“I feel sometimes like we’re the David who’s starting to really have a go at Goliath.”
In this version, Goliath is Temecula and David is the San Diego winery scene.
That’s the take of Mike Weber, the general manager of Orfila Vineyards & Winery and president of the San Diego County Vintners Association. A few times in a recent interview, he expressed bemused frustration that San Diego’s wineries are sometimes overlooked by local wine drinkers and revelers.
“I mean, they’re literally driving by 100 to 160 different wineries to go to Temecula,” he said.
But a report published Wednesday by San Diego’s winery trade group suggests San Diego wineries have some encouraging findings: In 2023, sales and hiring were both up year over year at San Diego County’s 166 wineries, which are scattered throughout urban San Diego neighborhoods like Point Loma and Mira Mesa, cities including Lakeside and Escondido, as well as in the backcountry of Julian, Ramona and Santa Ysabel.
These businesses have largely bounced back from the turbulence of the COVID-19 pandemic. Some are expanding.
That’s a striking contrast to how the rest of the U.S. wine industry is doing. According to Silicon Valley Bank’s State of the US Wine Industry Report, “Direct-to-consumer volume and value sales were lower in 2023 and tasting room visitation dropped for the second straight year.” That report says interest in wine is dwindling as other lures — beer, canned alcoholic beverages, liquor and cannabis — beckon, especially among key younger drinkers.
California’s wine industry also is hurting. Consumption fell almost 9 percent in 2023, according to a report cited Wednesday in the San Francisco Chronicle. Trouble has been brewing for a while. “Who Will Save the US Wine Industry? Not California Boomers” reads one recent headline by Bloomberg. And Last September, Meininger’s International, a wine trade publication, wrote about California’s grape surplus amid falling demand.
San Diego’s wine industry is a drop in the bucket — producing around $55 million, compared with California’s $55 billion. But its winemakers are doing a lot right, according to the San Diego wineries report, by the San Diego County Vintners Association trade group, which examined economic data and surveyed winemakers to piece together a state of the industry.
The data tells a story of resilience and resourcefulness, said Vince Vasquez, the report’s author.
“That is, I think, something that is a clear indication that wineries, at least in San Diego County, have found the solutions they need to be successful for serving existing and new customers,” he said.
Some of the report’s findings:
- Annual sales in 2023 totaled $54.5 million and were 11 percent higher than in 2022. Both 2022 and 2023 were record-breaking years.
- About 70 percent of winemakers surveyed said prices charged to consumers are the same or slightly above 2023 levels. In parallel, about 63 percent said they are impacted by a large increase in costs this year.
- The industry added around 100 jobs, reaching 802 workers in 2023. This was mostly driven by newer and expanding wineries.
- Wages were down in 2023 at San Diego area wineries, mirroring a statewide trend. Pay was highest in Napa and lowest in Riverside.
- San Diego’s industry, like others, has been impacted by the commercial insurance crunch, with about three-quarters of those surveyed experiencing denials or rate increases.
A rosé picture
Vasquez, the policy and data analyst hired to conduct the research and author the report, said San Diego’s wineries have mostly rebounded from pandemic era disruptions and are finding ways to draw in more customers.
While consumption fell 2 to 4 percent in the U.S. and more sharply in California, here it grew 11 percent. (The increase was due to more wine sold and less to higher prices, he noted.)
Last year, San Diego saw a tourism bump, and “all of the wineries benefited from that,” Vasquez said. But they’re also focusing on events, boosting marketing and, at a time when QR codes and apps make less ordering easy, vineyards are investing in customer-facing, tasting room staff. At wineries, storytelling sells: chatting with staff, meeting the owners, learning about the history of the winery, Vasquez said.
“Engagement from staff is credited as a key component to the winery experience,” he said.
During the pandemic, their outdoor spaces were vital — and now are being used for events and weddings.
Orfila, a large winery and vineyard in the San Pasqual Valley, hired an events manager last summer.
“With over 70 acres of sprawling vines and mountain views, there is no shortage of breathtaking scenery,” Orfila’s website says under the photo of rolling vineyards bathed in a dusky glow.
Its goal isn’t so much weekend weddings as corporate events that can run five days a week, Monday to Friday. Hiring an events specialist was a logical next step for the 30-year-old winery, given a jump in demand for events as the COVID-19 pandemic waned, Weber said.
“We had been getting quite a bit of interest through phone calls and email, and we just weren’t really equipped to do it,” Weber said. These days, he said, “we are seeing an ever–increasing amount of bookings.”
The report pointed to one macroeconomic condition that contributed to a strong year: Businesses can get what they need to make and sell wine.
“Supply chain challenges are no longer a significant issue or a meaningful issue for wineries here,” Vasquez said. The survey, which received 38 answers from 166 licensed current and planned wineries, not including satellite tasting rooms, showed a sharp drop year over year in worries about sourcing materials. In 2022, 81 percent of respondents had been worried about sourcing glass; 19 percent had no supply chain worries.
That was flipped in 2023: 19 percent worried about getting glass, and 81 percent were not worried about supplies.
Tempering that, though, were higher costs in a year of sustained inflation, the report noted.
Buzz kill
One more sign of the industry’s robustness: The percentage of wineries looking for financial assistance or outside capital in 2024 is low, at 11 percent, and has remained stable for the past three years. However, 5 percent of wineries surveyed said they are considering closing their business in the next six months, up from zero a year before.
Even though wineries are building rapport and drawing customers, the report also surfaced some areas of concern.
Smaller wineries are facing a tougher climate.
“Revenue growth in 2023 was mostly driven from the new and expanding large wineries in the region adding significant jobs and sales activity. Most of the smaller wineries are either experiencing another year of flat or declining sales or making modest increases in sales,” the report says.
Another challenge is reduced access to affordable insurance. Most surveyed wineries cut back brush and created defensible space and some invested in firefighting equipment on their sites in 2023. Still, nearly a quarter of those surveyed were denied coverage and 60 percent saw their rates increase.
Faced with denied coverage and raised rates due to wildfire risk, a greater percentage of wineries surveyed turned to Fair Access to Insurance Requirements (FAIR) Plans, which are pricey and considered insurance coverage of last resort.
Another challenge: San Diego wineries have lower wages than other wine-producing regions in the state.
This is linked to “the struggle to recruit and retain talented workers, the increased hiring of lower wage entry-level workers, more part–time employees replacing full-time employees, more boutique winery owners taking on additional roles, and reductions in force. California’s housing affordability crisis, which is more acute in San Diego County, is also likely having an impact,” the report states.
But Weber, with Orfila, said San Diego isn’t losing winery workers to Northern California, where wages in the industry are higher. If anything, he added, workers are moving here from elsewhere.
“Everything I’ve observed and heard is that it’s more the other way around. They come to San Diego, from other areas,” he said.
A (sling)shot at greatness
Back to that David and Goliath story.
“It’s funny that we still hear on a regular basis — people who are drinking or trying our wine at different events, saying ‘I didn’t know there’s wine in San Diego.’ Of course, we don’t really enjoy hearing that. It does just show a picture of what we’re up against,” said Weber.
San Diego’s wineries live in the shadow of not just Temecula, but craft beer. Who in San Diego, let alone in Arizona or Chicago, hasn’t heard of Stone Brewing?
To hold their own, local wineries need to get the word out, both Weber and Vasquez said. More wine events, more collaboration, more marketing.
A talking point: Wineries “are everywhere, from the San Diego coast to the desert to the border,” Vasquez said. In Napa and Temecula, they’re bunched together. But in San Diego it means one doesn’t have to travel far to try a local wine.
Local wines are also gaining acclaim. San Pasqual Winery picked up multiple awards at the 2023 San Francisco Chronicle Wine Competition — which evaluates thousands of wines from North America — and the Toast of the Coast International Wine Competition.
Carruth Cellars, an urban winery and tasting room, makes award-winning wines with grapes sourced from throughout California. Its 2019 Kelly Napa Cabernet Sauvignon won gold at the Toast of the Coast competition in 2023.
“We’re making some inroads,” Weber said. “It always starts with the wine quality. Several locals who’ve been in the business for a very long time have made rather strong comments saying just what a wonderful incline, increase, in the quality of wine that’s happened in the county in the last 10 to 15 years. It’s remarkable.
“I think if you lead with good wine, all the rest comes together,” he said.
