North Coast wineries fight for survival amid the coronavirus pandemic
The coronavirus pandemic has disrupted the Sonoma County wine industry like no other event since Prohibition. More than the effects of drought or wildfires. More than a lackluster grape harvest. Even worse than President Donald Trump’s international trade wars, particularly with China, which has crushed U.S. wine exports to that nation as the Chinese retaliated with tariffs nearly doubling the cost of a bottle of California wine.
Since March, the most visible debilitating effect has been the closures of about 300 area wine tasting rooms that typically provide a steady cash flow for wineries and a big marketing draw. There’s also far fewer visitors driving through the scenic Dry Creek Valley area outside Healdsburg, where at this time of the year usually would be teeming with people stopping at the 60 wineries to taste favorite vintages.
The industry’s pain has been compounded by the shutdown of bars and restaurants across the county and country, which feature the premium wines produced in this region. The pandemic-induced economic plunge occurred at the worst possible time for the wine sector. It already had been grappling with flat retail sales, a glut of grapes and an excess supply of bulk wines.
The calamitous effects of the virus ensure there will be a contraction in the domestic wine industry, in which California and Sonoma County are big players, vintners said. The sector contributes $57.6 billion to the state economy, according to industry trade group Wine Institute. The U.S. has more than 10,000 wineries, 450 of them located in this county, producing $23.5 billion in total annual sales. Not all will survive beyond COVID-19, wine company executives and industry analysts said.
“It’s a very different world, no question about it,” said Pat Roney, chief executive officer of Vintage Wine Estates of Santa Rosa, which has a portfolio including B.R. Cohn Winery in Glen Ellen, Sonoma Coast Vineyards in Bodega Bay and Cosentino Winery in Napa.
In the worst-case scenario, the domestic wine industry could lose up to $6 billion over the next year, said winery consultant Jon Moramarco, noting California produces 81% of all U.S. wine. Half of that loss would be the diluted tasting room business, which is about 80% of overall annual revenue for all but the top tier of wineries that generate a large portion of their money from retail sales. Another $2.5 billion would be lost from sales to restaurants, hotels and other customers who buy wine at winery properties. The average winery earned about 15% of its revenue last year from such on-premises sales mainly in tasting rooms that taken together tallied $3 billion, according to the most recent survey by Silicon Valley Bank’s wine division.
Indeed, the wine industry is the main driver of the Sonoma County economy, employing an estimated 55,000 people before the coronavirus arrived nearly three months ago and generating billions of dollars a year in economic impact through tourism and many small and large events — many during the summer months and canceled this year. In April, the county’s agriculture sector shed 5,000 jobs, and many of those positions likely were held by workers at wineries.
The overriding question is how many area wineries will make necessary adjustments to make it through the pandemic?
“People have to put back on their entrepreneurial hats and think how do I do business going forward, because it’s going to be different than what I did a year ago,” said Moramarco, the managing partner of bw166, a winery consulting firm in Santa Rosa.