Menu icon

The Depressed California Bulk Wine Market May Get Some Relief from Global Developments Starting in Q2 2024

By Sandy Mickas, Steve Katz (Host)
Home / Perspectives / The Depressed California Bulk Wine Market May Get Some Relief from Global Developments Starting i...
Wine Pod 4.19.24

On this podcast, we discuss the bulk wine market’s continued struggle in California and how a recent announcement by China could bring a positive impact to west coast producers here in the U.S.



Steve Katz  00:16

Hi, everybody, and thanks for taking time out of your busy schedule to listen in on our Hilco Global Smarter Perspectives podcast. I’m your host, Steve Katz. And if this is your first time with us, welcome, we’re glad you could tune in. Today we’re going to be talking again about one of my very favorite topics, personally, wine. The wine market. And we’ll be getting some insight and development specifically in the California bulk wine market from our friend Sandy Mickas, who serves as Valuation Director for Hilco Global and focuses on the wine market. And we’ve spoken with Sandy before, Sandy, welcome back to the podcast.


Sandy Mickas  00:55

Thanks, Steve, great to be back.


Steve Katz  00:57

Well, we are glad to have you on. Listen to get started, maybe we can talk a little bit about what you’ve been seeing over the past year or so since we last discussed the market.


Sandy Mickas  01:07

Sure, I’m happy to. So the California bulk wine market has continued to struggle over the last couple of years. And it doesn’t really seem that that’s going to be changing anytime soon, just based on, you know, people in the industry and just the market trends that we’re seeing currently. So just as an example Turrentine Brokerage was one of the big California bulk wine brokers, they reported that last year, around this time, they had listed about 19 million gallons of bulk wine for sale. And this year, it’s more around 24 million gallons. So, you know, just by looking at those trends that they’re seeing, there’s more bulk wine for sale. They also report that there are fewer buyers currently than there were even back in 2018. So they’re seeing less and less activity just with active buyers. I think that’s attributed to a few things. I think some wineries who may be historically used to have to purchase bulk wine to supplement their, you know, stock of bulk wine aren’t doing that anymore, because as consumer demand for wine has dropped. The wineries, some have started bottling less, so they have more bulk wine. It’s just sort of a trend that’s happened. And so, you know, they’re thinking that this is going to continue, they have said in you know, recent, you know, the last month or so in March, there were reports that some varietals in California were picking up specifically more than whites like Chardonnay or Sauvignon Blanc.


Steve Katz  03:00



Sandy Mickas  03:00

but not really as much on the reds or other and it’s really more region specific. So they’re not really seeing what they would like to see. They think the increase, you know, they have more older bulk wine than they historically have carried. And they think once the 2023 bulk wines really start becoming available, then they’re expecting that to even grow further. So there’s a little concern about the amount of wine and you know, the talk in the industry is that if the market was more active, they believe that there would be even more bulk wine for sale. But many winemakers are holding back listing because, you know, it’s just driving the pricing down. And so they really kind of, if you depending on who you speak to some people think it’s actually worse than than what we see. So it’s really interesting to follow.


Steve Katz  03:59

Yeah, it is interesting. Okay, good. Good info to get us started. Sandy, what about the harvests this past year? Are like our says we expect them coming up and also the pricing what you know, what are we looking at in terms of pricing now?


Sandy Mickas  04:21

So the 2023 crop during the fall harvest period was estimated to be just under 4 million tons. So I think 3.67 was the exact number 3.67 million tons were harvested. However, generally over you know, if you speak to the growers, and you know, what we’ve seen is that if they had actually harvested all of the grapes that were available, it would have been over 4 million tons but many other growers are not even harvesting all of their crops because there’s no market for them. And so because there’s so much excess bulk wine, many of the wineries have cut back on their grape purchases, because they just don’t need the volume. And so it’s trickling down as you can see to even the growers who are now having to walk away from some of the crop because there’s no market, so they’re just not harvesting it. And the same thing is actually happening now, in the spring, where some of the growers are not even pruning all of the vineyards because they don’t believe there’s going to be a market for it. So they don’t want to spend the labor to do that pruning. And so it’s definitely having an impact, you know, all the way down. And as far as pricing, you know, it’s interesting, because many of the wineries are in some are long term contracts with the growers. And historically, the way it’s worked is every year, just like you would imagine, there’s sort of an escalator in the contract. So every year, the grape price will go up by some percentage. And so we’ve seen the cost going up the cost of grapes, however, that’s not really indicative of, you know, a supply and demand situation, because then when you look on the spot market for grapes, people who are just trying to buy, you know, at the last minute who are not contracted, those prices are down considerably. And so I think it’s interesting to see the dynamic that’s happening. And I think that’s why some of the wineries are starting to pull back from the growers, because I think that, you know, they know, they could probably get better pricing. And so seems like there’s going to be a lot of negotiating going on in 2024. Because there’s a lot up in the air, and even the growers, you know, aren’t aren’t really sure what’s going to happen. So.


Steve Katz  06:54

Yeah, that’s great, great, great insights, kind of reading between the lines there. That’s what you don’t, you know, you don’t necessarily pick that up unless you’re close to the industry as you are. So that’s really, really great info. I guess, kind of wondering this, you know, is this something that’s unique to California? Or is it a broader Pacific Northwest phenomenon right now? What’s, what’s the situation there?


Sandy Mickas  07:17

Well, it’s, you know, frankly, it’s a global issue. But specifically, I think everyone is seeing it globally, but the Pacific Northwest is unique in that they have one company, the Ste. Michelle Wine Estates, who’s far and away the biggest entity in Washington or in the Pacific Northwest. And they recently told their growers that they were going to cut their purchasing by 40%, which is huge, obviously. And so what that means is, they’re gonna go from you growing, you know, and they’re taking approximately 35,000 acres of vineyards down to about 18,000, over a period of, say, 10 years, they’ve already been reducing it slowly over the last few years, but now they’re doing a drastic, you know, 40% cut. So that’s just shocking everybody. I mean, I’ve spoken to many people in that region. And it’s, you know, everyone’s very, very concerned.


Steve Katz  08:27

Yeah. Understandably.


Sandy Mickas  08:28

Ste. Michelle was using 70% of the state’s entire grape acreage, I’ll say, and now they’re going to be down to approximately 30%. And so many of those growers are likely going to be out of business. Some are not even, you know, replanting, it’s, it’s definitely been a shock. Now, for other people, other wineries, they’re obviously in a great position to start negotiating pricing. And so it’s going to be interesting to see how that plays out. Given that this is really going to be the first year, that whole situation is going to be in effect with a 40% reduction. So it’s concerning. Yeah, a lot of people up there.


Steve Katz  09:12

It sounds like it would be concerning. Certainly, if I was in industry, I would be concerned. What about, so you mentioned, you know, the global situation, you know, it’s it’s, it isn’t specific to California, it’s not even just specific to the North, you know, Northwest, it’s more, you know, it’s more global. What about are there other trends in the bulk wine market, that are happening around the world that are really, you know, driving this, you know, specifically?


Sandy Mickas  09:41

The situation in the Northwest is being impacted by a situation in Australia. There are other regions, obviously, that are impacted globally. I mean, Italy’s being impacted France, Argentina, all of South America, everybody. But in Australia, it’s been sort of a unique situation because back in 2020, Australia was exporting a lot of bulk wine into China. And in 2020, the Chinese government put a tariff on bulk wine imported from Australia. And it basically, you know, just almost stopped all of the export from Australia into China. So just as a, to give an idea, the export from Australia to China used to be about $790 million dollars. And now, it’s about 54 million. So that’s been a huge issue. Now, the flip side of that is, just about a week ago, the Chinese government lifted that tariff. And so, you know, nobody really knows what’s going to happen. Now China has seen just like the US a decrease in consumption of wine. And you know, they have other struggles in the wine space. So, nobody really knows how this is all going to settle out now that Australia will be able to export into China. But in the meantime, what was happening also, was Australia was exporting, even to the US into the Pacific Northwest, and that was really hurting the bulk market up there. Because they were doing it so cheap. So you know, it’s interesting, because this is just now happening with the tariff being lifted. So we’ll have to kind of stay tuned to see how it plays out in the next, you know, six months to a year.


Steve Katz  11:34

Yeah, hot off the presses. Alright. Well, we’ll know in our next conversation, and we’ll talk about what that what that yielded. I guess. Why did I use the word yield? And I guess, you know, I think of crops and yield, you use used grounds, but it will be is what would what results from that. All right. And then I guess, just to wrap us up, this is, by the way, great information and super relevant, especially given the timing of the word from China on the lifting of the tariffs. But for the benefit of lenders, who are you know, either already involved with businesses that are wine producers in the Northwest, or elsewhere, or those who could beginning about in the in the market moving ahead. What valuation focus diligence thoughts or recommendations, would you think are critical to share, given what we talked about today?


Sandy Mickas  12:27

Well, I would say, any lender in the bulk wine space should have an understanding that any liquidation scenario that you may have had, even a couple of years ago, is probably not relevant anymore. I think the liquidations would take longer, and they are going to net less. Obviously, it depends on the vintage and varietal and all that. And, you know, there are a lot of factors, obviously, however, just the market in general is down. And so, you know, in 2020, when we saw the big fires in Napa, and people were just frantically buying bulk wine, wherever they could get it, you know, that immediately after that there was, you know, a big hole in the market, I mean, there just wasn’t a lot of wine. And so appraisals that were done back, then some lenders, you know, maybe haven’t updated. And so I think it’s important for them to realize that, you know, those market conditions are not the case anymore. And so, you know, that’s one thing that they would want to understand. And also, you know, the costing issue that we were talking about, we’ve seen some estate and vineyards, where they’re growing and producing all of their bulk wine in house, you know, their costs are up, and maybe you know, they’re not harvesting as much. So what that’s doing is driving up the cost of their bulk wine. And so because the demand is down, they can’t really increase their price and the finished wine at the same rate, that their costs are going up for the grapes and the harvesting. So, you know, there could be reductions in margin on the finish good side, you know, related to this. And so I think it’s important for lenders to really watch that we’ve seen some entities from little wineries who their costs have gone up so much and and when we ask them, well are you going to raise your price that much? Because can your you know, will your customer base absorb that kind of increase? And they say no, and they essentially say they have to sell it at a loss this year, or like one year because they have no choice. So I think it’s important for lenders to understand that side of it as well.


Steve Katz  14:49

Yeah, tough situation, obviously for for some in the market right now. Well, listen, Sandy. Thanks so much. Very informative, as usual. For listeners who might have follow up questions, what’s the best way to get in touch with you?


Sandy Mickas  15:02

Yeah, they can feel free to reach out to me at anytime my email is S M I C K A S @ And my phone number is 626-622-3237. Or I can also be reached on LinkedIn.


Steve Katz  15:27

All right, perfect. Again, appreciate it, Sandy and listeners. As always, we hope that this Smarter Perspective podcast provided you with at least one key takeaway that you can put to good use in your business or share with a colleague or client to help make them that much more successful moving forward. And remember, you can always check out more great podcasts and articles featuring timely insights from Hilco experts like Sandy and forward slash Smarter dash Perspectives. Until next time for Hilco Global, I’m Steve Katz.

Headshot Sandy.Mickas1

Sandy Mickas

Valuation Director
Hilco Valuation Services phone vcard linkedin

Let’s connect and work together

If your business or a business in your portfolio is facing a current challenge, our team can provide a qualified perspective and experience-based guidance toward an optimized resolution.
Contact us