Business & Real Estate

Survey: California wine industry adapting to aging baby boomers, foreign competition, drought

In wine parlance, it’s called “passing the glass.” As aging baby boomers taper off their wine consumption, the millennial generation is poised to pick up the slack, according to a new UC Davis survey of California wine executives. And despite water shortages and increased competition from craft beers, cocktails and imported wines, California’s wine industry is holding its own globally.

Those are among the results to be presented Tuesday at the Wine Industry Financial Symposium in Napa.

Robert Smiley, professor and dean emeritus of the UC Davis Graduate School of Management, gathered comments from the heads of 26 wineries for his 13th annual survey of wine executives. About 60 percent of the wineries surveyed are in the Napa or Sonoma valleys, with most of the rest in the Central Valley, Sierra foothills and the Central Coast.

Smiley also completed a separate survey of wine professionals – representing more than 120 wine companies, growers, distributors and financial firms.

In the latest surveys, respondents said California’s massive wine industry will hold its own in the global marketplace despite shifts in consumer demographics, drought, competition from imported wines and the rising popularity of craft beers and cocktails.

Smiley said California wine likely will remain popular even as “baby boomers pass the glass to the millennial generation.” The survey of wine executives noted that wine consumption by baby boomers is declining and will continue to do so as that group ages.

“It’s just a simple fact of age. As you get older, you drink less,” Smiley said Monday.

In the recent survey, wine executives said consumption by millennials is expected to steadily increase, helping to compensate for decreased wine drinking by the post-World War II generation. Smiley said the challenge is to reach out to millennials, especially via social media like Facebook and Twitter.

“They are very different in how they shop. But they share experiences, and that includes wine,” Smiley said. “In the best of all worlds, if they visit a winery, you can hook them into your wine club ... with tastings, offers, comparative notes.”

Smiley said the Golden State’s wine industry is in a growth stage, “with something like 10 wineries a week opening all over the state ... Things slowed down during the recession, but now it’s a good time to be in the wine industry.”

Over the next three years, the strongest-selling white varietals will be chardonnay, sauvignon blanc and pinot grigio; the strongest reds will be cabernet sauvignon, pinot noir and red blends, according to the larger group of wine professionals who were surveyed. Wines in the $14- to $20-per-bottle range will show the strongest sales.

Climate change and water use will be among the industry’s top concerns over the next five to 10 years, according to the 26 wine executives. They said they are implementing strategies to combat the effects of drought, including use of imaging technology to minimize vineyard water consumption, recycling water for irrigation and changing conservation practices.