California's Wine Industry Is in Crisis

The sun is out and it's warming John Valletto's vineyard in Sonoma County, California. Rows and rows of Pinot grapes glint on the vine.

They're destined to be pressed, bottled, and uncorked at holiday parties or sipped after a toast.

What is your favorite wine? Well, you know,

I have three favorites. So if it's a warm day, it's our Rosé of Pinot Noirs.

On a nice afternoon, if we're having a nice steak or something, a great bottle of our 18-barrel Pinot.

And then if it's just a gentle afternoon, it would be our Teresa Chardonnay. It's making me thirsty, John.
It's making me want to grab a glass in the middle of my workday. Probably not a great idea.

John is a second generation Sonoma farmer. He planted his first wine grapes in 1995.

Today, he bottles his own wine and also sells a lot of his grapes to other wineries.

Well, on a harvest day, you would find, you'd see a pretty amazing site.

We have multiple crews and they're picking and sorting the grapes and bringing them in so we can load them on the trucks, get them to the winery before it gets warm. Just a wonderful thing.

For years, John's wine business, like the California wine industry more broadly, was a success story.

Americans couldn't get enough of the Pinots, the Zinfandels, and the Chardonnays that Sonoma is known for.

It's just a very special place

for us to live here, raise our children here, and also be able to grow wine grapes and make wine.

And, you know, our philosophy is to share wine with family and friends over a great meal and make new friends.

That's what Sonoma County is.

But this year, Sonoma County, along with the rest of California's renowned wine region, is drowning in troubles, from political pressure to cultural trends to the weather.

For John, it has meant the worst year he's had in a quarter century, with many of his grapes going unsold. He stands to lose millions.

As we headed into 2025, we had about 25% of our grapes that were not contracted.

And that was the first time in 25 years that that happened. Oh, wow.
And there's many other growers with the same pain, unfortunately.

That pain is amounting to the worst period the California wine industry has faced since Prohibition. As John put it: too much wine, not enough drinkers.

Welcome to The Journal, our show about money, business, and power. I'm Jessica Mendoza.
It's Thursday, December 4th.

Coming up on the show, why the cradle of American wine is in crisis.

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The wine we make the show from the farming company to the wineries. Got it.
Okay.

California wine accounts for roughly eight of every 10 bottles made in the U.S.

And back in August, just as the harvest was starting, our colleague Laura Cooper found herself in the middle of a vineyard in Sonoma County.

I haven't seen any

of these grapes. Can I take one?

There, she tasted Chardonnay grapes, warmed by the sun. Try to find a little

more yellow one.

It was probably the most beautiful business trip I've ever taken. Truly.
You know, I was in pickup trucks.

I was being dropped off in the middle of fields to see the grapes that weren't sold, to eat them off the vine. Wow.
Yeah, I wouldn't try that.

More translucent.

You're right. It tastes different.
Sweeter. Sweeter.

Beautiful, beautiful weather, blue skies, all this beautiful wine, and a lot of it was grapes that were going to die.

That's because beneath all that beauty and abundance is an industry in panic.

Why? Why did you make this trip to Sonoma? I went to Sonoma with the idea that I really wanted to tell the story of how winemakers were pivoting.

But what I really found was kind of a story of survival, people wanting to break even, people wanting to really just

make it through this year and figure out the next harvest. Just four years ago in 2021, The California wine industry made an estimated $53.5 billion in retail sales.

It was the culmination of America's decades-long love affair with wine. There are two moments in time that the folks in Sonoma pointed out as being really important to their industry.

The first was the French paradox. The French diet, the paradox, has begun to intrigue foreign researchers.

Which was something that was aired on 60 Minutes in the early 90s that essentially implied that drinking wine could be healthy.

There has been for years the belief by doctors in many countries that alcohol, in particular red wine, reduces the risk of heart disease. So people took that as an opportunity to buy more wine.

And then also on top of that, in 2004, there was this movie called Sideways. Yes, Paul Jamari, two buddies road tripping through wine country.
Yes, exactly.

First thing, hold the glass up and examine the wine against the light. You're looking for color and clarity.
Just get a sense of it.

But that really helped bring California wine country into the conversation. It became more of a tourist destination, like California as a whole.

California wine sales stayed pretty strong through the next couple of decades and hit a peak early in the pandemic when a lot more people were drinking at home.

But then after that knockout year of 2021, the buzz faded. The hangover hit.

It started the following year. 2022 saw Americans buying less wine than in 2021, according to an industry report card.
The demand was shrinking, but the wine supply wasn't.

It really became a supply-demand imbalance. The sales had dropped, people were drinking less, and there were all these grapes and really nowhere for them to go.

Vines take years to produce usable fruit, meaning growers often rely on old demand to forecast how much to plant. In this case, the industry was gearing up for a boom that was already over.

These are wine grape growers. They're farmers first.
This is a crop that you need to really nurture. It's not like a spirit that you can throw in a barrel and it stays there for seven years.

There's it's high intensity. So if you're a farmer and you're seeing that their demand is skyrocketing, in a couple years, your wine grapes will be ready, not immediately.

So we're also seeing like the tale of people seeing that demand and trying to meet the demand, which no longer exists.

Why did wine demand start falling off? So how I would describe it is honestly the perfect storm.

So, a lot of things have really impacted alcohol sales generally.

You know, mock tales, people wanting to drink less for health reasons, and also Gen Z, though a lot of them aren't legal drinking age yet, the ones that are, aren't embracing alcohol in the way that, you know, maybe millennials had, for instance.

Is it even cool to drink alcohol anymore? Now it's cringe. Why am I doing this?

So at the end of the day, they're choosing things like THC beverages or they're choosing cannabis or they're being really specific about what they do drink when they drink.

Science has changed a lot since 60 Minutes aired that segment on the French paradox. Research now points in the opposite direction.
Even moderate alcohol consumption is a health risk.

And then, This year, more problems.

In response to U.S. tariffs and President Trump's comments towards Canada, sellers there pulled American booze off the shelves.

That was a big blow to growers because Canada is the California wine industry's most lucrative export market.

Really, what's happening now is that Canada is refusing in most provinces to stock American wine, spirits, etc. California wines, any U.S.
ready-to-drink cocktails, gone from the shelves.

That's 3,600 products from 35 U.S. states no longer available.
So that really just like like, A, closed off the market. You can't export more wine.
B, all the wine that you had there is not for sale.

It's being held in like wherever,

and it's not being sold. So that source of income, if you had put your eggs in that basket, is completely not an option now.

U.S. wine exports to Canada dropped 96% in the second quarter of this year, which really hurt farmers.
Farmers like John Belletto, who we heard from earlier. It's hard.

It's hard, but we've got to make decisions and sometimes hard decisions.

But we're going to be a survivor. It's a lot of sleepless nights right now, just

trying to figure out things of what we're going to do.

After the break, the drastic measures farmers are taking to save themselves.

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John Beletto was feeling desperate.

In a cruel twist, Sonoma had just experienced a stretch of incredible weather, giving growers like him a glut of perfect grapes this harvest season.

In another year, this would have been great.

But major customers had stopped renewing contracts he'd relied on for decades. Fewer people were drinking.
So instead of a banner year, John couldn't sell enough to other wineries.

He says he could lose more than $3 million in sales compared to last year.

A lot of things went through our mind because we couldn't really believe that these big wineries that we've been doing business with for 25 years are now not re-signing the grapes.

These are big, big wineries that control maybe 10% of the wine that goes on restaurant tables and things like that.

And it's not like John can just hold on to the extra wine and store it away. Many of Sonoma's varietals are made to be enjoyed young, not aged for a long time.
And storage is expensive.

This year, it hasn't made economic sense to spend money on processing his grapes. So John made a choice that goes against every instinct he has as a farmer.
Letting the fruit die on the vine.

You grow grapes all year, you beautiful crop on this vine. It's just gorgeous.
And then to see them not being harvested, that's, it's just very upsetting.

But as an economic thing, you can't bring them all in because then you have to spend more money to process them.

But just this type of loss that you're talking about, over 3 million, what would that that mean for your business? Yeah, it's pretty devastating. We've had to make some changes.

We haven't really had to do major layoffs, but we had to just do hourlies, cutbacks, and different things like that. Part of John's backup plan involves bulk wine.

That's the kind of wine you see in stores like Target, Trader Joe's, and Costco. It would help John cut his losses.
But bulk wine also sells more cheaply, which would mean thinner margins.

So what happens there if you have a major or or big inventory of altcoin, you're going to have to be discounting it greatly in order to sell it.

In the meantime, John and other growers are chasing revenue anywhere they can find it. Some are selling discounted grapes on Facebook Marketplace.

Others are leaning into other crops like apples or even selling off parcels of their land.

John's strategy is to transform his vineyard into more of a destination, offering experiences beyond wine.

He's adding lawn games, bringing in musicians, and setting up tram tours, and hopefully bringing back younger legal age drinkers.

We have a regulation baseball field, Field of Dreams here at the winery.

And then along with our hospitality center, we have a beautiful patio for concerts and things like that that we're doing now.

So we're doing all these different things to try to bring consumers and new consumers here to the winery.

Once people taste our wines, they always come back for more.

So

that's what we're hoping.

All of this is triage. It keeps the business breathing.
But John's also considering a more extreme measure, one that's maybe the most emotional for him, tearing out his vines.

Yeah, it's every vine for us is like part of the family. So on a personal level,

it's devastation.

But again,

you have to put that aside because we have to run the business. So that's going to happen.
That's going to happen more and more on

making those tough decisions and pulling out some vines. This has to happen.

For a lot of the wine growers that I spoke to, they were either pulling up the vines because they're taking this as an opportunity to reset.

You know, so maybe you pull up the vines and next year you replant with something that you think will sell better in a couple years when they'll be ready, a different varietal of grape.

It's also possible that some of the fallow land that I passed will never be replanted. It's hard to tell.
I saw just hills that were empty that used to have wine grape.

So it was really staggering to see that. Even with all these reinventions, these strategies won't solve the underlying problems.

What the next harvest will look like, whether American wine will return to Canadian shelves, whether consumer trends will swing back.

Wine has been around for thousands of years, right? Consumer habits move very quickly.

What do you think this moment tells us about,

you know, the future of California wine as a business?

I don't think wine is going away. It will be here much longer than you or me, but I think that what it looks like might change.

And I will say this, October, November, December is the most important time for all alcohol sales because

Thanksgiving, Christmas, New Year's, especially sparkling. So

this is definitely a very important time. And I think that people will be watching closely what happens in this three-month period.
It might be hard.

Maybe the future holds some folks folding, some folks pulling out of the wine industry, which I already started seeing when I was out there.

Like there might be more pain ahead before the future looks better.

How are you feeling about your business at the moment?

Well, that's a good, that's a tough question. You know,

I love, I love the business.

I love coming to work. We've got such a great team.
And my youngest daughter just came back to work for us, which is great. And we have a new grandbaby.
She has a new grandbaby. Oh, congratulations.

Thank you. But yeah, it's hard.

But, you know, there's a lot of positive things in life here. Really is.
You know, we live in a great place. Well, cheers to that, John.
Well, thank you.

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