisher of closely watched reports on wine, beer and spirits industries. “It is going to be a different market going forward. It's going to be much better than it was a year ago, but it's going to take working differently.”

The good news for the wine business is that leisure travel, a key market, is trending up as economies reopen from pandemic restrictions, he told the audience of the Business Journal’s 21st annual Wine Industry Conference.

The U.S. travel industry suffered $646 billion in cumulative losses from the start of the pandemic in March 2020 through May of this year, according to the latest figures from the U.S. Travel Association. Overall travel spending in May was down 21% from the same month in 2019, but that’s much improved from May of last year, when spending was down 72%.

And more than half of U.S. travelers (52%) in a June survey by Tourism Economics were comfortable with traveling during the pandemic, the highest level since the virus emerged as a public health threat.

Moramarco said the bad news for makers of fine wine is that business travel is likely going to trend downward. He said conversations with companies have pointed to growing acceptance that video conferencing has been an effective tool for connecting with clients during the pandemic, and that could mean less spending on fine dining and wine to entertain clients.

“Ideally that would be offset by leisure travelers, but they may not necessarily be buying at the same levels of the highest (priced) wines,” he said.

But businesses are planning to ramp up travel this fall, according to a June survey by the Global Business Travel Association. More than half (55%) of survey respondents said they had domestic business trips planned for the next three months, up from just 31% in May of last year.

And business from tasting rooms likely will be different as the economy transitions out of the pandemic, Moramarco said. More vintners are keeping the appointment-only model that was called for under public health order restrictions for operation.

Sheltering Americans weren’t drinking more

While there was a spike in shipments to U.S. markets of beverage alcohol in the first weeks of the pandemic, there wasn’t an overall increase in consumption per adult, Moramarco said, citing federal and other data. Per-adult consumption with the latest data this year is back to where it was in 2007 after an uptick in the spring of last year, but there was a significant shift in such sales from on-premises venues to off-premises points of purchase, he said.

“Overall, people haven’t really been drinking that much more because of COVID,” Moramarco said.

Shipments of still wine had been growing from 1993 through 2016 then leveled off, while shipments of sparkling wine enjoyed renewed growth in recent years. But that flipped during the pandemic, with still wines gaining while sparkling wine ebbed, Moramarco noted. But growth for still wines wasn’t back to pre-2016 levels.

“The big growth last year in wine actually was in wine-flavored beverages,” he said.

This category includes hard seltzers such as top brand White Claw and newer entrants such as Napa Valley-based Trinchero Family Wines’ Del Mar wine seltzer. Trouble is, these wines retail at prices below what makes them feasible to be produced in the North Coast, and many of them are being made in Mexico to keep production costs even lower, he noted.

Moramarco likened the flavored-beverages trend to the surge in popularity of light beers and wine coolers in the 1980s. While hard seltzers and distilled spirits-based cocktails have been enjoying stronger growth than wine and beer, he sees these as “transitionary beverages.”

“I think the challenge for the wine industry is figuring out how do you take the consumer from White Claw and get them to start drinking wine, much like we have had in the wine industry (as consumers moved) from wine coolers to semi-generic wines to fighting varietals, etc.,” he said. “We're going to go through that same transition with younger consumers today.”

Preview of the restaurant market rebound

While California bars and restaurants have only begun fully reopening in the past few months, such on-premises beverage alcohol consumption venues in other key wine markets have been largely back to full operation since the second half of last year. Moramarco provided a look ahead to what on-premises consumer trends could look like for California in the next three or four months by analyzing tax receipts for Texas, representing all places that sell spirits and half those that sell beer and wine.

Beer and wine spending on premises in May had been rising for five years before dropping in 2020 then rebounding but still below 2019 levels. Spirits had the same up and down trajectory, but sales this past May were up significantly above 2019 levels.

Moramarco speculated that it may have to do with the demographics of those venturing out to imbibe in the pandemic may trend younger.

“They're going out, but they're not necessarily having fine dining,” he said. “It's casual dining. It's people back out with friends and having a drink with them. And I think that's why you're seeing better recovery by spirits than you are for wine or beer.”

He said that notion appears to be supported by tax data for the top 30 Texas fine-dining establishments showing sales of fine wine were down 28% in May from the same month in 2019.

“We're seeing a recovery in fine dining, where a lot of our wineries in Napa and Sonoma are relying on those on-premise accounts, but it's not coming back as quickly as the general on-premise (market),” Moramarco said.

Jeff Quackenbush covers wine, construction and real estate. Before the Business Journal, he wrote for Bay City News Service in San Francisco. He has a degree from Walla Walla University. Reach him at or 707-521-4256.

Rebound of U.S. travel industry

55%: Proportion of firms surveyed in May that plan to resume domestic business travel this summer, up from 31% in May 2020. (Global Business Travel Association)

-21%: Level of total U.S. travel spending in May 2021, compared with May 2019. (Tourism Economics)

-72%: Domestic travel spending in May 2020, compared with the same month in 2019. (Tourism Economics)

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