Hang on. Just another year of pain. Then a couple of years along a "bumpy bottom" and then modest growth.

That the forecast of Rob McMillan, EVP and founder, Silicon Valley Bank Wine Division, in the bank's annual ."State of the U.S. Wine Industry" report.

The wine industry ended 2025 with volume of 329 million cases, down 2% from 335.9 million in 2023, says Rob McMillan, EVP and founder, Silicon Valley Bank Wine Division. Revenue was $74.3 billion, down from $75.5 billion.

Even now, he says, upper quartile wineries continue to grow despite and nd to "the long era of passive demand – when visitation, distributor pull and automatic club growth could mask strategic shortcomings – has ended."

Why do upper quartile wineries show growth while lower-performing wineries struggle? "Top-performers focus on dialed-in consumer engagement, disciplined inventory and financial management, more precise brand positioning, and hospitality-centered experiences that build loyalty rather than throughput."

As for lower performers, they cite "slowing traffic, distributor disengagement, discounting and rising costs—responses that, while accurate, reflect the lack of strategic attention."

McMillan says it's not necessary to be right about when the bottom will arrive. "The most important goal now is to be predictive of the evolved consumer, identify opportunities, and prepare to benefit from a changed business as market demand bottoms. The most important goal is to be relevant to the lifestyles of a different consumer. You have to compete to earn share and be a part of that consumers’ occasions when they choose to drink."

The Survey Shows

Roughly half of wineries rate 2025 negatively. They tend to rely more on traditional wholesale. DtC has outperformed wholesale, but they haven';t adjusted. The top quartile of wineries in sales growth, however, tend to be smaller and more proactive, adjusting inventory and SKU counts, deploying targeted hospitality and cost-cutting that seeks a return on investment.

Fewer wineries told McMillan their financial condition was "strong" or "Very strong." Margins are being squeezed by higher input costs, rising interest rates and flat revenue.

For growers, the bad news is significant tonnage was unharvest. "Some believe the short harvest of 2025 will help more growers find contracts in 2026 and beyond. The problem with that logic is that there isn’t sufficient pull-through today to reduce the inventory bubble at wholesale. Without reducing supply, producers aren’t going to contract for more fruit. The best we can say is the light harvest won’t make the situation worse," he says.

McMillan advises wineries to "contracting with growers important to your brand, but to depend more to the spot market for grapes around harvest to fill out their remaining grape needs."

Keys to Success

Even amid declines in visitation, DTC remains the economic engine of the premium wine business. Tasting rooms and wine clubs account for more than half the average winery's reenue, McMillan says.

On pricing: About half plan to hold prices steady, a quarter plan small increases on small items. Few plan broad price reductions. Top performers are eliminating low-margin SKUs, shifting volume to higher-margin channels, controlling labor, investing in data tools to improve wholesale efficiency.

McMillan cautions against “'promotions' or broad discounting—tactics that risk eroding their long-term brand equity

On M&A: Fewer than one in five wineries say they are interested in buying wineries, vineyards are both, but the number of sellers has increased. But more investors are wondering if this is the time to invest.

On marketing: Treat clubs as core revenue engines, fewer SKUs, clear messaging. Use social and email to amplify events, clubs and releases.

On hospitality: Appointment driven, curated, with trained hospitality experiences.

Here's what McMillan finds top-performing wineries are doing differently:

• They treat the club as the core of the business. Clear value propositions, two-way communication, curated experiences and club-first allocation.
• They differentiate with slower pace, and know beforehand when the conversation is about wine education or fun. Some guests want depth, narrative and conversation—others want something unique and aligned with their values and desires.
• They treat digital storytelling as hospitality, and recognize the goal is to be inclusive and extend the halo from in-person hospitality between visits.
• They are deliberate with pricing and allocation. They hold discipline, avoid detached discounting and reinforce perceived value.