Wineries are facing financial turmoil due to extreme weather conditions and declining demand. Jordi Ustrell, interim CEO of Celler Devinssi, a small winery in Gratallops, Spain, anticipates a 50% reduction in their usual 15,000-bottle wine production due to the impact of climate change on grape growth. The International Organisation for Vine and Wine (OIV) reports that global wine production is expected to reach its lowest level since 1961, with Italy and Spain experiencing drops of 12% and 14%, respectively. Extreme weather events, including floods and wildfires, are affecting major wine-producing countries such as Australia, South Africa, and Chile.
The changing climate has both positive and negative effects on wine production. While Spain is grappling with drought and high temperatures, the United States is forecasted to see a 12% increase in output. Greg Jones, CEO of Abacela, notes that rising temperatures have turned Oregon into a top wine-producing region. In Spain, vineyards in Gratallops are forming associations to lobby for funding to improve water supplies for irrigation.
On the other hand, French winemakers are facing an oversupply issue, becoming the world’s largest wine producer in 2023. This surplus has led to a decline in prices, exacerbated by rising input costs due to inflation and high energy prices. French winemakers have protested against imports from Spain, emphasizing the need to prioritize local wines. Falling profits and increased production costs have pushed some wineries to sell their excess stock to distilleries for recycling.
Global wine consumption has dropped by about 6% between 2017 and 2022, according to OIV data, with people opting for beer, spirits, or abstaining from alcohol altogether. This trend, coupled with inflation and changing consumer habits, has led to a significant decline in wine consumption. The European Commission estimates even steeper declines in 2023, indicating a potential acceleration of the trend.
The combined pressures from climate change, oversupply, and changing consumer preferences have resulted in a challenging environment for wineries. Some vineyards, particularly in Bordeaux, are facing financial hardships, with a notable increase in winemakers selling their estates. Michael Baynes, co-founder of Vineyards-Bordeaux Christie’s International Real Estate, describes the situation as a “bloodbath,” highlighting the sad stories of multi-generational families losing their nurtured estates. The challenges began two decades ago when Bordeaux wines faced competition from New World wines, leading to the current crisis in the industry.
