LODI, Calif. (KTXL) – A new report released Tuesday says the COVID-19 pandemic will cost California’s wine industry $4.2 billion in lost revenue by the end of 2020.
With California being the largest wine-producing state in the U.S., this year’s economic shortfall will cause a $10 billion ripple effect throughout the state’s economy, including lost jobs and tax revenue, according to the report released by Sonoma State University’s Wine Business Institute.
“For all intents and purposes, we’ve been shut down for the past three and half months,” said Lodi Winegrape Commission Executive Director Stuart Spencer.
Lodi tasting rooms and retail shops have been slow to reopen due to the strict rules they must follow.
Vintner David Lucas of Lucas Winery told FOX40 he kept his operation closed for another reason.
“As I remind our team and the people that come for our wines, people are more important than the profits,” said Lucas.
Lucas is fortunate that only 20% of his revenue comes from on-site sales. His business model is online and direct sales to customers who now pick up orders by appointment only.
Lucas joked that since his retail operation is closed, he no longer has to shave. But he empathized with the pain felt by the 86 wineries in the Lodi area along with related businesses.
“For a lot of wineries, a lot of small businesses — we have friends with small shops and small restaurants — this has not been fun at all,” said Lucas.
California’s smaller, family-run wineries rely on on-site promotion and sales. Lucas said it took him 40 years to establish his client base and those lesser-known family wineries will struggle.
“The first introduction to a new customer is going to happen at the tasting room or at a restaurant where they’re able to try your wine,” explained Spencer. “With both of those two things shut out, it’s hard to acquire new customers.”
Tourism, which brings visitors to wineries, is still also hurt by warnings against travel.
One bright note in the economic report is since more people are staying at home, wine sales at retail outlets have spiked. Yet, that generally benefits large wineries with a distribution network of grocery stores and retailers.
“It’s been a challenge for many of our smaller producers,” said Spencer.
The report says the trickle-down economic hit affects 43,000 workers from trucking and warehousing to marketing and retail and a recovery timeline is uncertain.
“We don’t what we can do and when we can do it and when you’re managing a business that’s a very scary place to be,” said Spencer.
“We will open when they get the vaccine and when they get the vaccine then I will also shave,” laughed Lucas.
The wine grape harvest is six weeks away and the impact of poor wine sales may affect the market for grapes as well as production decisions winemakers must make.