Marketing in an Oversaturated Wine Market

California’s wine industry is in trouble as values drop and the market becomes crowded! Tune in to this week’s episode of the Brand Shorthand podcast as Mark and Lorraine dive into a recent article from the New York Post detailing the suffering wine industry. Learn the challenges these sellers face, how they should adapt, and whether the wine industry can bounce back.

Join Mark and Lorraine for 30-ish as they discuss all things marketing, advertising, and of course … positioning.

Transcript

Mark Vandegrift 
Welcome to another episode of the Brand Shorthand Podcast. I'm your host, Mark Vandegrift, and with me today is Lorraine Kessler, our powerful positionist. For today's episode, we're going to discuss one of your favorite topics, Lorraine, and that is...

Lorraine Kessler 
Wine! 

Mark Vandegrift
Wine!

Lorraine Kessler
The Vine and the wine. Yes, the drink of the gods, the fruit of the gods.

Mark Vandegrift 
Well, we're doing this because you sent me an article about California's suffering wine industry. So why don't you start off just talk a little bit about that article that you sent to us from the New York Post and then, you know, tell us what it's about and what's going on with the industry just so everyone's caught up.

Lorraine Kessler 
Well, the industry's been in a steep decline for over four years, particularly in the US, which is the largest consumption market, not the largest wine producer market, that's Italy, France, Spain, with Euro, the EU as a producing as producing countries producing sixty percent of the wine, but we're the largest consuming market. So let me just quote the dire headline from the New York Post. Not that the New York Post is known for, you know, kind of unsalacious headlines, but this was from May of 2026. And I thought their headline was interesting. It said, fresh hell for California's crippled wine industry as values hit rock bottom. I mean, what part of that is not emotional, right? 

Mark Vandegrift 
I love that.

Lorraine Kessler 
Yeah, I wish I wrote that. And then the opening line the opening line is California's battered wine industry is spiraling deeper into crisis as vineyard values across wine country plunge, buyers vanish and experts warn the pain could drag on for years. I mean this is like I wish I had one of those guys who would do the horror movies, you know.

Mark Vandegrift 
Yeah.

Lorraine Kessler 
When I was a kid, we went to a movie my best friend and I called Mark of Mark of the Devil. And stomach distress bags will be given at the door. And they did, they handed out stomach distress bags. It was great marketing.

Mark Vandegrift 
That's awesome.

Lorraine Kessler 
I know. So that's what this I wish I had the voice that did that commercial. If my voice is a little scratchy, I was in Michigan, we got hit with that terrible smoke and I happen to get a cold at the same time. So I still have this scratchy Brenda Vaccaro voice, if you know who Brenda Vaccaro is. Like so but plain and simple, something Jack Trout would preach, right, was you have to reposition in times of or and that means to adapt. And to deal with crisis, change, and competition. And change, usually consumer changes in attitudes or behaviors which affect demand is the number one problem that not just California but the worldwide wine market is facing. And crisis that could be something self induced like Boars Heads, listeria or what's going on right now with the lettuce problems in the industry and competition. So just to just to talk about two out of the three that I think are most affecting wine. Not that crisis, the tariffs have, you know, hurt exports. That's kind of a minor transitory thing. I think the two main things are change and competition. One, consumer demand for wine, especially luxury wines, the more expensive wines, the more snobby wines, which NAPA has really focused on a lot. the demand has changed. Boomers are dying. Boomers were the big wine market and they're dying. And so what we see in millennials and Gen Zs and Alphas which are drinking yet but they're coming along, is that there's changing habits with the millennials in particular they're drinking other things. A lot of these mixed drinks that are in cans and and their cannabis is a big taking away. When you think about change, it's not just in the beverage industry in what people consume, but it's also other things that compete for the same wallet, if you will. So cannabis is a big competitor. So you know the numbers are really dire, I think the US consumption dipped4.3 percent in 2025, but the global is down 2.7, and that's one point almost 1.6 billion gallons. 

Mark Vandegrift 
Wow

Lorraine Kessler
Right and that's year over year. So it's been 14% drop, five point almost 5.5 billion gallons since 2018. And so these declines started in 2007. So, you know, what we have is a very changing marketplace. And that's why land is there are more sellers than buyers in Napa. People like even Mandavi is getting rid of some land. So that's pretty yeah, it's pretty extreme. And like I said, then you have the competition share of wallet, cannabis. There's also non alcoholic drinks that are coming on and lower alcohol which wine quite honestly I haven't found a wine yet that's either zero zero or low alcohol that's good. It's abysmal. It's like I drink zero zero Heineken, Peroni, they're wonderful. I love the taste of beer with a burger. I don't need the alcohol. So I really like those beverages. I'd rather have that than a Diet Coke or any other zero product. But they taste great. And these wines, my son in law has introduced me to a few and we both agree they're just bad. They're not there. So that's an opportunity. So anyway it's a it's pretty dire when you consider that, you know, this is this has been going on for years. It's not it's not a fad. It's a trend and they're gonna have to adjust somehow.

Mark Vandegrift 
Well, you're mentioning quite a few things. I guess maybe let's break them out a little bit. So as vineyard values across the wine country plummet, right? And then the market becomes crowded, because you said there's more competition, fewer buyers. So what are some recommended initial steps or considerations that need to be made given that?

Lorraine Kessler
Yeah, it's it it's really challenging because you know I had to give a lot of thought to this because you don't change you don't change a millennial's taste for other alcoholic beverages overnight. And you do have these new competitive things for the wallet that are outside the category. So you know, what you have is a market going down. I always remember Dick Maggiore saying don't chase a declining market down, right? So, what do you do? There's no easy fix, there's no quick fix. I think there's a number of things you have to do that are based on reality. I think one is manage supply, decrease the production of the higher value luxury class wines, keep them elite and margin-driving, but just look at your portfolio in terms of what you have there and if you're small enough to make hay with those great but if you're a big winery then you really have to think about how do I pair back and focus on the really great luxury wines. Because there are buyers for that. They're just not as big. So how do I win my share of competitive share within that category. But that's one thing. I have to say that is it's gonna take a number of things for every vineyard to think about. And then I would go for cheap and chic wines like Sauvignon Blanc, right? Yeah, the sparklings are really big. Now sparkling for those who don't know wine, champagne is a sparkling wine, but you cannot call anything champagne, because that's a French brand from the Champagne region. So you cannot call it champagne if it's not from Champagne. But sparkling is the category, the generic. So prosecco is a big Italian version. So I would focus on those wines, what I call chic wines, that capture the budget sensitive and maybe younger buyer segments. They're less big, they're less complex. I would look at that. I already said streamline the portfolio overall. Innovate, you know, it's like Peter Drucker, right? Marketing and innovation. Right. Come out with a, if you're the first to come out with a great zero zero wine or a low alcohol wine, kudos. I'd love to see that happen. But also think about new cocktails with wine, how to make those trendy. And more emphasis on wine coolers. That's a branding thing. There's been long talk about, you know, you gotta avoid the snobbery to make wine more approachable. So I think that's a way to do that, both in product and in terms of promotion and what you do. Also, you know, distribution is a channel way to just differentiate but it's also a way to win. Try and focus more on the high margin direct channels, like Vivino is a great app I use in the grocery stores to rate wines and see what they taste like and see if they fit my palette and my budget. So wine clubs or things like the apps like Vivino, because you're gonna get a higher margin on a on a lower cost wine, so I would be looking at that. Marketing that focuses more on as we know occasion drinking and occasion. One of the things that I think is really interesting and maybe undermarketed is, you know, because you and I, we like to home cook and we look for interesting recipes and there's so many recipe apps from American Test Kitchen to whatever, Delish, New York Times. I would jump on these cooking interests and look at partnerships. It's a one point one trillion dollar industry. I mean eight sixty-two to eighty percent of Americans cook at home still and they're looking to make that special. So wine wine at its core, for those who don't understand alcohol, wine unlike distilled or unlike beer, is the least man infiltrated product. It is really the gift of the gods because it's what the grapes the Torah, the terrain and the grapes give you. There's very little manipulation beyond that and so it's always been a food for many, like in Italy, they consider it food. Right? So it's always been about food culture and wine culture together and the culture of the region. So I think that if you f pair this even better more closely, that's really gonna be a win. And that can be in terms of these recipe sites, like people for home cookers, but also partner with those top meal kits like Factor and Blue Apron and Hello. I would look to this. I think these are new avenues to make wine more approachable for people who don't understand it as a food product. So that's those are some

Mark Vandegrift 
Yeah, well yeah, you gave some really good solutions there. What let's back up a little bit. What are some of the challenges that brands face in an oversaturated market? So to me this hits more around the crisis situation. What do you think are some of the challenges?

Lorraine Kessler 
Well, I think the challenge for a brand is the first of all, because the wine industry grew s for so many years and had such interest, you have so many small boutique wineries, right? People who got in and had single vineyards or boutique, they're gonna be hurt. I mean, this is what happens in the decline, right? The strong get stronger and the weak get weaker. It's kind of a sad story. So I expect there's gonna be consolidation because the brands that have to now approach more marketing, occasional marketing, making these partnerships are gonna have the money, the distribution, they're gonna they're gonna have the the advantage over these smaller mentors. And I think you do have to pay more attention to your brands and what you're doing. But it's a weird it's a weird thing because if you become known for being only the cheap and chic brand wines, you're not known for the good wines. You're gonna lose your high margin audience. So you really have to be kind of a house of brands, right? You have to have, you can't have these things coalesce. It's gonna be a problem. So you almost have you have to look at segmentation more than maybe you've looked at in before. And I would look at that both in marketing and in branding.

Mark Vandegrift 
Well, that's certainly gonna help advertising dollars go further. Do you think do you think the boutiques are gonna rise above everyone else?

Lorraine Kessler 
Well, it's yeah. No, I don't think they'll rise above. I think they'll find here's the thing, if you're if you can make money in a niche as a boutique, you have a target distinctive audience who really knows your brand and really like Helen Keplinger out of Canton, who's one of the top wine makers in Napa and who makes French style blends. Her wines are unbelievably good, but they're very expensive. But if she can make money on that, stay small, stay focused, keep making money. It's kind of that gorilla mindset we talked about in marketing warfare, where you narrow the playing field where you alone can win. Right? So I would stay narrow. But if you're too boutique and you can't make money, you don't have enough, you're on the edge, you're in trouble. And I think if you're too big, you have to look at paring back that portfolio to fit what's going on, or you have to be number one, number two, number three. So it's the old rules of positioning that we've talked about for a long time. You always have to think about who's my total customer market. Are they big enough to make me money?

Mark Vandegrift 
Well, and speaking of that, I mean you I would put wine on the discretionary spending list, right? It's not it's not a core need. Some might make it that. But given that, you know, you're chasing fewer dollars. 

Lorraine Kessler 
Yeah. Yeah. Yeah, we might disagree with it.

Mark Vandegrift
I'm not Italian, I'm Dutch.

Lorraine Kessler
Although ever since my heart episode, I really do I mean our consumption is so far down. 

Mark Vandegrift 
Is it?

Lorraine Kessler
If I have a bottle a month, that's a lot.

Mark Vandegrift 
Wow. 

Lorraine Kessler
Yeah, I just don't you know, it's a weird thing. I just don't need the I don't have a taste.

Mark Vandegrift
Yeah. Well, and we know that discretionary income is shrinking because with inflation, just getting the essentials has been a challenge for a lot of middle income Americans and I'm sure that's where the market is shrinking the most. So you know, thinking about that, you you're gonna have to develop wines that fit the current income level, the lifestyles. I get that trends, you know, you can chase a trend, but I'm not sure that the shrinking income is something that's necessarily a trend because we supposedly have a great economy right now, but we are seeing quite a shift in disposable income. So in all of your solutions, what do you think would be considered like one of the core principles of positioning that's gonna lead to long term success when it's really difficult to anticipate where the market's headed for all these different reasons.

Lorraine Kessler 
Yeah, I think of all the things I said I would have a diverse portfolio. If I'm not a niche player, right? I'd have to get more mass and I'd go with the cheap chic wines, with multi branding and that's gonna take money 'cause you know every time you create a brand, it's not a brand you get it in the mine, so it takes time and money. So and to manage a house of brands takes money for each of those brands. You can't just create a name and think that's gonna be the magic solution. So I think it's gonna take marketing money and I think that's you're gonna have to diversify. You're gonna have to reach people and again that occasion marketing, whether it's food, entertaining, boating, ski vacation, whatever these people are doing that fits with wine, traveling, then I think you have to jump on that and so it's gonna take some marketing.

Mark Vandegrift
Do you know the current so there's a let's call it the luxury market. Do you know how much of the wine industry is just that luxury side of things? Is it fifty percent falls into luxury or is it twenty percent? Like what is that percentage?

Lorraine Kessler 
Yeah. Well I don't I don't know that. I could look that up. I don't know that. I do know that luxury is a pretty broad category because it can go from bottles that are super expensive, to bottles that are a hundred dollars, seventy dollars, sixty dollars, which is to me mid tier. They call they do break it up into like the super expensive and then the mid tier and then the lower tier, approachable but still like great lines. Helen Keplinger that I mentioned, I think I'd put her in mid tier, even though $70 a bottle isn't an everyday wine. We say we put those away and save them for family gatherings and that kind of stuff. So but I think I'd want to make sure I'm balanced in that. I'm I would imagine the luxury tier, you're gonna have less volume but higher margin, mid-tier, bigger audience you know, good margin and then the chic and the cheap and chic, you would have to really drive volume high in order to keep the price where it is and and make some margin that's satisfied.

Mark Vandegrift 
Would you say the squeeze is on that mid tier though right now?

Lorraine Kessler 
Probably, yeah. I would say mostly in the mid tier. Because those people who have means, you know, and are collectors and puts bottles away. I know that one of the things there was also a bad production year in 2025, I believe, overseas, like in Italy and maybe even in California. So what a lot of those wines like in Italy, if you have a Monte Lacino wine that has to sit for five years before they release it. But they're also have other wines they've been sitting on and they're gonna release those to make up for the bad production year. But they probably don't have to release them as quickly if demand is down. Yeah.

Mark Vandegrift 
Okay. Interesting. Well, what do you think let's take one word away from today and that's adapt, because that's the most on the street word for repositioning, if you will. So what's your number one recommendation to our listeners as it pertains to adapting?

Lorraine Kessler 
Well, I think it goes back to Peter Drucker, right? Only two things produce a new customer and that's market and innovation. Marketing and innovation. And I think that you have to do that. My caution would be when adapting, you have to connect with the core ideas. So I wouldn't want to see wine promoted like beer, right? I wouldn't want it's not the same audience, it's not the because of this historic understanding of wine as something very special in the alcoholic beverage and connection to food. It's very different than distilled alcohol. It's very different than beer. I would keep that food experience when I adapt. I would keep the food experience there and I would keep that connection of the culture and the rich history of wine there in some way that's highly relevant to today.

Mark Vandegrift 
Good. Awesome. Let's wrap up today's episode of the Brand Shorthand Podcast. Thanks, Lorraine, for joining us today, as always. And to our listeners for tuning in. Don't forget to like, share, hit that subscribe button. We really need that.

Lorraine Kessler
Yep. And have a glass of wine. Yeah.

Mark Vandegrift
Yes. Glass of wine in one and click with the other, right?

Lorraine Kessler
Yeah. Nice a nice Zip pendel from Russian River Valley would be good.

Mark Vandegrift 
There you go. And then you can listen, you can binge watch or binge listen to the brand pod podcast brand shorthand podcast, right?

Lorraine Kessler
And you're sober. Look at this.

Mark Vandegrift
So and I'm sober. Yeah, imagine if you had me drink anything. So great. Well, until next time, have an amazing day.