Ciatti California Report - January 2025

Looking back over a challenging 2024 and ahead to 2025

This month’s California Report looks back at the year just passed and ahead to the new one: Read on below for an in-depth review of the bulk wine and grape markets in 2024, as well as bulk inventory charts for a range of periods and an updated bulk/grape market activity barometer. A Q&A with Ciatti broker Johnny Leonardo, discussing the current market situation, will be published in the coming days, together with the first packaging bulletin of the year from our friends at Saxco.

For California’s wine industry, the year 2024 was defined by a painful but necessary right-sizing as the industry evolves into one better suited to delivering to the US market something like 350 million 9-liter cases of wine per year instead of the 400 million cases of the past. Rationalization of businesses and vineyard area took greater hold – there was a marked rise in wine-related property on the real-estate market and a shortage of vineyard removal services – while the bulk wine and grape markets were filled with opportunities for buyers seeking high qualities at pricing lower than in previous years.

The benefit of this enhanced quality-price ratio will ultimately be to the consumer, the most important but also most enigmatic player in the whole equation, who the wine industry and attendant commentators have struggled to read in the post-pandemic years. Have consumers reduced spending on non-essential items in response to 2021-23 inflation and still-elevated interest rates? Are they trading up, down, buying less or abstaining altogether? Are they in fact buying almost as much wine as pre-pandemic, but retailers/distributors are proceeding on a just-in-time basis and holding less inventory? Is recent negative health messaging having cut-through in a more rapid way than ever before? Are Gen Z and Millennial consumers snubbing wine and, if so, will this change as they age?

The most important question of all is: When and at what level will wine sales settle at their ‘new normal’? Sales stabilization would regularize retailer/distributor demand and, in turn, allow wineries and growers to plan for the future. Until then, the whole industry will remain wary of how far demand might fall. Buying on the bulk wine and grape markets has been muted to enable existing bulk inventories to be drawn down; therefore, stabilization of demand - when it comes - could trigger a quick upturn in market activity. All will be hoping 2025 is the year stabilization finally arrives.

The Ciatti broker team with its many decades of experience stands ready to help navigate buyers and sellers through the year ahead, and beyond.

• Bulk wine suppliers should list their wines with us and send in samples, so we can harness buyer interest expediently when it arises. Suppliers can contact either Mark at +1 415 630 2548 / mark@ciatti.com or Michael at +1 415 630 2541 / michael@ciatti.com. Prospective bulk wine buyers should contact our broker team using the contact details listed here.

• Grape growers should inform us now of what fruit they may have available in 2025, so we can match supply with buyers as they arise: Please contact Molly at +1 415 630 2416 or molly@ciatti.com. Prospective grape buyers trying to get a feel for potential 2025 availability should also reach out using the contact details listed here.

• International bulk wine buyers seeking to harness highly attractive price-quality opportunities in California should contact Greg at +1 415 458-5150 or greg@ciatti.com. California is able to offer: Coastal wines for mid-tier programs; more typical bulk options (including White Zinfandel); competitively-priced generics; and low/no-alcohol wines. One-year and multi-year opportunities are available.

Ciatti brokers will be attending/speaking at the following events and look forward to seeing you there. In the meantime, the whole Ciatti team would like to wish all of its friends, clients and business associates a very Happy New Year.

Dates For Your Diary

January 16th: Sonoma County Winegrowers’ Dollars & Sense 2025 (Virtual)

Ciatti partner and broker Todd Azevedo will be speaking.

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January 28-30th: Unified Wine & Grape Symposium 2025

The Ciatti broker team will have a booth (1744 on Level 1, Exhibit Halls A-D), and Ciatti partner and broker Glenn Proctor will be speaking at the ‘State of the Industry’ session on the 29th.

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2024: The Rocky Year That Was

January – March

“The bulk market comes into the new year as it did 2023 – with acute buyer hesitancy.”

These were our opening comments of 2024 and foreshadowed the tone for the 12 months ahead. Any stimulus to buying from a 2023 crop of 3.68 million tons – the fifth consecutive to come in below the 4-million-ton mark, partially due to uncontracted grapes going unpicked – was easily offset by the ongoing slowness of US retailer/distributor demand: SipSource data showed an 8% drop in distributor depletions in the 12 months ending January 2024, rising to 9% in the three months to the end of January 2024.

Hesitant retailer/distributor need, combined with higher input costs (inflation was down from its 2022 peak yet still elevated; interest rates remained at a 17-year high of 5.5%), squeezed winery cashflow and disincentivised possessing wine stock. This in turn reduced grape demand and cashflow for growers. In the early months of 2024, there was still some optimism that retailers/distributors had completed the rightsizing of their inventories following the pandemic’s consumer demand spike in 2020-21, “paving the way for more stable, predictable volume requirements though 2024”. However, this failed to materialize.