(TDB) - There is a “growing mismatch” between supply and demand that is badly hampering the Californian wine industry, new analysis has claimed.

Bumper harvests and vineyard expansion across the state over the last three years has created a situation where those bulk producing areas that least require overstocked inventories are struggling to shift produce.

Similarly, because of changing consumer trends towards premium wines, the more esteemed regions that could do with more production aren’t expanding quick enough.

This worrying imbalance across the Californian wine industry will lead to an estimated 100,000 non-bearing acres of wine grapes coming into production over the next three years, as excess vineyards can’t be stripped back fast enough, despite producers’ best efforts.

However, in regions like Napa and Sonoma, political pressure against much-needed vineyard growth to keep up with rising demand is pushing up grape prices to worrying levels.

Entry-level excess

The findings were made in a Rabobank report on the state of the Californian industry, titled Too Much of a Good Thing.

It refers to figures from Allied Grape Growers (AGG) estimating that 20,000 acres of wine grapes have been removed from the more bulk-producing San Joaquin Valley since the 2014 harvest. “We expect the process of removals in that region to continue over the next three years,” the report says.

Citing a millennial shift to buying wine from premium, small-batch producers and a more competitive environment brought on by a strong dollar and new international trade agreements, there is an “excess grape supply capacity in some regions [such as the San Joaquin Valley] and continued tight supply in others”.

“The current context has created a challenging environment for many brand owners with brands in the lowest price segments, and also for growers in the San Joaquin Valley with uncontracted fruit.

“Brokers report extremely high levels of inventories available for sale, with very few interested buyers,” the report revealed.