WA winery gorilla cancels 40% of 14 Hands contract volume…
And referring to 14 Hands as a Premium Wine Brand gave me at least 100% of my RDA of marketing BS for the day…
Michael
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I read a few articles on this and haven’t seen any mention of my question: what were the terms of the contracts regarding cancellation?
Turning grapes into wine is an additional cost for CSM, so foregoing the expense of picking, crushing, etc. is money saved. But will not these growers be made whole for this growing season? Next year is another story.
Nice to see our Silicon Valley Bank friends make an appearance in this article. The last paragraph is certainly a stark departure from other articles I’ve read where the growers are being advised to consider ripping out/not replacing vines. Though I generally disagree with many of the takeaways/solutions in the SVB report.
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DTC sales are also down, both in volume and price point. I didn’t need this article to tell me that, because I saw it in spring release numbers already (and I don’t think it was the wines) - people just don’t have enough money to spend right now with the inflation as it is. Cost of living is crazy, so everyone is feeling it.
Still, I see a lot of producers increasing their prices, some by a lot (see about 39 other threads) as if it’s just a business as usual. I personally think it’s a bit of a risky move, but what do I know - maybe their customers can take it?
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I am cutting lists. My food budget is up 60%+. I have moved from the $40-60 range being typical to $20-40. Bottom fishing on wine bid. I see myself going deeper into wineries that provide great QPR and less wineries overall for the near term and waiting for BD to hopefully score some deals.
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Depends on the vineyard. Many contracts are year to year. Others are multi year. I’m guessing they cancelled all the non term contracts.
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From the article linked in the first post…
The move comes as Ste. Michelle, owned since 2021 by Sycamore Partners, a New York private equity firm, works to rebalance its business to meet less demand from young adults, price pressures and oversupply.
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Some of those Ste. Michelle brands have been getting marked down / closed out in my region.
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We had an exceptional boom due to covid and all the excess savings. Normalization had to come at some point. The culprit is not really the inflation but this normalization with the excess savings depleting and demand normalizing (but of course, inflation doesn’t help either, but is not as important in the fine wine market).
Your report shows it well: the 2023 DTC number is still 10% above the 2019 level (corresponding to a good 2.3% annual growth rate since 2019). The 30% jump in 2020 was the outlier. We have a similar picutre in so many other sectors: a not sustainable 20, 30, 50% growth rate in 2020/2021 and now a normalization back to real, reasonable levels.
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I was driving in a rural area with lousy reception, but thought I heard a story that Chateau Ste Michelle had cancelled a large number of their grape contracts with Washington growers.
Does anybody have any info about this? I know the market is tough, but this is a biggie. I think Ste Michelle is one of the ten biggest US producers.
Thanks in advance for any info.
Dan Kravitz
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Mods ( @ToddFrench @brigcampbell ) please merge with
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In CA not many years ago, big boys like KJ and Gallo pulled the same shit on growers. Not much a grower can do. Pretty sad.