American wine industry faces decline as wineries close and mergers rise

The American wine industry is experiencing a significant shift, marked by a decline in the number of wineries for the first time in a generation. In 2024, the West Coast saw a 4.3% drop in winery numbers, as reported by Wine Business Analytics. This trend has been particularly noticeable in the Bay Area, where several well-known wineries, such as Edmunds St. John, Carlisle, and Brendel, announced closures last year. The trend has continued into 2025, with Napa's Newton Vineyards among the latest to close.

Some wineries, like Brian Arden and Arista, have opted to sell their facilities while attempting to keep their brands alive in new forms. Dale Stratton, managing director at Napa consulting firm Azur Associates, explains that the wine industry is undergoing a slow decline. The past two decades saw significant growth in wine consumption, leading to an expansion in infrastructure, including vineyards and tasting rooms. However, as consumption moderates, some of this infrastructure is becoming redundant.

The current situation suggests that there are too many wineries for the amount of wine Americans are consuming. As a result, some vineyards are being removed to balance the market, and many wine producers may need to close their doors. Not all distressed wineries will shut down; some will be sold. The wine industry has seen considerable merger and acquisition activity, although the total value of these deals decreased to $2.6 billion in 2024 from $3 billion the previous year. This decline was partly due to the discounted assets of Vintage Wine Estates, which filed for bankruptcy.

Stratton anticipates more acquisitions in the coming year. There are rumors that Constellation, the fifth-largest wine company in the U.S., is considering selling all its wine brands, including Robert Mondavi and Woodbridge. Stratton notes that Constellation's beer business, which includes brands like Modelo and Corona, is performing better financially. Beer sales now account for nearly 82% of Constellation's revenue, compared to wine's 15.6%. Beer sales grew by 3% year-over-year in the third quarter of last year, while wine sales dropped by 14%.

However, Constellation faces challenges with President Donald Trump's tariff announcement, which imposes a 25% tax on beer produced in Mexico. This situation is reminiscent of past instances where diversified beverage companies exited the wine business. Coca-Cola and Nestle both invested in wine in the 1970s but eventually withdrew. Diageo, once a major wine corporation, sold all its wine brands in 2016 to focus on spirits.

Stratton believes the industry has stabilized in negative territory. As long as current conditions persist, the market will likely continue to see mergers and acquisitions, along with some wineries closing their facilities. The American wine industry is navigating a challenging period, with many brands facing uncertain futures.