Ted, thank you. Your pieces always leave me thinking long after I’ve finished reading them.
As I read this one, I found myself wondering if it’s less a story about Napa than about a recurring pattern in mature industries. Capital naturally flows toward success, capacity expands, differentiation narrows, costs continue to rise, and eventually everyone finds themselves competing for essentially the same premium customer.
Having spent decades in automotive retail, I see striking parallels: escalating facility requirements, ever-expanding luxury model lineups, and now an astonishing number of vehicles priced between $75,000 and $100,000—all competing for essentially the same affluent buyer. Luxury has become crowded. Different product, same economics.
Perhaps the deeper lesson is that markets have a remarkable ability to overestimate the depth of premium demand. Eventually, reality reasserts itself.
As always, thank you for sharing your wisdom. You continue to challenge me to rethink my assumptions.
Thanks Ted for another well written dose of reality. Though focused on Napa it certainly applies over the Mayacamas here in Sonoma. With the clarity of hindsight it is amazing that many believed "the party would never end". Moving to Dry Creek Valley in the early 1980's there were half dozen wineries in the Valley. When I took over the little red barn on Lytton Springs Rd and began making Peterson Wines in 1987 there were (about) 16 wineries. Currently there are over 70 wineries competing for attention and customers. I go back to hearing Leon Adams (journalist co-founder of the California Wine Institute) giving a talk where he said that if we want a true wine and food culture in the US we need to produce and sell decent bottles of wine that don't cost much more than a gallon of milk. He also said that the wine market could be compared to a pyramid. That if you wanted more room at the top you first need to increase the size of the base. We see what happened to that idea over the past 40 years.
Real data is needed, not just supposition data. How many wineries see revenue declining and by how much? How much are margins declining? Are wineries going out of business at a higher rate? I think the idea has merit and is probable.
@Ted Hall this is written with such precision! 🎯🎯🎯Sobering to say the least.
Ted, thank you. Your pieces always leave me thinking long after I’ve finished reading them.
As I read this one, I found myself wondering if it’s less a story about Napa than about a recurring pattern in mature industries. Capital naturally flows toward success, capacity expands, differentiation narrows, costs continue to rise, and eventually everyone finds themselves competing for essentially the same premium customer.
Having spent decades in automotive retail, I see striking parallels: escalating facility requirements, ever-expanding luxury model lineups, and now an astonishing number of vehicles priced between $75,000 and $100,000—all competing for essentially the same affluent buyer. Luxury has become crowded. Different product, same economics.
Perhaps the deeper lesson is that markets have a remarkable ability to overestimate the depth of premium demand. Eventually, reality reasserts itself.
As always, thank you for sharing your wisdom. You continue to challenge me to rethink my assumptions.
Thanks Ted for another well written dose of reality. Though focused on Napa it certainly applies over the Mayacamas here in Sonoma. With the clarity of hindsight it is amazing that many believed "the party would never end". Moving to Dry Creek Valley in the early 1980's there were half dozen wineries in the Valley. When I took over the little red barn on Lytton Springs Rd and began making Peterson Wines in 1987 there were (about) 16 wineries. Currently there are over 70 wineries competing for attention and customers. I go back to hearing Leon Adams (journalist co-founder of the California Wine Institute) giving a talk where he said that if we want a true wine and food culture in the US we need to produce and sell decent bottles of wine that don't cost much more than a gallon of milk. He also said that the wine market could be compared to a pyramid. That if you wanted more room at the top you first need to increase the size of the base. We see what happened to that idea over the past 40 years.
We have an inverted pyramid: crowded with players at the top, which makes the structure very unstable.
Real data is needed, not just supposition data. How many wineries see revenue declining and by how much? How much are margins declining? Are wineries going out of business at a higher rate? I think the idea has merit and is probable.