Half of all Napa vineyards may be Cabernet Sauvignon by 2025.

May 23, 2018

Since 1994, Cabernet Sauvignon's share of Napa vineyard land has increased by roughly 50%.  Other red Bordelais varieties have, as a category, seen a very similar shift, as you can see in the chart below.  I know it's hard to see - Wix's blog setup is sub-par - so you'll have to zoom in to read the chart or try right-clicking to download it.  If you'd like the original, just let me know.

 

Over the past five years or so, the increase in vine-share dedicated to red Bordelais varieties seems to have slowed.  Meanwhile, Cabernet Sauvignon's share has continued to grow very slowly and steadily.  This slowing could be due to a few factors.  Maybe we are seeing some limits to what the market can bear.  For instance, many wineries feel they need to offer more than just Cabernet Sauvignon as part of their Napa portfolio and those grapes have to come from somewhere.

 

Whatever the case, I think we'll see concentration growth resume for red Bordelais.  My forecasting models are showing a roughly 75% chance that concentration in red Bordelais varieties will continue to grow, in the long-run, defined as the next 12 years.  My forecast is that, by 2029, 65% of Napa's vineyard land will be dedicated to red Bordelais varieties.  So, good chance it will grow, but pretty darn slowly.

 

The chance that concentration in Cabernet Sauvignon continues to grow is somewhere well north of 80%, though I did not try to come up with a specific number, since it's close enough to 100% to be integrated into my price forecasts, without contemplating alternative scenarios.  I expect that, by 2025, half of all Napa vineyard acreage will be Cabernet Sauvignon.  It's a bit mind-blowing to have that level of concentration.

 

Now, for a bit of technical talk.  My model forecasts using a Holt model of exponential smoothing.  This assumes that there is no upper limit on how much land can be turned over to Cabernet Sauvignon in Napa, other than the mathematical limit of 100%. 

 

There may, however, be a real-world cap.  I fitted a growth curve to see where that cap could be.  It's somewhere around 50% and, if that is the limit, we wouldn't hit it for at least another 30 years.  That's a very rough way to forecast acreage concentration growth and the model has strong indications of weakness (Ljung-Box Stat 95.5 P=1.00).  I think the Holt model depicted in the chart is a better approximation of reality.

 

A weakness that both models have are their lack of causal variables.  In actuality, real-world forces determine outcomes: NIMBYism, regulation, consumer demand, competition.  These models don't capture those - although the probabilities I gave try to.  Only time will tell, but if I were a betting man - and I am - I'd take or give odds based on what I presented above.

 

 

Listened to while writing this: Kygo, Best of Kygo

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