Great piece here and follow up to Ted Hall’s work. While I understand the forces that have gotten us to this place, I hesitate to look to public policy and more regulation as the solution. Markets are incredibly efficient beasts and will get us to the right place. My guess is that the destination may be a place that is uncomfortable for many of the current players (and whatever new players that aren’t equipped for what’s ahead), but I think it’s hard to deny that the journey there has begun. Tasting rooms shuttering, wineries closing, layoffs, bank pressure. All part of the Darwinian trek to a balanced market.
This is a thoughtful and well-structured piece, and Ted's original diagnosis deserved exactly this kind of prescriptive response. The fragmentation analysis is right. The legacy permit inequity observation is real, if narrower than the framing suggests. And the shift from expansion to optimization is the correct direction.
But I want to push on the premise, because I think it's carrying more weight than it can hold.
"Napa didn't lose demand, per se" is doing enormous load-bearing work here. Reports by SVB, Community Benchmark, Commerce7 and well documented generational drinking trends all suggest that the stability in visitation numbers may be a ledge, not a plateau. And you are absolutely correct that visitation is mostly driven by day trippers -- even in 2019 that was the case as Visit Napa Valley used to track and report. Wine's share of total alcohol is shrinking. The sober curious movement, cannabis, and broader lifestyle shifts are not cyclical corrections. They are structural. If that's true, the arithmetic is worse than you're describing, and supply rationalization — however rational — just slows the rate at which incumbents feel the pain.
On the permit inequity: I've been through the Napa permitting process, and the picture is more complicated than it appears. Nearly any significant winery expansion or operational modification triggers a use permit update that typically subjects the impacted spaces to current standards — parking, water, wastewater, fire, all of it. Pre-WDO status doesn't provide much insulation once a winery has been materially modified, and very few haven't been. The variation in visitation limits is real, but attributing it to systemic inequity is speculative. Some of it is physical. Some of it is the political environment at the moment of approval (e.g. Napa Vision 2050). Some of it may be negotiation. Harmonizing those numbers would mean reopening agreements that some operators benefited from and won't willingly revisit.
But here's what I think is the central issue, and where I'd push back most directly: the county's job is not to guarantee that any individual winery is successful or profitable. Its job is to enforce the spirit of the Agricultural Preserve and the Winery Definition Ordinance, imperfectly and incrementally, as it always has.
We have roughly 400 wineries in a 30-mile stretch. Most of the newer ones were built without the marketing infrastructure, the DTC discipline or the brand differentiation required to take share from a more established neighbor. That is a business plan problem, not a structural one. A ten-year permit pause doesn't rescue those operations. It just prevents new entrants from making the same mistake while the existing underperformers work through their own correction.
The consolidation you acknowledge is already underway. The market is already delivering the verdict. The county stepping in to manage the pace of that process, through a pause, a transfer tax, or a harmonized operating framework, may feel like stewardship. But it's closer to market protection — and for the operators who built real customer relationships and real DTC infrastructure, it mostly just delays the competitive clarity they've already earned.
The question isn't whether Napa should stop overbuilding. It should, and arguably should have sooner. The question is whether policy can substitute for the marketing and operational discipline that the struggling tier of wineries didn't or couldn't build. I'm skeptical that it can.
This is a thoughtful push, Steve. I appreciate you weighing in. I agree with more of it than I disagree with.
On demand, you may well be right that it’s a ledge, not a plateau. If so, the arithmetic is worse, not better. But that only reinforces the core point: continuing to add capacity in a structurally pressured demand environment compounds the problem. Whether demand is flat or declining, expansion is still the wrong response.
On permitting, I take your point that the system is more complex than a simple legacy advantage. My argument is less about fairness in any individual case and more about coherence at the system level. Whatever the origins, the result is highly uneven operating conditions in an already fragmented market.
But where you make mention of the policy…I agree the county’s job is not to guarantee success, it absolutely shouldn’t be. But it also shouldn’t ignore system-level outcomes. When capacity continues to expand in a share-driven, potentially contracting market, that’s not neutral. It shapes the competitive environment, whether that’s intended or not.
We can’t rescue underperforming wineries for a lot of reasons, and policy can’t substitute for marketing or operational discipline. What it can do is stop reinforcing a (in my mind, dangerous) structural mismatch between supply and demand.
The market will deliver its verdict either way. The question is whether we keep expanding into it.
I suppose that if the Napa County community wishes to tighten their permit process even further to increase the benefits of the "already-haves," that's their kuleana (Hawaiian for "your own business"). Of course, what you say makes sense, given current market conditions. Personally, though, my concern is for smaller, independent handcraft producers as well as for longtime growers who wish to produce their own wines. To me, newly imposed restrictions will only ice out these very people who 1) represent a direction many consumers are going in (that is, wines perceived as more authentic and terroir driven), and 2) the very lifeblood of the entrepreneurial, creative, groundbreaking energy that grew Napa Valley in terms of business and prestige in the first place. Basically, regulations favoring current owners would be shooting your own self in the foot. Personally, I'd rather see fewer big money corporate interests (why protect these bully boys?) and more handcraft/grower driven wines because I'm a wine geek, and because I think it's better in the long run for the valley. Then again, no one asked my opinion, but there you have it, just the same.
I am always interested in your opinion, Randy, make no mistake about it. I didn’t write this thinking ‘here’s a total slam dunk,’ believe me. I agree with you wholeheartedly on the importance of small, independent producers, and they’re a big part of the Napa fabric. Where I push back a bit is that the current system already favors scale and capital. It’s not friendly to the producers you describe here. And continuing to add to the capacity into a flat demand market only makes it worse. While this does protect incumbents, it isn’t designed to - rather to stop the expansion as a default setting. A clearer boundary with equal/equitable/workable regulations within it would shift the advantage to producers who stand out, rather than just build out. If we get that wrong - if the result is entrenching the big guys at the expense of the small guys - then we’ve failed, regardless of the economics. Leveling the field is overdue, nonetheless.
I'm glad you see that "leveling the field" is just as important (or more) as controlling growth. As you know, big money owners in the valley simply run roughshod over systems whenever given the chance. They could care less about small independent operators, even less about grape growers. That's the way our "big beautiful" capitalist system usually works. Don't get me wrong. "Corporations are people, too," and there are big, established companies who also do great work (I'm loving, for instance, what Joseph Phelps and Sequoia Grove have been doing recently). If anything, I'm more on the side of keeping it a free market and letting the chips fall. That is, letting the consumers themselves decide who they want to support. The same way it was done back in the '60s and '70s when we saw the sudden explosion of "boutiques" which catapulted the reputation of the valley into the stratospheres. Consumers, after all, should always have the last word, not the regulators or busybody "commissioners."
With respect to Ashes & Diamonds, I love their Cab Franc as well. We get Cab Franc from the same Santa Cruz Mountains vineyards...criminally under appreciated growing area, and a great one for Cab Franc!
Excellent read for a real problem. Had the pleasure of visiting Ashes and Diamonds last fall. What a terrific winery. Outstanding food and even better wine. Its a must visit when in Napa. Although we did feel we were in the Brady Bunch's house. 😄
Great piece here and follow up to Ted Hall’s work. While I understand the forces that have gotten us to this place, I hesitate to look to public policy and more regulation as the solution. Markets are incredibly efficient beasts and will get us to the right place. My guess is that the destination may be a place that is uncomfortable for many of the current players (and whatever new players that aren’t equipped for what’s ahead), but I think it’s hard to deny that the journey there has begun. Tasting rooms shuttering, wineries closing, layoffs, bank pressure. All part of the Darwinian trek to a balanced market.
This is a thoughtful and well-structured piece, and Ted's original diagnosis deserved exactly this kind of prescriptive response. The fragmentation analysis is right. The legacy permit inequity observation is real, if narrower than the framing suggests. And the shift from expansion to optimization is the correct direction.
But I want to push on the premise, because I think it's carrying more weight than it can hold.
"Napa didn't lose demand, per se" is doing enormous load-bearing work here. Reports by SVB, Community Benchmark, Commerce7 and well documented generational drinking trends all suggest that the stability in visitation numbers may be a ledge, not a plateau. And you are absolutely correct that visitation is mostly driven by day trippers -- even in 2019 that was the case as Visit Napa Valley used to track and report. Wine's share of total alcohol is shrinking. The sober curious movement, cannabis, and broader lifestyle shifts are not cyclical corrections. They are structural. If that's true, the arithmetic is worse than you're describing, and supply rationalization — however rational — just slows the rate at which incumbents feel the pain.
On the permit inequity: I've been through the Napa permitting process, and the picture is more complicated than it appears. Nearly any significant winery expansion or operational modification triggers a use permit update that typically subjects the impacted spaces to current standards — parking, water, wastewater, fire, all of it. Pre-WDO status doesn't provide much insulation once a winery has been materially modified, and very few haven't been. The variation in visitation limits is real, but attributing it to systemic inequity is speculative. Some of it is physical. Some of it is the political environment at the moment of approval (e.g. Napa Vision 2050). Some of it may be negotiation. Harmonizing those numbers would mean reopening agreements that some operators benefited from and won't willingly revisit.
But here's what I think is the central issue, and where I'd push back most directly: the county's job is not to guarantee that any individual winery is successful or profitable. Its job is to enforce the spirit of the Agricultural Preserve and the Winery Definition Ordinance, imperfectly and incrementally, as it always has.
We have roughly 400 wineries in a 30-mile stretch. Most of the newer ones were built without the marketing infrastructure, the DTC discipline or the brand differentiation required to take share from a more established neighbor. That is a business plan problem, not a structural one. A ten-year permit pause doesn't rescue those operations. It just prevents new entrants from making the same mistake while the existing underperformers work through their own correction.
The consolidation you acknowledge is already underway. The market is already delivering the verdict. The county stepping in to manage the pace of that process, through a pause, a transfer tax, or a harmonized operating framework, may feel like stewardship. But it's closer to market protection — and for the operators who built real customer relationships and real DTC infrastructure, it mostly just delays the competitive clarity they've already earned.
The question isn't whether Napa should stop overbuilding. It should, and arguably should have sooner. The question is whether policy can substitute for the marketing and operational discipline that the struggling tier of wineries didn't or couldn't build. I'm skeptical that it can.
This is a thoughtful push, Steve. I appreciate you weighing in. I agree with more of it than I disagree with.
On demand, you may well be right that it’s a ledge, not a plateau. If so, the arithmetic is worse, not better. But that only reinforces the core point: continuing to add capacity in a structurally pressured demand environment compounds the problem. Whether demand is flat or declining, expansion is still the wrong response.
On permitting, I take your point that the system is more complex than a simple legacy advantage. My argument is less about fairness in any individual case and more about coherence at the system level. Whatever the origins, the result is highly uneven operating conditions in an already fragmented market.
But where you make mention of the policy…I agree the county’s job is not to guarantee success, it absolutely shouldn’t be. But it also shouldn’t ignore system-level outcomes. When capacity continues to expand in a share-driven, potentially contracting market, that’s not neutral. It shapes the competitive environment, whether that’s intended or not.
We can’t rescue underperforming wineries for a lot of reasons, and policy can’t substitute for marketing or operational discipline. What it can do is stop reinforcing a (in my mind, dangerous) structural mismatch between supply and demand.
The market will deliver its verdict either way. The question is whether we keep expanding into it.
I suppose that if the Napa County community wishes to tighten their permit process even further to increase the benefits of the "already-haves," that's their kuleana (Hawaiian for "your own business"). Of course, what you say makes sense, given current market conditions. Personally, though, my concern is for smaller, independent handcraft producers as well as for longtime growers who wish to produce their own wines. To me, newly imposed restrictions will only ice out these very people who 1) represent a direction many consumers are going in (that is, wines perceived as more authentic and terroir driven), and 2) the very lifeblood of the entrepreneurial, creative, groundbreaking energy that grew Napa Valley in terms of business and prestige in the first place. Basically, regulations favoring current owners would be shooting your own self in the foot. Personally, I'd rather see fewer big money corporate interests (why protect these bully boys?) and more handcraft/grower driven wines because I'm a wine geek, and because I think it's better in the long run for the valley. Then again, no one asked my opinion, but there you have it, just the same.
I am always interested in your opinion, Randy, make no mistake about it. I didn’t write this thinking ‘here’s a total slam dunk,’ believe me. I agree with you wholeheartedly on the importance of small, independent producers, and they’re a big part of the Napa fabric. Where I push back a bit is that the current system already favors scale and capital. It’s not friendly to the producers you describe here. And continuing to add to the capacity into a flat demand market only makes it worse. While this does protect incumbents, it isn’t designed to - rather to stop the expansion as a default setting. A clearer boundary with equal/equitable/workable regulations within it would shift the advantage to producers who stand out, rather than just build out. If we get that wrong - if the result is entrenching the big guys at the expense of the small guys - then we’ve failed, regardless of the economics. Leveling the field is overdue, nonetheless.
I'm glad you see that "leveling the field" is just as important (or more) as controlling growth. As you know, big money owners in the valley simply run roughshod over systems whenever given the chance. They could care less about small independent operators, even less about grape growers. That's the way our "big beautiful" capitalist system usually works. Don't get me wrong. "Corporations are people, too," and there are big, established companies who also do great work (I'm loving, for instance, what Joseph Phelps and Sequoia Grove have been doing recently). If anything, I'm more on the side of keeping it a free market and letting the chips fall. That is, letting the consumers themselves decide who they want to support. The same way it was done back in the '60s and '70s when we saw the sudden explosion of "boutiques" which catapulted the reputation of the valley into the stratospheres. Consumers, after all, should always have the last word, not the regulators or busybody "commissioners."
Thanks for another very thoughtful article.
With respect to Ashes & Diamonds, I love their Cab Franc as well. We get Cab Franc from the same Santa Cruz Mountains vineyards...criminally under appreciated growing area, and a great one for Cab Franc!
Great analysis of a very real problem and one that is evident in the Beer and Spirits industry as well.
Excellent read for a real problem. Had the pleasure of visiting Ashes and Diamonds last fall. What a terrific winery. Outstanding food and even better wine. Its a must visit when in Napa. Although we did feel we were in the Brady Bunch's house. 😄