Issue link: http://read.dmtmag.com/i/72545
EDITOR'S DESK Trending Upward It may not seem like it right now, but the U.S. wine industry is head- ing for a long-term period of steady growth – at least, according to Silicon Valley Bank's "State of the Wine Industry" report for 2012- 2013. The annual report predicts a 7%-11% increase in sales for the fine-wine segment in 2012. As wine demand increases in the United States, producers will be faced with short supply, which is likely to drive up grape and wine prices. But don't break out the bubbly just yet. While our friends in Oregon and Washington could reap the benefits of more non-bear- ing acreage than California and lower land costs, the bump in demand will largely be met through foreign bulk and bot- tled wines. The U.S. vintners who end up thriving during the next few years, the report states, will be the ones who can get their hands on qual- ity fruit at the right price, and can manage to keep their operating costs down. With bulk inventory scarcer these days than foie gras at a PETA cocktail party, "virtual" wineries will face a much bigger fruit-sourc- ing challenge in the next couple years while waiting for new plant- ings to come online. And remember how Millenni- als, with their gigantic numbers and unslakable thirst for wine, were going to be a hugely impor- tant market for fine-wine sales? According to Rob McMillan, author of the SVB report, that initial excite- ment was premature – at least for the over-$20 wine category. "This demographic today has the larg- 10 VINEYARD & WINERY MANAGEMENT JULY - AUG 2012 est unemployment rate and at the same time is starting out more burdened by college loans, (and) is experiencing delayed entry into the labor market," McMillan said. Sorry, did the headline imply that this was going to be good news? Don't worry, there's still plenty to be optimistic about, especially if you've got fruit or vineyard land to sell: • According to agricultural land assessor Tony Correia, who par- ticipated in a live webinar expand- ing on the SVB annual report, land values will increase as grape prices rise. "Folks are going out to buy new land to plant new vineyards," he said, "and we're seeing a rise in land prices as that demand continues." • "Grape prices rose in 2011," he added, "and we can expect that prices will rise more in this crop year and going forward." • Millennials still matter. "They have a place in the fine-wine seg- ment at this stage, but they're a smaller piece of it," McMillan said. In the meantime, Millennials' older siblings – Generation Xers – are established in their jobs and have money to spend on luxury goods. "Millennials are the future," McMil- lan said, "but GenX is now." Let's drink to that upward growth trend, for all price catego- ries and generations. Salute! Comments? Please e-mail us at feedback@vwm-online.com. vwm-online.com WWW.VWM-ONLINE.COM