California wine growers continue to pull vines, and a key measure of bulk wine supply has eased from a record high. But consumer sales are still falling, pointing to a market making more progress on supply than on demand toward a hoped recovery in the next few years.
Jeff O’Neill, founder and CEO of Marin County-based O’Neill Vintners & Distillers, told a packed session Tuesday at WineBusiness and CalCPA’s Wine Industry Financial Symposium in Napa that producers expanded for 4%–5% annual sales growth that never materialized. He expects the industry to recover at a smaller size to match 18% lower demand for wine in the past five years.
“We cannot cost-cut our way back to growth. We have to give consumers a reason to value what we do,” O’Neill said.
Analyses at the event fit with Silicon Valley Bank’s closely watched industry outlook released in January, which projected a “bumpy bottom” for U.S. wine demand in 2027–2028, followed by modest growth.
Turrentine Brokerage’s Audra Cooper told symposium-goers that vineyard cuts were helping bring supply into line, and her team of grape and bulk-wine dealers expected another eight to 12 months of work clearing aging excess wine.
Beverage alcohol consultant Danny Brager said sales trends were stabilizing below year-ago levels.
Also on Tuesday, Wine & Spirits Wholesalers of America’s SipSource service released data that showed U.S. wine volume sold by distributors to retailers, bars and restaurants fell 6.7% in the three months through September, while revenue fell 4.2%. Wines below $13 remained under pressure, and distribution losses weighed on sales.
Supply shrinks, surplus lingers
Cooper, a vice president at Turrentine, projected California’s bearing vineyard acreage would fall roughly a quarter from 2020 to 2027. Abandoned vineyards and reduced farming are complicating the estimate, she told the symposium audience.
The latest LandIQ tally of existing vineyards found 439,115 acres statewide as of Aug. 1, with 47,229 acres removed (nearly 10%) in the previous 12 months. That’s up from 38,000 acres found to be pulled out in the previous period.
In the North Coast, which includes two premium west Solano County appellations, the acreage removed over that period was more than 8,000 acres, or almost 6% of the total, according to the report. Napa County had 41,998 standing acres, with 2,944 acres removed (6.6% reduction); Sonoma County, 55,893 acres, 3,523 removed (5.9%); Lake County, 11,349 acres, 667 removed (5.6%); and Mendocino County, 15,986 acres, 811 (4.8%).
Cooper estimated the 2026 crush at about 2.3 million tons statewide, but the El Niño weather cycle could push up the size of the 2027 crop a bit. The 2025 crush weighed in at 2.62 million tons in the Golden State and 436,000 tons in the North Coast, each down just over 8% from 2024. The first official tally of this year’s crop is set for release early next year.
Bulk wine — excess production sitting in vintners’ tanks — remains a major obstacle to right-sizing supply. Turrentine had about 25 million gallons listed for sale, up from roughly 20 million a year earlier, Cooper said. Listings had fallen from a historic peak of about 33 million gallons during 2026.
Cooper said buyers showed little interest in bulk wine from the 2024 vintage or earlier.
“I’d love to say that we’re in a position where we see full market recovery, and that’s just simply not the case at the moment,” Cooper said.
O’Neill estimated California has 30% to 35% excess winery capacity. He said a 2.3 million-ton crush this year could yield less wine than the market was buying, while wineries would still have older inventory to work through.
Leading industry analyst Jon Moramarco in early October estimated California winery stocks at nearly 888 million gallons at the end of 2025, or 22.1 months’ worth of shipments, compared with a historical average of 18.5 months. His model showed California could return to that average by the end of 2028, assuming crushes averaging about 2.3 million tons a year statewide from 2026 through 2028. It assumed domestic shipments of California wine would fall 5% this year and 4% in each of the next two years.
Growth hides in the details
Brager identified gains in smaller packages, some lighter whites and selected premium wines.
Data from Moramarco’s MarketPour that Brager presented showed direct-to-consumer wine volume falling 8.8% in the 12 months through September, while revenue declined 1%. Wines priced at $100 or more per bottle gained 1.3% in volume and 9.3% in revenue.
Smaller packages also gained ground. NIQ data in Brager’s presentation showed U.S. retail wine sales in packages smaller than 750 milliliters rising 7.2% in dollars during the 52 weeks ended Oct. 3. Packages of 750 milliliters or larger fell 4.6%.
Kaleigh Theriault, director of thought leadership for NIQ’s beverage alcohol business, urged wineries to look beyond assumptions that Generation Z is responsible for wine’s troubles.
NIQ’s consumer analysis attributed 72% of the declines examined to fewer purchase occasions and 28% to fewer buyers. Higher spending per occasion provided a partial offset.
Theriault said younger adults still drink, but approach alcohol more intentionally. She urged producers to balance price and quality, recruit consumers through relevant experiences and give existing buyers reasons to return.
Lose the rule book
O’Neill urged his colleagues to rethink glassware rules and tasting-room jargon that have made wine needlessly complicated.
“Heritage is important, but it alone is not a business strategy,” he said.
Rather, O’Neill has found that leaning into sustainability and transparency, namely ingredient labeling, can build trust. All the roughly 125 growers supplying his company, representing about 15,000 vineyard acres, are certified sustainable.
O’Neill said regenerative farming initially costs more, but yields can improve after years of work. He encouraged growers to test it on a small block. About 4 million bottles across two company brands carry ingredient labels, he said, with broader adoption the goal.
O’Neill said wineries also compete with other beverages for the same customers.
“If we’re going to get ourselves out of this mess, we aren’t going to do it by simply making more wine,” he said.
Jeff Quackenbush joined North Bay Business Journal in May 1999. Reach him at jeff@nbbj.news or 707-521-4256.
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