In Napa, Prices and Risks are Up, Interest is Down…

 

The numbers are a bit squishy, but depending on how one defines ‘winery’ there are almost 500 physical wineries or wine brands with dedicated tasting rooms, but there are north of 1,700 wine brands producing Napa Valley wines (and clearly the majority of these brands are custom crush wines). To put things in perspective, on Geek’s first trip to Napa in 1981, there were less than 40 wineries operating in Napa. Today there are wineries, tasting rooms, restaurants, hotels, shops, boutiques, et cetera on every corner. Indeed, trying to navigate Hwy 29 on a random Fall Friday is a …well let’s say it’s exciting. So why would one want to leave the ‘wine country lifestyle’ and sell?

A tsunami of events and extraneous factors have taken a bit of the bloom off of Napa Valley’s rose; they have experienced almost everything but a tsunami.

  • Wildfires: so prevalent are wildfires in California, they now name them, like hurricanes. The 2020 ‘Glass Fire’ was the most recent devastating fire to the Valley, but there have been many others, some big (as in the terrible ‘Tubbs Fire’ in 2017), and some smaller—yet still deadly. Add to the risk from actual fires, PG & E has been intermittently shutting off power throughout California—including Napa Valley—as a preventative move (some fires have been started by downed power lines). Kinda hard to operate a winery without power.
  • Climate Change: regardless of where you stand on this (it being an existential threat, or a cyclical change), almost every vintner we’ve talked with says things are warmer now compared to thirty years ago. This affects ripening/sugar levels as well as other factors (pests, disease). Lots of growers are considering planting non-traditional, warm climate grapes as a hedge.
  • Droughts: If you don’t know that California has a general water shortage/crisis, you should change the channel on your TV. Some wineries have been forced to alter their ideal irrigation regimens in order to conserve water; this can affect both yields and quality. No especially devastating episodes as yet, but we are pretty confident it is coming.
  • Labor Shortages: currently, the entire country is experiencing worker shortages, and Napa is as well. But in Napa’s case, there’s an extra shortage: a significant number of the vineyard workers in Napa (and most wine producing areas) are temporary/seasonal workers from south of our border. The ability for this workforce to come and go as they have done historically is has greatly diminished over the past few years. Many vintners are biting their nails as we write this.
  • Land Prices: we have watched for decades as analysts have correctly predicted certain stages of the inexorable rise of land prices in Napa. In 1993 Vineyard land averaged $75,000 an acre. Some predicted in would cross $100,000 in ten years; it did so in five years. Fifteen years hence, the average crossed $200,000 an acre. Now—just last year, we were told that the top sites are now over $1 million an acre. We must hit a ceiling at some point.
  • Millennials: The wine boom in Napa—and the explosion in premium wine in general—has been fueled almost entirely by Baby Boomers. As that generation is replaced by Millennials, things are changing. The industry has assumed that as millennials age and their incomes grow, their turrets will turn toward premium wine, but so far…not so much. Millennials are into ‘lifestyle’ wines and ‘authentic’ wines…not trophy wines. At the same time Napa Cab prices are heading to $100, $200, $300 a bottle (and more), most millennials are looking for $20 natural wines and $6 seltzers. The good news is this might be your chance to get on the mailing list at Screaming Eagle.

Call your rich uncle: now is your chance to buy into the Napa lifestyle!

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