Economic Impact of California Wine Country Wildfires: Preliminary Analysis

wine-country-fireLike most of you I have been intently focused on the wildfires that have swept through the California North Coast wine region and their tragic human impact. It is difficult to accept that such loss of life and property is possible, but the fires and the winds that drive them have been relentless.

I started getting calls from reporters as soon as a wildfire emergency was declared and, like many others, I declined to comment on the economic impacts. Too soon to know, I said, and not the real story in any case. More important to tell the human story and help people come together and cope with loss.

Still Too Soon

It is still too soon to know the economic impacts. The fire danger continues and the fatality  and property damage reports are still coming in. But I have started to think about the nature of the potential losses to the wine industry. As Tom Wark wrote last week,  we need to think about what happens when the fires are finally out, even if that’s not the most important immediate concern.

Here is what I am thinking now. The direct impact of the wildfires on California wine will very unevenly distributed, because that’s how a wildfire works, but the indirect effects are likely to be even larger and widespread. It is important to get out the message that California wine is open for business.

Uneven Direct Impact

The North Coast region (Napa, Sonoma, Mendocino, and Lake counties) is very important in terms of the value of the wine it produces, but is dwarfed by Central Valley production in terms of volume. The huge quantities of California appellation wines that fill the nation’s retail shelves will not be much affected by the wildfires. This is important to realize since some press reports link the wildfires to the tight global wine market that has resulted from poor harvests in Europe this year, which risks giving a false impression about wine supplies in California.

While some North Coast vineyards and wineries lost everything, others suffered little or no direct damage to cellar, vineyard, or wine stocks. The floor of the Napa Valley, for example, is not much damaged so far. But that doesn’t mean that wineries without direct damage won’t suffer an economic loss.

Wine Tourism Losses

No way to put a dollar and cents  figure on the direct losses until individual assessments of winery destruction, vineyard damage, loss to stored wines, possible smoke taint issues, and so forth are made. But we can already see the indirect cost in one area: tourism.

napa1Wine tourism is incredibly important to Napa and Sonoma these days, both for the high-margin direct sales that wineries there increasingly rely upon to compensate for escalating grape costs and for the hospitality industry that has grown up to serve wine tourists.  The economic impact of wine tourism is very large for the region.

On a typical day in 2016, according to the latest Napa tourism economic impact study, there were almost 17,000 tourist in the Napa Valley who spend more than $5 million. These are not typical days and the income and jobs those numbers represent are nowhere to be seen for now.

The wildfires have obviously interrupted wine tourism even for wineries that are not directly affected by the fires and it is not clear how soon anything like a normal tourist flow will return. This is complicated by a number of factors including the perception that the whole region is badly burnt and therefore closed for business, damage to transportation and hospitality infrastructure, and problems for the workers who support both the wine and hospitality industries.

It’s a People Business

Many of the workers who live in the region are dealing with personal losses or are busy helping those in need. The hundreds of workers who live outside the local area and commute to jobs in Napa face obviously obvious obstacles, too. In the short term I am told that it is actually the shortage of staff more than the direct impacts of the fires that limits winery operations in many cases.

The bottom line is that while the direct damage from the firestorm is large but unevenly distributed, the indirect costs are likely to be even bigger and affect almost everyone in the region, wine people and non-wine folks, too.  It is not entirely clear what normal will look like when the smoke clears and it will take some time to find out. But, as Tom Wark writes, Napa Stands Strong (and Sonoma, too) and it is important to press ahead.

Renewal and Rebirth

The videos I have seen of  the fire damage bring to mind scenes of burning Napa vineyards that appear in a wonderful 1942 book by Alice Tisdale Hobart called The Cup and the Sword (which was made into a terrible 1959 film called This Earth is Mine starring Rock Hudson and Jean Simmons and set in Napa and Sonoma).

Hobart’s novel is about the resilience of the strong women and men who built the California wine industry and the vineyard fire signifies rebirth from the ashes because, with some effort and care, the sturdy vines in the novel do come back to life. It is an image to keep in mind today when recovery, rebuilding, and rebirth are on our minds once again.


4 responses

  1. Having lived in the Bay Area for 29 years before moving to Minnesota seven years ago, I know many of the people involved in the wineries. Fortunately, at least as far as we can tell now, none of them lost their property, but will still feel an impact, One winery, Judd’s Hill, across the Silverado Trail from the Atlas Peak Fire, had no damage to the winery or the vineyard. But here is something most of us have not considered: the wines they had recently crushed need daily tending and monitoring. The winemaker had to have an escort to get in each day to attend to this duty. They were lucky, since many of the wineries have not been accessible for days or even more than a week. That will complicate the vintage as will smoke taint, and the effect of ash covering the vineyards in some areas.
    The timing was also a problem with the Trump administration’s misguided treatment of ‘illegal’ workers. First, California legalized marijuana which has drawn off some workers for better pay and working indoors instead of the hot sun. The ignorance of cracking down…to protect American jobs is unbelievable. These are jobs Americans won’t take. Furthermore, prior to 9/11 they had their green cards and would come up to work the vineyards and orchards up and down the West Coast, then return home to their families in Mexico and other Latin American countries. These were not illegals, merely people trying to provide a better living for their families in jobs no American is willing to do.
    Post 9/11, they stayed, sending remittances back to their families. One man I knew had been here for five years. He was an accomplished artist in Pueblo, Mexico, but couldn’t make money there, so he came up and stayed, restoring some paintings, doing odd jobs, etc. I asked him how he did it. He said he talks to his wife once a week (lives in an apartment with five other men), and sends most of his money home. I felt for him, and then he added, “but my son goes to the university…he couldn’t have if I had stayed there.”
    The same goes for other workers, who have been forced into longer commutes as rents have risen in the valley, Now many are in hiding for fear of being deported as happened in Texas and Louisiana. One has to wonder what will happen next year…eh, Mr. Trump your Attorney General?
    Tragedies are supposed to bring us together as one…I have seen little of that in the string of crises this year. By the way, I am always asking winemakers about climate change. I have yet to find even one who doesn’t believe it is happening. After all they keep detailed daily records of temperature, rainfall, frosts, etc. But what do they know, versus industries that benefit from doing nothing and of course…Trump.
    Basically, as Joe Heitz told me decades ago, “it’s not romantic, it’s agriculture…farming.” Now if we could just get Congress and the Administration to believe that.
    Why can’t we, as Americans, see we are doing far too many things wrong…and for what? Money!

  2. Mike, on Tuesday, Dan Sumner and I wrote a short piece trying to detail the potential cost to the roughly 10% of Napa and Sonoma grapes that remained on the vine at the time of the fire. You and your readers may find it of interest. Please note that we were trying to calculate the maximum loss–we have no way of knowing to what extent grapes suffered from smoke-taint.

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