California’s iconic wine industry is encountering a formidable crisis, described by industry insiders as a ‘Grapes of Wrath’ scenario. Widespread layoffs, winery closures, and the sad sight of grapes left to decay on the vine are becoming alarmingly common.

Vineyards across California are grappling with a harsh cocktail of challenges, including tariffs, a decline in alcohol consumption, and the steep costs associated with operating in the state. These factors are squeezing the life out of the once-thriving industry.

For some winemakers, the situation has deteriorated to the point where the cost of harvesting grapes surpasses their market value. Last fall, one vineyard owner made the difficult decision to leave approximately 50 tons of grapes to rot, as processing them would have resulted in financial loss.

The burdensome economic climate is exacerbated by California’s hefty state income taxes, coupled with considerable taxes on sales and property. These financial pressures significantly inflate the cost of doing business within the state.

Adding to the industry’s woes, Jackson Family Wines, the sixth largest wine producer in the nation, recently shuttered its Carneros Hill winery in Sonoma, resulting in the loss of 13 jobs. Known for its Kendall-Jackson Chardonnay, the company oversees more than 25 wineries in California and produces about six million cases of wine annually. Jackson Family Wines cited underutilization as the reason for closing the facility, announcing plans to consolidate production at other locations.

The company, which has 40 brands and is best known for its Kendall-Jackson Chardonnay, produces around six million cases of wine a year and operates more than 25 wineries in California.  Jackson said the Carneros Hill facility had become ‘underutilized’ and production would be consolidated elsewhere. 

The shutdown is just the latest sign of trouble sweeping California wine country. Already this year, America’s biggest wine makers have shut a string vineyards – or put them up for sale – while axing axe jobs. 

Just days earlier, industry giant E & J Gallo Winery announced it would close a production facility in Napa Valley and cut 93 jobs across four sites. 

Wineries across California are the latest corner of America’s alcohol industry to be hit by a perfect storm of forces working against drinking culture (Pictured: Vineyards in Napa Valley)

Tariffs are squeezing exports and pushing up the cost of imported ingredients. Running a business in California is becoming ever more complex and expensive. And, crucially, Americans are going teetotal at sobering rates

Gallo, which owns brands including Barefoot, Black Box and Dark Horse, also shut a winery in nearby San Luis Obispo last year too. 

In February, Foley Family Wines  shut the winemaking headquarters of historic Chalone Vineyard in Soledad, Monterey County. 

The winery once produced the first American wine that famously picky chef Julia Child said she loved.

The same month, Trinchero Family Wine & Spirits – the third-largest wine company in the country, producing 17 million cases a year – has put two of its top vineyards up for sale. 

Meanwhile, Australian-owned Treasury Wine Estates – the seventh-largest US wine producer – paused dividend payments to shareholders after making a big loss on its American business amid a 17 percent drop in sales over six months. 

In January, Constellation Brands  – America’s fifth-biggest wine company –  laid off more than 200 workers at the historic Mission Bell Winery in Madera. 

The same month, Jean-Charles Boisset, a major Napa Valley winery owner, shut two tasting rooms in the region.

For some growers the economics have become so grim that harvesting grapes no longer makes financial sense. 

The latest layoffs come less than a week after E. & J. Gallo Winery – the largest wine company in the US which owns Barefoot Wine (pictured)

Stuart Spencer, owner of St Amant Winery in Lodi, said he left around 50 tons of grapes to rot on vines last fall because harvesting and processing them would have cost more than they were worth. 

‘We’re doing our best to keep our head above water,’ Spencer, owner of St. Amant Winery and executive director of the Lodi Winegrape Commission, told the LA Times. 

The departure of so many companies from the largest wine market in the US is a warning sign for an industry which is already struggling as Americans increasingly cut back on alcohol. 

In fact, industry insiders say the turmoil reflects several pressures hitting the sector at once.

Tamara Bingham, founding partner at brand strategy agency Likely Story Strategies, said California’s wine industry was already grappling with oversupply before tariffs and shifting drinking habits piled on new problems.

‘Too many producers and too many tasting rooms are chasing too little foot traffic,’ she said, adding that the high cost of making wine in California makes it difficult for smaller wineries to compete with cheaper imports.

Bingham said the industry is likely entering a broader ‘market correction,’ but rejected suggestions that wine itself is in decline.

‘Humans have been making and drinking wine for more than 8,000 years,’ she said. ‘It’s not going anywhere.’

Jim McClellan, founding partner of wine shipping platform FORT Systems, said sales are falling fastest among lower-priced wines, while ultra-premium bottles – which dominate direct-to-consumer shipping – have held up better.

California winemakers are confronting a ‘Grapes of Wrath’ moment as their businesses begin to collapse

But even high-end producers are seeing softer demand, he said, forcing wineries to rely more on customer data and targeted marketing rather than reputation alone.

LaToya Jordan, founder of MarbleWines.com, said today’s drinkers are becoming more selective about the brands they support and the experiences they want from wineries.

‘The market isn’t gone – it’s evolving,’ she said. ‘Brands that focus on storytelling, direct relationships with customers and experiences will be better positioned to survive.’

Keith Wallace, a sommelier program developer at the National Wine School, said the downturn is also being driven by demographic shifts as younger drinkers explore alternatives such as cocktails, hard seltzers and cannabis products.

‘Most of the decline is happening in entry-level wines,’ he said. ‘Higher-quality wines remain relatively stable, and many analysts see this as a short-term adjustment rather than a collapse.’

Aside from the wine industry, hard liquor distributors have been hit hard too.  

Stoli vodka and Kentucky Owl bourbon announced they would be shutting down earlier this year. 

Parent company Stoli Group said on Friday its US vodka and bourbon businesses are being liquidated after a bid to turn them around failed. 

The downturn is also being driven by demographic shifts as younger drinkers explore alternatives such as cocktails, hard seltzers and cannabis products 

Kentucky Owl built a cult following with limited-run bourbons that could sell for as much as $400 a bottle.

Meanwhile, Stoli became a nightclub and bar staple as well as a being popular in stores where a standard 750ml bottle sold for around $20.

The vodka was sold in the US as Stolichnaya – which roughly translates as ‘capital city’ in Russian – in the US until 2022. 

But the company rebranded as Stoli following Russia’s invasion of Ukraine, and widespread boycotts of Russian-branded items. 

The company said its troubles began after its public support for Ukraine. Its assets were seized in Russia and the company alleged that a massive cyberattack had undermined its US production facilities.  

Diageo, Pernod Ricard, Campari, Brown Forman and Rémy Cointreau, the five largest alcohol producers, are reportedly stuck with $22 billion worth of aging inventory, according to Financial Times. 

They are behind household names like Johnnie Walker, Smirnoff, Absolut, Jack Daniel’s and Hennessy.

It is a pileup that begin with overproduction to meet demand during the Covid-19 pandemic.