California Wine Market Update for Asset Based Lenders: Mid-Year 2025

September 2025

Market Observations

The California wine industry includes a total of 4,608 wine producers as well as 570,000 acres of vineyards, generating close to $84.51 billion in total economic activity.  This industry also serves as a major tourists attraction, with California’s “wine country” regions generating 42.27 million tourist visits and $8.07 billion in annual tourism expenditures, benefiting local economies and tax bases.

But even with these impressive totals, the California wine industry is navigating uncertain times in all aspects including, but not limited to, wine consumption, the bulk wine market, vineyard acreage, and the projected 2025 harvest.  This uncertainty has lead many winemakers to be conservative with potential grape and bulk wine purchases.  Due to the persistent oversupply of wine, many vineyard acres have been removed or unfarmed and bulk wine has consistently been sold at lower-than-average prices.

Wine that is in the process of aging, either in a barrel or tank, or fully aged wine that is stored in tanks, is generally referred to as bulk wine.  The bulk wine market varies greatly in condition at any point in time, given wines in this category can range from recently produced and just starting the aging process to ready for bottling.

As discussed in our previous California bulk wine article, the bulk wine market has continued to struggle.  As previously reported, as of February 2024, Turrentine Brokerage reported that nearly 24 million gallons were actively for sale statewide.  As of June 2025, the active bulk gallons are 24.8 million, down from 26.8 million in early February 2025.  Although relatively stabilized, the volume of bulk wine currently for sale is high and above average compared to prior years.

The oversupply of bulk wine has been caused by a continued decrease in wine consumption by consumers. Competition from spirits, health concerns, and other available ready-to-drink options have all factored into the wine consumption decrease, illustrated below.

The industry is currently in the process of a demand correction which will take several years to accomplish.  As shown in the chart below, the last market correction took place from approximately 1986 to 1994.  Although the most current data is not yet available, it is anticipated that the downward trajectory has continued through 2024 and will continue into 2025, but likely at a lesser pace.

To further add to the uncertainty in the California wine market, on June 2, 2025, Republic National Distributing Company (RNDC) announced their decision to cease operations in California by September 2, 2025.  As the second-largest alcohol wholesaler in the United States, RNDC’s exit will leave a significant gap for numerous wineries, given California’s strict regulations that require wineries to partner with wholesalers for retail and restaurant sales.

This announcement shocked many in the industry given RNDC’s substantial market presence, with estimated sales of $12.2 billion for 2024 and a 16.9% share of the US wholesale market. For comparison, the bottom 300 wine and spirits wholesalers are projected to account for only $13.4 billion in sales with an 18.5% market share. RNDC had previously strengthened its position in California by acquiring Young’s Market in November 2022, the state’s largest wholesaler.

Lender Guidance

Lenders should be aware of the ongoing bulk market decline and understand that liquidations in this space may take longer than anticipated and may not yield the same returns as they might have even one year ago. In addition, they should monitor inventory levels of cased wine and gross margins, as excess cased wine may prompt discounting, leading to a decline in gross margin. They should also watch for other warning signs such as negative cash flow despite revenue growth, deteriorating vineyard yields, and loss of key distribution relationships.

Lenders would also be well advised to take note of the trend of strong vineyards and wine brands changing hands, as cited by Silicon Valley Bank (SVB) in its State of the US Wine Industry 2025 report, and expect that trend to continue. More retirement-aged owners will continue to look for exits in 2025 as part of another bubble. Importantly, however, smaller average-size wineries are likely to have a more challenging time identifying interested buyers at previously seen exit prices.

Additionally, it is important to be properly informed regarding the other unique risks and dynamics of this highly seasonal, capital-intensive, and fragmented industry. The long production cycle, aging inventory, and dependence on agricultural conditions each create complex borrowing base management challenges. Risks such as wildfires, droughts, labor shortages, shifting consumer preferences, and market oversupply can also work to quickly undermine a borrower’s viability.

To protect their interests, ABLs should plan to conduct frequent inventory appraisals that account for aging wine and market conditions, recalibrate borrowing bases dynamically, and implement strong covenants tied to liquidity, inventory turns, and sales trends. Ongoing field exams, detailed reporting requirements, and proactive borrower engagement can help lenders spot trouble early and work collaboratively with borrowers to right-size operations, improve cash flow, and shift toward higher-margin channels like direct-to-consumer when appropriate. In high-risk areas, lenders should also consider steps such as securing liens on vineyards, trademarks, and customer lists. With this in mind, we encourage you to reach out to our highly experienced team today to discuss current challenges with your business or a business in your portfolio.