As always, very well researched and insightful. I would add a couple nuances.
The drop in sales numbers (I believe) has a lot to do with the value of the market dropping. Prices of fine wines in particular are 30% to 50% lower than the peak. When you say: "Even those reporting healthy profits have done so against contracting turnover of between 5% and 50% over the past three reporting years", that could be the value of assets being sold, rather than less bottles being sold. Wine industry still needs to find ways to compensate for this drop in turnover, but I am not sure it means that the industry is broken. Prices are back post Brexit rally levels, before the Covid rally. Most trade companies were (I assume) profitable then. Overlay the technology driven efficiency gains now available, there should be a way to keep the lights on.
I do believe after an extremely long sell off, the market is much closer to an equilibrium between buyers and sellers. Given how much bad news was thrown at the wine market in 2026, it remains well supported at these levels. I do not believe this will translate to a large, or any, recovery in prices. Buyers are bidding, not lifting offers. They understand the huge overhang from the clients of managed wine investment companies has added considerably to traditional market supply. And I completely agree with you that funding large balance sheets of wine is a very different premise now that interest rates have settled at elevated levels.
It points to a market that is becoming settled at these levels, and likely to trade more sideways and steady, than any dramatic moves like we have been accustomed to in the past 7 years.
Everything you say is true, especially the point that we are much closer to equilibrium than we were three years ago. But that doesn't necessarily mean we've reached it, or that there isn't still more pain ahead.
On pricing—which ultimately affects merchants' top lines—I think we've seen a double whammy. Only very recently have release prices begun to adjust to what the secondary market is actually willing to pay. In the meantime, merchants have been squeezed between falling selling prices and purchase prices that remained too high.
Whether merchants have managed to maintain volumes and are simply generating lower revenues because of lower prices, I'm somewhat skeptical, although it's certainly possible—and you probably have better visibility on that than I do.
The other issue is that margins have compressed significantly. At these levels, perhaps the number of steps (or businesses) between producers and the final consumer simply needs to shrink. Don't you think?
That would imply a market that is no longer economically viable for many operators, leading to a reconfiguration of the trade. And that transition is unlikely to happen without further pain.
I think there is wine and there is the wine industry. The latter clearly in trouble. Anecdotally it seems small producers from sought-after wine zones don’t have much of a problem.
I have been working in UK since 2014 and in London since 2022, and I will agree with the overall picture you drafted.
I see wine consumption being stable in over 35 , and much less so in under 35, but I don’t think this is directly related to younger generations drink less, I just see them drinking less wine now and more cocktails for example. So hopefully when as they grow, they’ll learn to appreciate wine more and more.
Perhaps those under 35 are still figuring out what they like?
Wine often takes a bit longer to appreciate than cocktails or spirits. It will be interesting to see whether today's under-35s naturally shift towards wine as they get older, or whether this cohort behaves differently from previous generations.
From where I sit as a California winemaker, the similarities are real, but the pressure, at least in the California broader US market, shows up somewhat differently. Our problem is less about the secondary fine-wine market and more about an industry built for considerably more volume than the market now supports. We have excess vineyard acreage, too much bulk wine, shrinking wholesale demand, declining direct-shipping volume, and capital that is far more expensive to carry than it was even a couple of years ago.
Concurrently, the market is becoming sharply bifurcated. Small producers with genuine demand, financial discipline, controlled inventory, and strong direct relationships with an affluent subset of the market, can still do quite well; businesses carrying too much wine, and/or relying heavily on distributors are in an increasingly precarious position. The middle is being hollowed out.
So I’m not sure I would call what we are seeing a death rattle. It looks more like a structural contraction and reconfiguration. California will likely emerge with fewer acres, fewer undifferentiated brands, more consolidation, and a greater emphasis on direct sales. Wine itself is not disappearing, but the gap between healthy operators and everyone else is widening quickly... and parts of the business model around it are no longer economically sustainable.
Thanks for sharing your experience and perspective.
The “steps in the middle” between producers and the final consumer really seem to be the ones losing out at the moment.
I’m not sure whether it’s simply because they add to the cost of the bottle, or whether they’ve become less relevant. What I mean is that they used to add real value by curating thoughtful wine lists, championing interesting producers, ageing wines, and so on. Now, it often feels as though they stock the same handful of safe brands as everyone else. And with current release pricing, even the economics of ageing wines no longer seem to stack up.
It certainly feels like the industry is due for a reconfiguration, as you say.
The situation in the U.K. is made much worse by the excessively high alcohol duty and related VAT increases. The prices are too high for the middle classes who are being squeezed and the young who are being clobbered by the never ending cost of living crisis.The wine industry and hospitality will not recover until the economy recovers and people have more disposable income.
A broader issue is that winemakers are trying to go organic and one SA winemaker opined that you can’t go green if you are in the red.
Yes, I don’t want to boil a very nuanced situation down to a single issue, but I agree—it’s a value proposition that no longer holds up. I was in central London a couple of months ago, and the cheapest glass of wine was £25, while cocktails and beer were much cheaper. I think many people would rather have a good, reliable beer/cocktail than a mediocre glass of wine—and I’m one of those people too.
I found myself thinking less about whether the market is technically recovering and more about whether that recovery is actually healthy. Inventory replenishment can create the appearance of renewed confidence even while the underlying economics remain under pressure. What would you need to see before you considered the recovery genuinely structural rather than cyclical?
That's a very difficult question to answer. To me, the key question is whether anything is fundamentally different from before. Some might argue that it is—prices are lower, some activity picked up. But I think there are simply too many headwinds, from macro factors like wars, tariffs and the cost-of-living crisis to tighter lending conditions and better-priced alternatives. I don't think it's one big issue; it's the accumulation of many smaller ones.
As always, very well researched and insightful. I would add a couple nuances.
The drop in sales numbers (I believe) has a lot to do with the value of the market dropping. Prices of fine wines in particular are 30% to 50% lower than the peak. When you say: "Even those reporting healthy profits have done so against contracting turnover of between 5% and 50% over the past three reporting years", that could be the value of assets being sold, rather than less bottles being sold. Wine industry still needs to find ways to compensate for this drop in turnover, but I am not sure it means that the industry is broken. Prices are back post Brexit rally levels, before the Covid rally. Most trade companies were (I assume) profitable then. Overlay the technology driven efficiency gains now available, there should be a way to keep the lights on.
I do believe after an extremely long sell off, the market is much closer to an equilibrium between buyers and sellers. Given how much bad news was thrown at the wine market in 2026, it remains well supported at these levels. I do not believe this will translate to a large, or any, recovery in prices. Buyers are bidding, not lifting offers. They understand the huge overhang from the clients of managed wine investment companies has added considerably to traditional market supply. And I completely agree with you that funding large balance sheets of wine is a very different premise now that interest rates have settled at elevated levels.
It points to a market that is becoming settled at these levels, and likely to trade more sideways and steady, than any dramatic moves like we have been accustomed to in the past 7 years.
Everything you say is true, especially the point that we are much closer to equilibrium than we were three years ago. But that doesn't necessarily mean we've reached it, or that there isn't still more pain ahead.
On pricing—which ultimately affects merchants' top lines—I think we've seen a double whammy. Only very recently have release prices begun to adjust to what the secondary market is actually willing to pay. In the meantime, merchants have been squeezed between falling selling prices and purchase prices that remained too high.
Whether merchants have managed to maintain volumes and are simply generating lower revenues because of lower prices, I'm somewhat skeptical, although it's certainly possible—and you probably have better visibility on that than I do.
The other issue is that margins have compressed significantly. At these levels, perhaps the number of steps (or businesses) between producers and the final consumer simply needs to shrink. Don't you think?
That would imply a market that is no longer economically viable for many operators, leading to a reconfiguration of the trade. And that transition is unlikely to happen without further pain.
I think there is wine and there is the wine industry. The latter clearly in trouble. Anecdotally it seems small producers from sought-after wine zones don’t have much of a problem.
You are right, Robert. But they would be fools if they rested on their laurels.
I see them shifting in some cases to more direct sales. More work. But more stability with higher margins.
I have been working in UK since 2014 and in London since 2022, and I will agree with the overall picture you drafted.
I see wine consumption being stable in over 35 , and much less so in under 35, but I don’t think this is directly related to younger generations drink less, I just see them drinking less wine now and more cocktails for example. So hopefully when as they grow, they’ll learn to appreciate wine more and more.
Perhaps those under 35 are still figuring out what they like?
Wine often takes a bit longer to appreciate than cocktails or spirits. It will be interesting to see whether today's under-35s naturally shift towards wine as they get older, or whether this cohort behaves differently from previous generations.
From where I sit as a California winemaker, the similarities are real, but the pressure, at least in the California broader US market, shows up somewhat differently. Our problem is less about the secondary fine-wine market and more about an industry built for considerably more volume than the market now supports. We have excess vineyard acreage, too much bulk wine, shrinking wholesale demand, declining direct-shipping volume, and capital that is far more expensive to carry than it was even a couple of years ago.
Concurrently, the market is becoming sharply bifurcated. Small producers with genuine demand, financial discipline, controlled inventory, and strong direct relationships with an affluent subset of the market, can still do quite well; businesses carrying too much wine, and/or relying heavily on distributors are in an increasingly precarious position. The middle is being hollowed out.
So I’m not sure I would call what we are seeing a death rattle. It looks more like a structural contraction and reconfiguration. California will likely emerge with fewer acres, fewer undifferentiated brands, more consolidation, and a greater emphasis on direct sales. Wine itself is not disappearing, but the gap between healthy operators and everyone else is widening quickly... and parts of the business model around it are no longer economically sustainable.
Thanks for sharing your experience and perspective.
The “steps in the middle” between producers and the final consumer really seem to be the ones losing out at the moment.
I’m not sure whether it’s simply because they add to the cost of the bottle, or whether they’ve become less relevant. What I mean is that they used to add real value by curating thoughtful wine lists, championing interesting producers, ageing wines, and so on. Now, it often feels as though they stock the same handful of safe brands as everyone else. And with current release pricing, even the economics of ageing wines no longer seem to stack up.
It certainly feels like the industry is due for a reconfiguration, as you say.
The situation in the U.K. is made much worse by the excessively high alcohol duty and related VAT increases. The prices are too high for the middle classes who are being squeezed and the young who are being clobbered by the never ending cost of living crisis.The wine industry and hospitality will not recover until the economy recovers and people have more disposable income.
A broader issue is that winemakers are trying to go organic and one SA winemaker opined that you can’t go green if you are in the red.
Yes, I don’t want to boil a very nuanced situation down to a single issue, but I agree—it’s a value proposition that no longer holds up. I was in central London a couple of months ago, and the cheapest glass of wine was £25, while cocktails and beer were much cheaper. I think many people would rather have a good, reliable beer/cocktail than a mediocre glass of wine—and I’m one of those people too.
Central London mark ups on wine approach 500%. So I just drink tap water instead.
I found myself thinking less about whether the market is technically recovering and more about whether that recovery is actually healthy. Inventory replenishment can create the appearance of renewed confidence even while the underlying economics remain under pressure. What would you need to see before you considered the recovery genuinely structural rather than cyclical?
That's a very difficult question to answer. To me, the key question is whether anything is fundamentally different from before. Some might argue that it is—prices are lower, some activity picked up. But I think there are simply too many headwinds, from macro factors like wars, tariffs and the cost-of-living crisis to tighter lending conditions and better-priced alternatives. I don't think it's one big issue; it's the accumulation of many smaller ones.