About a year ago, one prominent Napa vintner told me, “A lot of brands are dead, but they don’t even know it right now.”
At that point, last spring, it was becoming clear that the American wine industry was facing a major reckoning. It just wasn’t clear how intense that reckoning would become.
One of the clearest ways to understand this moment for American wine is in looking at winery closures: For the first time in a generation, the number of U.S. wineries declined in 2024. The West Coast’s winery count dropped by 4.3%, according to Wine Business Analytics.
In the Bay Area, we began to see notable wineries announcing closures in the middle of last year (Edmunds St. John, Carlisle, Brendel, Tarpon, Sbragia). The first three months of 2025 have delivered even more fallen soldiers, notably Napa’s Newton Vineyards. A slate of others — Brian Arden, Arista — have sold off their facilities while hoping to keep the brands alive in a different form.
“It’s going to be a slow decline,” said Dale Stratton, managing director at Napa consulting firm Azur Associates. “The 20-year run that we had as a wine category was phenomenal. As all of that consumption growth was happening, infrastructure was growing along with it to support it. As we see consumption moderate, we’re going to see some of that infrastructure” — vineyards, production facilities, tasting rooms — “go away too.”
In other words, there are too many wineries in the U.S. for the amount of wine that Americans currently want to drink. And just as vineyards across California are now being ripped out in an attempt to achieve market equilibrium, many wine producers will need to shut their doors too.
Some distressed wineries won’t close; they’ll sell. There’s been plenty of merger-and-acquisition activity in the wine industry in the past year, though Azur estimates that the total value of it, at $2.6 billion, was down in 2024 from the previous year’s $3 billion. Some of that was skewed, Stratton said, by the extremely discounted assets of Vintage Wine Estates, a major conglomerate that filed for bankruptcy in the summer.
More from Esther Mobley
Stratton expects to see a flurry of acquisitions in the coming year. He addressed the widely circulating rumor that Constellation, the country’s fifth-largest wine company, is trying to sell off all of its wine brands, which include Robert Mondavi, the Prisoner, Woodbridge and Domaine Curry, as reported by leading wine trade publication Wine Business. If true, Stratton said, it wouldn’t surprise him: “When you look at financial results, their beer business seems to be in a much stronger position,” he said. (Constellation sells Modelo and Corona.) “There have been analysts suggesting that maybe the wine business isn’t a great place for Constellation.”
Beer now represents nearly 82% of Constellation’s sales, according to the company’s annual earnings report, compared with wine’s 15.6%, a divide that has widened: Beer sales grew by 3% year-over-year in the third quarter of last year, while wine dropped by 14%. Strong as the beer business may have looked, however, Constellation was just dealt a blow by President Donald Trump’s tariff announcement. All of its beer that is produced in Mexico will now be subject to a 25% tax.
There is historical precedent for a diversified beverage company exiting the wine business. Coca-Cola and Nestle both invested in wine in the 1970s when they acquired wineries including Napa’s Sterling and Beringer, respectively. Both got out of wine in the following decades. Diageo, once a formidable wine corporation, sold off all of its wine brands in 2016 to focus on spirits.
How much worse can it get? “I would say that we seem to have leveled out in negative territory,” said Stratton. “As long as conditions stay where they are, we’ll continue to see activity in the M&A market and, more than likely, some people just shuttering facilities.”
You’re reading the Drinking with Esther newsletter. Reach Esther Mobley: emobley@sfchronicle.com
March 6, 2025