French Insider Podcast Ep. 43
The State of the U.S. Wine Industry with Jean Hoefliger of JH Wine Consulting
Thank you for downloading this transcript.
Listen to the podcast released January 26, 2026 here.
In this episode of French Insider, Swiss-American winemaker Jean Hoefliger joins host Karl Buhler to discuss the latest trends, challenges and global shifts shaping the U.S. wine market. They explore everything from champagne’s continued popularity and Napa’s reputation to French investment influences and the evolving business models behind American wineries.
About Karl Buhler
As an associate with the Corporate and Securities Practice Group and French Desk in Sheppard Mullin’s New York Office, Karl Buhler focuses on domestic and cross-border transactions, including mergers, acquisitions, joint ventures and complex commercial agreements in industries such as technology, communications, life sciences, energy, defense and aerospace. In particular, he advises foreign companies with the installation and development of their operations in the United States.
About Jean Hoefliger
Born in Switzerland, Jean Hoefliger worked in vineyards and wineries throughout the world before landing in Napa Valley in 2001. After working for 15 years as a winemaker, he switched to consulting, and today has consulted with over 25 brands spanning the globe—from California, Oregon and Washington to Italy, Switzerland, and Australia.
Transcript:
Speaker 1:
Welcome et bienvenue à French Insider, the Sheppard Mullin French desk monthly podcast dedicated to French investors and companies investing and doing business in the United States. Each episode features conversations with thought leaders and experts in various industries on the business environment and challenges in investing and successfully growing in the U.S. And now, for the inside look.
Karl Buhler:
Hello, everyone. My name is Karl Buhler. I am an associate at Sheppard Mullin in New York. And in today's episode of the French Insider Podcast, we welcome Jean Hoefliger, who is a Swiss-American winemaker.
Hello, Jean. How are you?
Jean Hoefliger:
Thanks for having me. I'm doing well.
Karl Buhler:
Happy New Year.
Jean Hoefliger:
Happy New Year to you guys as well.
Karl Buhler:
All right. So as I understand, you've been living in California since '01. You are an expert in the wine industry, not only in California, but in the rest of the world, and we'd be happy to learn from you and discuss the state of the wine industry in the U.S. and the rest of the world. So why don't you tell us a little bit more about yourself?
Jean Hoefliger:
Well, it's interesting to be interviewed by attorneys because I was born and raised in Lausanne, so it's on the French-speaking part of Switzerland. And because every person on both sides of the ocean, my mom being American and my dad being Swiss, went to law school, and so I thought I would do exactly the same thing and I actually went to law school for two years. But the only thing that I actually studied during these two years of law school was to play cards and taste wine.
So after two years of law school, I decided to do something else with my life and went into wealth management because of course, in Switzerland and in business in general, it's quite a useful tool to have. And the same theme came back, wine, wine, wine. So I decided to go and jump in the wine world. I traveled first and worked in California, South Africa, Bordeaux, completing all my wine-making degrees in Switzerland.
Went back to Bordeaux at Lynch Bages, and then wanted to go back to that very entrepreneurial, creative American way, and went back to Napa Valley and became the winemaker of Newton Vineyard in St. Helena, where I stayed for five years, and then started Alpha Omega and ran Alpha Omega business in the wine-making for 15 years before kind of switching, because I've been asked over the years by many different people to help them with their brand, to help them with their wine-making, and so I became more of a consultant. And now, a consultant in Australia, Spain, Italy, Switzerland, Oregon, Washington, Texas, Napa, Sonoma, a lot of different places.
Karl Buhler:
Fantastic. So let's start today with the U.S. wine market. It seems like things have been changing over the past years and the aftermath of COVID is definitely something that has impacted the wine industry in the U.S. and the rest of the world. So would you tell us what's happening in the U.S. wine scene now?
Jean Hoefliger:
Well, yeah. The U.S. wine scene is going through a troubled time. And why do I say that and how did it come to that? First, you named it, COVID. Well, COVID was actually very helpful for the wine industry because people had to stay home and a lot of them purchased wine and relearned how to cook and to live at home. So they ordered wine to be delivered, the direct-to-consumer model.
The other thing that was very useful during COVID is we were able to engage with the Millennial because suddenly, the wine industry finally modernized itself into offering digital experiences and Zooms. And events with screens indeed, but educational events. So that helped us engage the younger generation into the wine world, and we saw sales dramatically go up during COVID.
But the consequences of the post-COVID is of two. First, there's much less gathering. Social gathering are way down. Clearly, most of drinking is when people get together, especially in a society like the U.S. where wine is still a luxury good versus the old Europe where wine is more of a daily consumption good. So people still don't have the habit of having just a glass of wine with dinner.
So because of COVID and that drop in gathering, we saw consumption go down. People also started seeing on the internet, on social media how news and facts spread extremely fast, starting that hyper-health movement. And of course, you listen to what you hear and somebody suddenly says that everything is bad and don't drink any type of alcohol which is so short-sighted. Many, many different medical groups would scream it's the polar opposite. But all of that dramatically disturbed the wine consumption pattern in the U.S.
But the most and biggest part. I consult for a multi-billion-dollar group and they established, made a big study to understand why that downturn in wine consumption in the U.S. And more than 60% of the equation was a lack of disposable income in the younger generation. That means that they don't have the money, the buying power, and are not willing to put that money into buying a bottle of wine versus other pleasures, including cannabis, including shots and mixology, and all the other options that are now present.
Karl Buhler:
I recently attended an event where the speaker was saying that also, the new generation, there's a new kind of taste and they are seeker for a more sweeter wine, as opposed to what the offer is now. And there seems to be a gap between what wineries are preparing, as opposed to what the young generation consumers are looking for.
Jean Hoefliger:
First, in the American world, food in general, but drinks as well, we are educated and raised in a much higher sugar content society. So the sugar content is very, very important. And if you look at the start of the wine industry which is clearly more recent than in other parts of the world in the U.S., a lot of the white zinfandel, all these wines had sugar, had sweetness. And progressively, because America learns much faster to almost compensate for the lack of history, we adapt, we learn, and we research and learn faster. So we transformed all these wines into bigger, juicier, fruitier wine, but not sweet.
And today it's true that with cocktails, sweetness come, but so is lower alcohol content wines or non-alc wines is an option as well. And it's really interesting to see a shift from the last 20 years where red wines were clearly the dominant force of the industry into white wine. It is, first, the price point is lower clearly, but they also have the feeling that it is not as heavy and therefore healthier for them.
Karl Buhler:
What about rose? If I remember correctly, in the 2015, 2016, that's where there was a push of rose in America. Is it the same thing?
Jean Hoefliger:
Correct. I always in the wine world, you never want to be a trend follower because if you start following a trend, by the time you produce the wine bottle, the wine gets on the market, the trend already has passed. So it's easier to be a trend-setter, to be ahead of everybody else.
You mentioned the rose, it's the perfect example. Rose went through a boom over the last 10 years where every single winery was producing rose, there was not enough rose on the market, but rose is a very seasonal wine. 90% of rose is consumed during spring and summer, dependently of where you are. Clearly, earlier in Florida or in Arizona because people go there during winter to find the sun and eat. But it's actually, its shelf life or its trend life between the vintage is fairly small.
So everybody was trying to produce rose as fast as they could for these type of markets, but then the trend die. Today it's a segment that it is extremely difficult to sell and position to the point where I heard retailers, national retailers say, "We don't even accept free rose anymore because the supply is so big."
But you're correct that rose matches a lower price point, usually a little bit lower alcohol and it is one of the wines that the younger generation enjoy.
Karl Buhler:
Fascinating, I see. So let's change the thought a little bit. How would you say the U.S. wine stands in the global context?
Jean Hoefliger:
Well, the U.S., let's take Napa Valley because Napa Valley is special for many different things. Clearly, its geological formation within a valley of 30 miles of length by five of width. You have 120-some soil variation, you have 25 major soils of the world in that tiny region. And that's really, in addition to the consistency of climate, it brings what is special about Napa.
Napa builds itself on the local and domestic market and therefore, it started growing not only, as far as consumption within the U.S., but also bring hospitality to Napa. So the direct to consumer was really the model, is really the model for most wineries of Napa outside, of course, of the bigger producer. You can imagine that your direct sales channel plateau at a certain point, and as you produce hundreds of thousands of cases or millions of cases, you will not have that type of visitation to be able to sell this type of volume. But globally, Napa is and banked on the direct to consumer experience.
So they did very, very well until COVID, you're 100% right. And the same thing happened after COVID, everybody wanted to get out. But I think that Napa in general got a little bit too cocky with price. Price of hotels, of restaurants, of wines, of tastings. And after the bubble, what I call the COVID bubble burst because for the first time during COVID, people started saving in the U.S. We saw credit card debt going down, we saw people saving money, be really conscious about their spending. And as soon as COVID was done and they could travel, they exploded, they wanted to enjoy life and did that.
But after that, when that disposable income disappeared, it became reality again. So the wineries that had over the 10, 20, 30 last years grew a DTC base and experience in Napa at a fairly high price point, when these people started seeing that they could order the wine in their local retailer or they had local wineries that they could go at these price points, they decided, "Well, we're going to look for other options." And that's not even talking about the younger generation because the younger generation is clearly looking for an experience and just going for Napa for a tasting is not sufficient enough. They need education, they need something that will bring memories to them.
Karl Buhler:
And do you know if what they do in Napa has been exported to the rest of the world, or was it something already in France, Spain, fairly un-unique, and that Napa just inspired them?
Jean Hoefliger:
No, it's really interesting. Napa was clearly ahead of it. And when I was at Lynch Bages, for example, early 2000, 2000, 2001, the entire Route des Châteaux, so the Médoc road where most tourism is done, you would have knocked on many, many doors that were not open. And only the AXR Group at the time and Lynch Bages also were open to the public for tasting. Today, most of them are because they understand the model of direct to consumer. And it is clearly, that access to consumer is clearly the attraction of foreign investments into Napa Valley, into California, which has happened for now 20, 30 years with phases. With phases depending on global economy and global politics.
Karl Buhler:
So at first it was like you would open the winery so you could come and taste our wines, then there is a shop. And from what I understand, you can also get married on wineries now.
Jean Hoefliger:
Yeah, you have food and wine pairings, you've got blending sessions. There's a whole bunch of experiences because people want to live more.
And when I started Alpha Omega in 2005, we had a main counter, a main bar. Because at the time, and you're talking 2005, not that long ago, but in 2005, '06, people would want to come to Napa just to taste the wine and to be poured wine, to have access to the wine and leave. Today, stand-up counters don't work. Today most people want a sit down experience, a one-on-one experience with a winery associate that tells them the story behind the wine, the philosophy about the wine, and really showing them the origin. The true authenticity of what's behind the wine and the brand.
Karl Buhler:
Okay. So I guess the fact that they let their consumers in and they show them their wineries and how they make wine, somehow it translated in the pricing of the bottles that they sell, right?
Jean Hoefliger:
That is correct because the direct to consumer has a cost. Because you could imagine that an associate can only see X amount of people per day and therefore the cost of that associate has to make sense, and you reflect these sales and marketing costs into the price of the bottle. But the other good part of being able to have sales go through direct to consumer is your margin for winery are better as well.
But that is a very interesting point to say that the more experience, the more sophisticated experience you get, the more cost you accrue and therefore it's going to be reflected in either the experience, but usually people don't charge that much for the experience. They charge for the bottle of wine.
Karl Buhler:
I see, I see. In terms of pricing, would you say that the bottle from Napa comparatively to what we can have in Europe, or South America or South Africa, for instance, is the valuation adequate at this stage? Or there's been some kind of inflation which is also reflected because of the inflation post-COVID years?
Jean Hoefliger:
That's a great question and I think it's a little bit of both. So first thing first, to compare apples to apples. If you think about what we are doing today in Napa Valley, in California versus Central Valley. In Central Valley, so the valley that is standing between San Francisco and Los Angeles inland where most of the grapes are cultured. Napa is only 5% of California production. A ton of grapes of Cabernet Ernesto vino in Central Valley is going to be 700 to 1000, $1500. And an acre is going to yield about five, seven, to 12 tons an acre. In Napa, the average ton of grapes is at, let's say $7500, and you average three tons to the acre, but you have certain exceptional sites that go up to 50 or $60,000 a ton of Cabernet Ernesto vino.
And clearly, when you have these [foreign language 00:15:56], these amazing terroir, I call it that sing story that dramatically transfer from the grapes into the wine, and ultimately the mouth and the nose of the consumer while you set a higher price point. But nowhere in the world today will you find people that are charged the prices per ton that we are in Napa Valley.
Karl Buhler:
In one side note, you said that Napa only represents 5% of the wine being produced in California?
Jean Hoefliger:
Yeah. Volume-wise, Napa is less than 5% of California wine.
Karl Buhler:
Pardon my ignorance, but where is the rest coming from?
Jean Hoefliger:
So for example, Sonoma is five-times bigger than Napa. And then most of the California production is in that Central Valley, which is between, say East Bay of San Francisco going south. Lodi, and Tracy, and Modesto and all that.
Karl Buhler:
I see. Now we'd like to talk about French investment in America. Over the past years, we've seen a real interest of French companies investing, acquiring American wineries. That comes along with the rest of the French businesses located in California and serving the wine industry in general. Do you have any comment on that? Do you see sort of an influx, or is it somewhat on pause because of the international context?
Jean Hoefliger:
That's an amazing question. I talked a little bit earlier about the phases of investment in Napa. And I think every wine region, Bordeaux, including Burgundy for sure, but Texas and Australia are the same, have to protect their asset. At one point, it's important to know what you're sitting on for history, for culture, for everything that goes with it, but Napa went through phases of investment. We had Chinese investment for a while, we had Russian investment for a while. We had now what I call the French investment phase and it has been happening over the last 10 years.
Why? Because I think that French people have looked at Napa a little bit as their lab on the corner of their eyes saying, "Oh, that's something to watch, but clearly they don't have the history and the proven track of great terroir." And then progressively, Napa Valley has shown that they were not only able to produce world-class wines, but most importantly especially in business, to sell them and at a high price point.
So there's two different type of investors in Napa today. Usually, American investors go and buy brands because what they try to do is mainly a scalability model. Most of French investors, and the latest ones are clearly, who are LVMH, Rothfeld, [foreign language 00:18:46], the Cathiard Family with Flora Springs, et cetera, et cetera. Most of the French, because they have so much history behind in the wine industry, in the specific field, always like their purchase to come with a tradition, a land and an asset.
So it's really funny, it's interesting, because they're extremely successful brands that we call virtual brands in Napa that don't own vineyard, that own a winery. But French companies are almost never interested in these models because French companies look for establishing a history, a legacy over time with vineyard and I think that changes completely the model.
Karl Buhler:
All right. I guess those virtual brands, as you name them, they don't really exist in France, right?
Jean Hoefliger:
No, they don't. But most, most American brands, and that's one of the mistakes that we've made I think over time in Napa, is we were so lucky to be able to sell our production fairly easily within the U.S. that I have the feeling that we almost overlooked the international market and the export market. And in order to establish a real legacy, A, you need time, and you need the world. So you have to push from the DTC model of Napa Valley itself to trying to use the wholesale model and to pay the marketing dollars to go establish your brand in the rest of the world.
Karl Buhler:
In Napa's support, from what I understand, there is also a whole generation of French winemakers and Italian winemakers who moved to Napa and brought with them their knowledge and skills that they able to have in their own country, right?
Jean Hoefliger:
Yeah. It's true that for many many years and especially at the beginning of the establishment of Napa, European winemakers were extremely sought, they were extremely precious because of their experience. But now there's wine-making school everywhere in the world that train fairly well and educate fairly well young people that then can establish their experiences.
But it is true that, in certain vintages and certain conditions, it's really useful to have people that come from the profile of that vintage. Let me explain. If you have a very cool year, like we did in 2011 for example in Napa, European winemakers did really well because they know how to handle these type of situations. Rain, Napa winemakers often are completely freaking out if there's three drops of rain. In European winemakers, we see rain pretty much every harvest at least once or twice so we're used to handling these. And I think more and more, to have a winemaker that has a global experience of different climatic response of the vintage is very useful.
Karl Buhler:
You see the next area that seems to be highly rated is Oregon. Do you have a few word about Oregon?
Jean Hoefliger:
Yeah. So I worked with actually the Champagne Bollinger, who owns a winery called Ponzi up in Oregon. We make pinot and chardonnay out there. And there's two things.
First, you have to understand that one of the big problem of Napa Valley today is clearly its price point. And what is Napa Valley? Well, clearly cabernet is king. That is king in Napa and the price point of these wines became really high. And people that did not have and don't have the means to be able to purchase these type of bottles are going to shift to other regions.
In addition to Oregon is still affordable as far as land, and therefore as far as the reflected price point of the bottle. But also, it is cooler climate and you grow a thinner-skinner varietal like pinot noir, which are lighter reds and I think that the consumer are looking for that, are looking for wines that are a little bit more aerial and not as dense and concentrated. As I said earlier, the American wine consumption history is fairly short and therefore the pendulum of trend swings wider.
And in [foreign language 00:23:10] for example, we went through these very European Bordeaux [foreign language 00:23:14] in the '70s to the '80s, '90s, to these very juicy, soft, no tannins, no acidity [foreign language 00:23:23]. But we're back into where the pendulum always settles, balance. With pinot noir, you have a little bit more elegance because they're thinner-skinner and you have wines that are a little bit more aerial and I think that's something to pull at people.
Karl Buhler:
And do you see the Napa U.S. wine industry heading this way, trying to set the new trend in terms of consumption and the wine that people would be willing to buy and drink?
Jean Hoefliger:
Yeah, I think there's zero doubt that we are going towards a price adjustment that will actually meet ultimately the buying power of consumers better. But I also think that we are becoming a less young consuming society, and therefore our tastes are becoming a little bit more refined, and with refinement comes balance. So in any varietal, chardonnay, cabernet, pinot, we are now at a time where people are looking for a little bit more balance, a little bit more elegance than just power and more power.
Karl Buhler:
I see. In terms of foreign investments in the U.S., do you see also a positive outlook in the long run?
Jean Hoefliger:
Yeah. Look, wine has been around for 12,000 years, it's not about to disappear. It might readjust itself, like any industry has phases. Now it's clear that with the current tariff negotiation, let's call it that way, with the current geopolitical situation that the investment in the U.S. as far as specifically as the wine industry is concerned is going to probably pause for a little bit and we're seeing that downturn. Most of the studies that I see state that the wine industry is going through a downturn that will come up probably mid to third quarter of '27 and then we'll start growing back again. And that is only dependent that if there's a recession, that increase in sales and popularity will come back, push back if there's a recession because again, of disposable income.
Karl Buhler:
Well, I think that's it. Thank you very much, Jean, for your time. That was very interesting and insightful. Really appreciate you taking the time to be with us today.
Jean Hoefliger:
Well, thanks very much for having me and I wish you all a happy new year. Don't forget that wine is not only a glass of alcohol, it is also a social helper, a relaxer and something that brings people together. And I think that's what's going to be really hard to contradict forever. Yes, we know antioxidants could be argued or not. Now there's a bunch of doctors that said that red wine specific is key to your microbes in your stomach and your intestinal system. So we'll see, we'll see. But thanks for having me and yeah, enjoy life.
Karl Buhler:
Thank you. Thanks for that.
Speaker 1:
This podcast is recorded monthly and available on Spotify, Apple Podcasts, Stitcher, and Amazon Music. As well as on our website, sheppardfrenchdesk.com. We want to help you, and welcome your feedback and suggestions of topics.
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The State of the U.S. Wine Industry with Jean Hoefliger of JH Wine Consulting
Thank you for downloading this transcript.
Listen to the podcast released January 26, 2026 here.
In this episode of French Insider, Swiss-American winemaker Jean Hoefliger joins host Karl Buhler to discuss the latest trends, challenges and global shifts shaping the U.S. wine market. They explore everything from champagne’s continued popularity and Napa’s reputation to French investment influences and the evolving business models behind American wineries.
About Karl Buhler
As an associate with the Corporate and Securities Practice Group and French Desk in Sheppard Mullin’s New York Office, Karl Buhler focuses on domestic and cross-border transactions, including mergers, acquisitions, joint ventures and complex commercial agreements in industries such as technology, communications, life sciences, energy, defense and aerospace. In particular, he advises foreign companies with the installation and development of their operations in the United States.
About Jean Hoefliger
Born in Switzerland, Jean Hoefliger worked in vineyards and wineries throughout the world before landing in Napa Valley in 2001. After working for 15 years as a winemaker, he switched to consulting, and today has consulted with over 25 brands spanning the globe—from California, Oregon and Washington to Italy, Switzerland, and Australia.
Transcript:
Speaker 1:
Welcome et bienvenue à French Insider, the Sheppard Mullin French desk monthly podcast dedicated to French investors and companies investing and doing business in the United States. Each episode features conversations with thought leaders and experts in various industries on the business environment and challenges in investing and successfully growing in the U.S. And now, for the inside look.
Karl Buhler:
Hello, everyone. My name is Karl Buhler. I am an associate at Sheppard Mullin in New York. And in today's episode of the French Insider Podcast, we welcome Jean Hoefliger, who is a Swiss-American winemaker.
Hello, Jean. How are you?
Jean Hoefliger:
Thanks for having me. I'm doing well.
Karl Buhler:
Happy New Year.
Jean Hoefliger:
Happy New Year to you guys as well.
Karl Buhler:
All right. So as I understand, you've been living in California since '01. You are an expert in the wine industry, not only in California, but in the rest of the world, and we'd be happy to learn from you and discuss the state of the wine industry in the U.S. and the rest of the world. So why don't you tell us a little bit more about yourself?
Jean Hoefliger:
Well, it's interesting to be interviewed by attorneys because I was born and raised in Lausanne, so it's on the French-speaking part of Switzerland. And because every person on both sides of the ocean, my mom being American and my dad being Swiss, went to law school, and so I thought I would do exactly the same thing and I actually went to law school for two years. But the only thing that I actually studied during these two years of law school was to play cards and taste wine.
So after two years of law school, I decided to do something else with my life and went into wealth management because of course, in Switzerland and in business in general, it's quite a useful tool to have. And the same theme came back, wine, wine, wine. So I decided to go and jump in the wine world. I traveled first and worked in California, South Africa, Bordeaux, completing all my wine-making degrees in Switzerland.
Went back to Bordeaux at Lynch Bages, and then wanted to go back to that very entrepreneurial, creative American way, and went back to Napa Valley and became the winemaker of Newton Vineyard in St. Helena, where I stayed for five years, and then started Alpha Omega and ran Alpha Omega business in the wine-making for 15 years before kind of switching, because I've been asked over the years by many different people to help them with their brand, to help them with their wine-making, and so I became more of a consultant. And now, a consultant in Australia, Spain, Italy, Switzerland, Oregon, Washington, Texas, Napa, Sonoma, a lot of different places.
Karl Buhler:
Fantastic. So let's start today with the U.S. wine market. It seems like things have been changing over the past years and the aftermath of COVID is definitely something that has impacted the wine industry in the U.S. and the rest of the world. So would you tell us what's happening in the U.S. wine scene now?
Jean Hoefliger:
Well, yeah. The U.S. wine scene is going through a troubled time. And why do I say that and how did it come to that? First, you named it, COVID. Well, COVID was actually very helpful for the wine industry because people had to stay home and a lot of them purchased wine and relearned how to cook and to live at home. So they ordered wine to be delivered, the direct-to-consumer model.
The other thing that was very useful during COVID is we were able to engage with the Millennial because suddenly, the wine industry finally modernized itself into offering digital experiences and Zooms. And events with screens indeed, but educational events. So that helped us engage the younger generation into the wine world, and we saw sales dramatically go up during COVID.
But the consequences of the post-COVID is of two. First, there's much less gathering. Social gathering are way down. Clearly, most of drinking is when people get together, especially in a society like the U.S. where wine is still a luxury good versus the old Europe where wine is more of a daily consumption good. So people still don't have the habit of having just a glass of wine with dinner.
So because of COVID and that drop in gathering, we saw consumption go down. People also started seeing on the internet, on social media how news and facts spread extremely fast, starting that hyper-health movement. And of course, you listen to what you hear and somebody suddenly says that everything is bad and don't drink any type of alcohol which is so short-sighted. Many, many different medical groups would scream it's the polar opposite. But all of that dramatically disturbed the wine consumption pattern in the U.S.
But the most and biggest part. I consult for a multi-billion-dollar group and they established, made a big study to understand why that downturn in wine consumption in the U.S. And more than 60% of the equation was a lack of disposable income in the younger generation. That means that they don't have the money, the buying power, and are not willing to put that money into buying a bottle of wine versus other pleasures, including cannabis, including shots and mixology, and all the other options that are now present.
Karl Buhler:
I recently attended an event where the speaker was saying that also, the new generation, there's a new kind of taste and they are seeker for a more sweeter wine, as opposed to what the offer is now. And there seems to be a gap between what wineries are preparing, as opposed to what the young generation consumers are looking for.
Jean Hoefliger:
First, in the American world, food in general, but drinks as well, we are educated and raised in a much higher sugar content society. So the sugar content is very, very important. And if you look at the start of the wine industry which is clearly more recent than in other parts of the world in the U.S., a lot of the white zinfandel, all these wines had sugar, had sweetness. And progressively, because America learns much faster to almost compensate for the lack of history, we adapt, we learn, and we research and learn faster. So we transformed all these wines into bigger, juicier, fruitier wine, but not sweet.
And today it's true that with cocktails, sweetness come, but so is lower alcohol content wines or non-alc wines is an option as well. And it's really interesting to see a shift from the last 20 years where red wines were clearly the dominant force of the industry into white wine. It is, first, the price point is lower clearly, but they also have the feeling that it is not as heavy and therefore healthier for them.
Karl Buhler:
What about rose? If I remember correctly, in the 2015, 2016, that's where there was a push of rose in America. Is it the same thing?
Jean Hoefliger:
Correct. I always in the wine world, you never want to be a trend follower because if you start following a trend, by the time you produce the wine bottle, the wine gets on the market, the trend already has passed. So it's easier to be a trend-setter, to be ahead of everybody else.
You mentioned the rose, it's the perfect example. Rose went through a boom over the last 10 years where every single winery was producing rose, there was not enough rose on the market, but rose is a very seasonal wine. 90% of rose is consumed during spring and summer, dependently of where you are. Clearly, earlier in Florida or in Arizona because people go there during winter to find the sun and eat. But it's actually, its shelf life or its trend life between the vintage is fairly small.
So everybody was trying to produce rose as fast as they could for these type of markets, but then the trend die. Today it's a segment that it is extremely difficult to sell and position to the point where I heard retailers, national retailers say, "We don't even accept free rose anymore because the supply is so big."
But you're correct that rose matches a lower price point, usually a little bit lower alcohol and it is one of the wines that the younger generation enjoy.
Karl Buhler:
Fascinating, I see. So let's change the thought a little bit. How would you say the U.S. wine stands in the global context?
Jean Hoefliger:
Well, the U.S., let's take Napa Valley because Napa Valley is special for many different things. Clearly, its geological formation within a valley of 30 miles of length by five of width. You have 120-some soil variation, you have 25 major soils of the world in that tiny region. And that's really, in addition to the consistency of climate, it brings what is special about Napa.
Napa builds itself on the local and domestic market and therefore, it started growing not only, as far as consumption within the U.S., but also bring hospitality to Napa. So the direct to consumer was really the model, is really the model for most wineries of Napa outside, of course, of the bigger producer. You can imagine that your direct sales channel plateau at a certain point, and as you produce hundreds of thousands of cases or millions of cases, you will not have that type of visitation to be able to sell this type of volume. But globally, Napa is and banked on the direct to consumer experience.
So they did very, very well until COVID, you're 100% right. And the same thing happened after COVID, everybody wanted to get out. But I think that Napa in general got a little bit too cocky with price. Price of hotels, of restaurants, of wines, of tastings. And after the bubble, what I call the COVID bubble burst because for the first time during COVID, people started saving in the U.S. We saw credit card debt going down, we saw people saving money, be really conscious about their spending. And as soon as COVID was done and they could travel, they exploded, they wanted to enjoy life and did that.
But after that, when that disposable income disappeared, it became reality again. So the wineries that had over the 10, 20, 30 last years grew a DTC base and experience in Napa at a fairly high price point, when these people started seeing that they could order the wine in their local retailer or they had local wineries that they could go at these price points, they decided, "Well, we're going to look for other options." And that's not even talking about the younger generation because the younger generation is clearly looking for an experience and just going for Napa for a tasting is not sufficient enough. They need education, they need something that will bring memories to them.
Karl Buhler:
And do you know if what they do in Napa has been exported to the rest of the world, or was it something already in France, Spain, fairly un-unique, and that Napa just inspired them?
Jean Hoefliger:
No, it's really interesting. Napa was clearly ahead of it. And when I was at Lynch Bages, for example, early 2000, 2000, 2001, the entire Route des Châteaux, so the Médoc road where most tourism is done, you would have knocked on many, many doors that were not open. And only the AXR Group at the time and Lynch Bages also were open to the public for tasting. Today, most of them are because they understand the model of direct to consumer. And it is clearly, that access to consumer is clearly the attraction of foreign investments into Napa Valley, into California, which has happened for now 20, 30 years with phases. With phases depending on global economy and global politics.
Karl Buhler:
So at first it was like you would open the winery so you could come and taste our wines, then there is a shop. And from what I understand, you can also get married on wineries now.
Jean Hoefliger:
Yeah, you have food and wine pairings, you've got blending sessions. There's a whole bunch of experiences because people want to live more.
And when I started Alpha Omega in 2005, we had a main counter, a main bar. Because at the time, and you're talking 2005, not that long ago, but in 2005, '06, people would want to come to Napa just to taste the wine and to be poured wine, to have access to the wine and leave. Today, stand-up counters don't work. Today most people want a sit down experience, a one-on-one experience with a winery associate that tells them the story behind the wine, the philosophy about the wine, and really showing them the origin. The true authenticity of what's behind the wine and the brand.
Karl Buhler:
Okay. So I guess the fact that they let their consumers in and they show them their wineries and how they make wine, somehow it translated in the pricing of the bottles that they sell, right?
Jean Hoefliger:
That is correct because the direct to consumer has a cost. Because you could imagine that an associate can only see X amount of people per day and therefore the cost of that associate has to make sense, and you reflect these sales and marketing costs into the price of the bottle. But the other good part of being able to have sales go through direct to consumer is your margin for winery are better as well.
But that is a very interesting point to say that the more experience, the more sophisticated experience you get, the more cost you accrue and therefore it's going to be reflected in either the experience, but usually people don't charge that much for the experience. They charge for the bottle of wine.
Karl Buhler:
I see, I see. In terms of pricing, would you say that the bottle from Napa comparatively to what we can have in Europe, or South America or South Africa, for instance, is the valuation adequate at this stage? Or there's been some kind of inflation which is also reflected because of the inflation post-COVID years?
Jean Hoefliger:
That's a great question and I think it's a little bit of both. So first thing first, to compare apples to apples. If you think about what we are doing today in Napa Valley, in California versus Central Valley. In Central Valley, so the valley that is standing between San Francisco and Los Angeles inland where most of the grapes are cultured. Napa is only 5% of California production. A ton of grapes of Cabernet Ernesto vino in Central Valley is going to be 700 to 1000, $1500. And an acre is going to yield about five, seven, to 12 tons an acre. In Napa, the average ton of grapes is at, let's say $7500, and you average three tons to the acre, but you have certain exceptional sites that go up to 50 or $60,000 a ton of Cabernet Ernesto vino.
And clearly, when you have these [foreign language 00:15:56], these amazing terroir, I call it that sing story that dramatically transfer from the grapes into the wine, and ultimately the mouth and the nose of the consumer while you set a higher price point. But nowhere in the world today will you find people that are charged the prices per ton that we are in Napa Valley.
Karl Buhler:
In one side note, you said that Napa only represents 5% of the wine being produced in California?
Jean Hoefliger:
Yeah. Volume-wise, Napa is less than 5% of California wine.
Karl Buhler:
Pardon my ignorance, but where is the rest coming from?
Jean Hoefliger:
So for example, Sonoma is five-times bigger than Napa. And then most of the California production is in that Central Valley, which is between, say East Bay of San Francisco going south. Lodi, and Tracy, and Modesto and all that.
Karl Buhler:
I see. Now we'd like to talk about French investment in America. Over the past years, we've seen a real interest of French companies investing, acquiring American wineries. That comes along with the rest of the French businesses located in California and serving the wine industry in general. Do you have any comment on that? Do you see sort of an influx, or is it somewhat on pause because of the international context?
Jean Hoefliger:
That's an amazing question. I talked a little bit earlier about the phases of investment in Napa. And I think every wine region, Bordeaux, including Burgundy for sure, but Texas and Australia are the same, have to protect their asset. At one point, it's important to know what you're sitting on for history, for culture, for everything that goes with it, but Napa went through phases of investment. We had Chinese investment for a while, we had Russian investment for a while. We had now what I call the French investment phase and it has been happening over the last 10 years.
Why? Because I think that French people have looked at Napa a little bit as their lab on the corner of their eyes saying, "Oh, that's something to watch, but clearly they don't have the history and the proven track of great terroir." And then progressively, Napa Valley has shown that they were not only able to produce world-class wines, but most importantly especially in business, to sell them and at a high price point.
So there's two different type of investors in Napa today. Usually, American investors go and buy brands because what they try to do is mainly a scalability model. Most of French investors, and the latest ones are clearly, who are LVMH, Rothfeld, [foreign language 00:18:46], the Cathiard Family with Flora Springs, et cetera, et cetera. Most of the French, because they have so much history behind in the wine industry, in the specific field, always like their purchase to come with a tradition, a land and an asset.
So it's really funny, it's interesting, because they're extremely successful brands that we call virtual brands in Napa that don't own vineyard, that own a winery. But French companies are almost never interested in these models because French companies look for establishing a history, a legacy over time with vineyard and I think that changes completely the model.
Karl Buhler:
All right. I guess those virtual brands, as you name them, they don't really exist in France, right?
Jean Hoefliger:
No, they don't. But most, most American brands, and that's one of the mistakes that we've made I think over time in Napa, is we were so lucky to be able to sell our production fairly easily within the U.S. that I have the feeling that we almost overlooked the international market and the export market. And in order to establish a real legacy, A, you need time, and you need the world. So you have to push from the DTC model of Napa Valley itself to trying to use the wholesale model and to pay the marketing dollars to go establish your brand in the rest of the world.
Karl Buhler:
In Napa's support, from what I understand, there is also a whole generation of French winemakers and Italian winemakers who moved to Napa and brought with them their knowledge and skills that they able to have in their own country, right?
Jean Hoefliger:
Yeah. It's true that for many many years and especially at the beginning of the establishment of Napa, European winemakers were extremely sought, they were extremely precious because of their experience. But now there's wine-making school everywhere in the world that train fairly well and educate fairly well young people that then can establish their experiences.
But it is true that, in certain vintages and certain conditions, it's really useful to have people that come from the profile of that vintage. Let me explain. If you have a very cool year, like we did in 2011 for example in Napa, European winemakers did really well because they know how to handle these type of situations. Rain, Napa winemakers often are completely freaking out if there's three drops of rain. In European winemakers, we see rain pretty much every harvest at least once or twice so we're used to handling these. And I think more and more, to have a winemaker that has a global experience of different climatic response of the vintage is very useful.
Karl Buhler:
You see the next area that seems to be highly rated is Oregon. Do you have a few word about Oregon?
Jean Hoefliger:
Yeah. So I worked with actually the Champagne Bollinger, who owns a winery called Ponzi up in Oregon. We make pinot and chardonnay out there. And there's two things.
First, you have to understand that one of the big problem of Napa Valley today is clearly its price point. And what is Napa Valley? Well, clearly cabernet is king. That is king in Napa and the price point of these wines became really high. And people that did not have and don't have the means to be able to purchase these type of bottles are going to shift to other regions.
In addition to Oregon is still affordable as far as land, and therefore as far as the reflected price point of the bottle. But also, it is cooler climate and you grow a thinner-skinner varietal like pinot noir, which are lighter reds and I think that the consumer are looking for that, are looking for wines that are a little bit more aerial and not as dense and concentrated. As I said earlier, the American wine consumption history is fairly short and therefore the pendulum of trend swings wider.
And in [foreign language 00:23:10] for example, we went through these very European Bordeaux [foreign language 00:23:14] in the '70s to the '80s, '90s, to these very juicy, soft, no tannins, no acidity [foreign language 00:23:23]. But we're back into where the pendulum always settles, balance. With pinot noir, you have a little bit more elegance because they're thinner-skinner and you have wines that are a little bit more aerial and I think that's something to pull at people.
Karl Buhler:
And do you see the Napa U.S. wine industry heading this way, trying to set the new trend in terms of consumption and the wine that people would be willing to buy and drink?
Jean Hoefliger:
Yeah, I think there's zero doubt that we are going towards a price adjustment that will actually meet ultimately the buying power of consumers better. But I also think that we are becoming a less young consuming society, and therefore our tastes are becoming a little bit more refined, and with refinement comes balance. So in any varietal, chardonnay, cabernet, pinot, we are now at a time where people are looking for a little bit more balance, a little bit more elegance than just power and more power.
Karl Buhler:
I see. In terms of foreign investments in the U.S., do you see also a positive outlook in the long run?
Jean Hoefliger:
Yeah. Look, wine has been around for 12,000 years, it's not about to disappear. It might readjust itself, like any industry has phases. Now it's clear that with the current tariff negotiation, let's call it that way, with the current geopolitical situation that the investment in the U.S. as far as specifically as the wine industry is concerned is going to probably pause for a little bit and we're seeing that downturn. Most of the studies that I see state that the wine industry is going through a downturn that will come up probably mid to third quarter of '27 and then we'll start growing back again. And that is only dependent that if there's a recession, that increase in sales and popularity will come back, push back if there's a recession because again, of disposable income.
Karl Buhler:
Well, I think that's it. Thank you very much, Jean, for your time. That was very interesting and insightful. Really appreciate you taking the time to be with us today.
Jean Hoefliger:
Well, thanks very much for having me and I wish you all a happy new year. Don't forget that wine is not only a glass of alcohol, it is also a social helper, a relaxer and something that brings people together. And I think that's what's going to be really hard to contradict forever. Yes, we know antioxidants could be argued or not. Now there's a bunch of doctors that said that red wine specific is key to your microbes in your stomach and your intestinal system. So we'll see, we'll see. But thanks for having me and yeah, enjoy life.
Karl Buhler:
Thank you. Thanks for that.
Speaker 1:
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