Californian grape growers could suffer $437m losses

Wine grape growers in California could stand to lose US$437 million as a result of Covid-19, according to analysis which has examined the impact of the fall in on-premise sales.

According to a report by Jon Moramarco, managing partner of consulting firm bw166 and editor of the Gomberg-Fredrikson report, volume sales of Californian wine from March 2020 to February 2021 are expected to fall by 9.21m nine-litre cases, equating to a loss of $437m for growers.

Moramarco said that off-premise retail and winery cellar door and online sales will not be able to make up for on-premise losses.

His report found that Covid-19 had slowed down sales via certain channels to the extent that certain wines will not sell in their “expected timeframe”. This slowing will result in reduced volumes of grapes purchased from growers this year.

This is compounded by issues relating to excess inventory. Moramarco stated that, at the end of last year, the industry had 10% excess stock, for the most part due to a large 2018 grape crop. This in turn will also lead to reduced sales, with growers set to experience losses of $395m. The total economic impact for growers between March this year and next February could amount to losses of $832m, the report found.

President of the California Association of Winegrape Growers (CAWG), John Aguirre, said: “Moramarco’s analysis makes clear what many California growers already know: growers will experience significant economic hardship following this year’s grape harvest. California growers are accustomed to cyclical markets, but the Covid-19 pandemic threatens to turn a down year into a financial catastrophe for many of them.”

Santa Barbara County grower and CAWG chair Mike Testa said that he “never seen so much uncertainty in the marketplace”.

He continued: “Growers are struggling to find a home for their fruit, vineyard acres are being pulled out and our winery customers are experiencing extraordinary challenges. For many growers, getting paid this year is no sure thing.

“It is essential that the U.S. Department of Agriculture recognizes the harm Covid-19 has caused our markets, and wine grape growers need to be included in the next round of financial assistance for agricultural producers.”

The latest Covid-19 impact report from industry body WineAmerica supported the findings. It noted that in May, the average winery in the US lost 70% of its tasting room sales revenue. While direct-to-consumer sales (internet) were up by 66%, “they were from a much smaller base and so didn’t make up of the on-site loss”.

The report noted that on average, wineries lost $30,416, a combination of reduced sales and additional expenses involved in reopening. This figure is expected to rise to $35,490 by the end of June if the situation persists. Wineries predict that it will take six months to be back to normal, pre-Covid-19 operations.