By MARTHA WILLIAMS, US REAL ESTATE & CONSUMER REPORTER
California’s legendary wine industry is facing what insiders are calling a ‘Grapes of Wrath’ moment as layoffs spread, wineries shut down and tons of fruit is left rotting on the vine.
A toxic mix of tariffs, falling alcohol consumption and soaring costs of doing business in California is squeezing vineyards across the state.
Some winemakers say conditions have become so bad that harvesting grapes would actually cost more than the fruit is worth. Last fall, one California vineyard owner left around 50 tons of grapes to rot because processing them would have lost money.
California has one of the highest state income taxes in the US, as well as imposing high taxes on sales and property, which dramatically increase the cost of doing business in the state.
The latest blow came last week when Jackson Family Wines – the sixth largest wine producer in the United States – shut its Carneros Hill winery in Sonoma, with the loss of 13 jobs.
The company, which has 40 brands and is best known for its Kendall-Jackson Chardonnay, produces around six million cases of wine a year and operates more than 25 wineries in California. Jackson said the Carneros Hill facility had become ‘underutilized’ and production would be consolidated elsewhere.
The shutdown is just the latest sign of trouble sweeping California wine country. Already this year, America’s biggest wine makers have shut a string vineyards – or put them up for sale – while axing axe jobs.
Just days earlier, industry giant E & J Gallo Winery announced it would close a production facility in Napa Valley and cut 93 jobs across four sites.
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Wineries across California are the latest corner of America’s alcohol industry to be hit by a perfect storm of forces working against drinking culture (Pictured: Vineyards in Napa Valley)
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Tariffs are squeezing exports and pushing up the cost of imported ingredients. Running a business in California is becoming ever more complex and expensive. And, crucially, Americans are going teetotal at sobering rates
Gallo, which owns brands including Barefoot, Black Box and Dark Horse, also shut a winery in nearby San Luis Obispo last year too.
In February, Foley Family Wines shut the winemaking headquarters of historic Chalone Vineyard in Soledad, Monterey County.
The winery once produced the first American wine that famously picky chef Julia Child said she loved.
The same month, Trinchero Family Wine & Spirits – the third-largest wine company in the country, producing 17 million cases a year – has put two of its top vineyards up for sale.
Meanwhile, Australian-owned Treasury Wine Estates – the seventh-largest US wine producer – paused dividend payments to shareholders after making a big loss on its American business amid a 17 percent drop in sales over six months.
In January, Constellation Brands – America’s fifth-biggest wine company – laid off more than 200 workers at the historic Mission Bell Winery in Madera.
The same month, Jean-Charles Boisset, a major Napa Valley winery owner, shut two tasting rooms in the region.
For some growers the economics have become so grim that harvesting grapes no longer makes financial sense.