Senate CA Wine2 — 2026-03-12

All right, thank you, Senator. Good afternoon, Dr. Torrence Powell. I'm the Superintendent President here at Napa Valley College. Just very briefly wanted to say welcome to our campus. It is an extreme privilege and honor for us to host such an important event for our region and for our state. Here at the campus, we are inextricably linked to the wine industry in the wine field, being a licensing bonded winery ourselves. So really looking forward to the chance for you to be on campus and to do some productive work. So just want to say welcome to Napa Valley College. Welcome to Napa and have a great meeting.

I'll make it quick. Thank you everyone for being here. You know, Napa Valley is the heart of our wine and economic development here.

Is it on now?

Okay. I just want to thank you all for being here. Wine is such an important asset to our community and it's just delightful to see everybody here today. As you know, is that I been working in this area for 10 years, hopefully a few more years. And I've always enjoyed and appreciate the input that all of you have provided myself in your agricultural community. So thank you very much for being here today. I look forward to the conversation.

Thank you for that. Chair Caboldan. Good afternoon to yourself and Assembly Majority Leader Agriyard. I'm Curry of the Select Committee on the State of the Wine Industry. My name is Damien Wilson. As mentioned, I'm the faculty director of the Wine Business Institute at Sonoma State University. And I'm going to echo a number of the comments that you mentioned just earlier, Senator Caboldan. Firstly, that the wine industry will work its way through this summer challenge that we're facing at the moment. And despite the fact that things may look kind of challenging to a certain degree, we've got both the skills and the people behind us to get us out of this challenge. In your packets you will find our briefing memo which outlines the structural changes impacting our industry. The local wine industry is worth almost $80 billion to the California economy. And now putting that into perspective, it's roughly equal to the net surplus of tax revenue that the state of California contributes to the federal government. So losing that would be quite a loss indeed. I'm here to talk about the recent change from the era of uninterrupted growth we enjoyed from 1993 to 2023, 30 years of growth which led us into this situation. We find ourselves at the moment where Wine production has plummeted from nearly 900 million gallons in 2017 to less than about 650 million today. That's quite a fall in a short period of time. We are no longer in a cyclical dip. We are in a period of profound structural change. So our memo highlights three key headwinds that demand a bipartisan response. The first one is economic contraction. Our producers are facing a triple threat of inflationary input costs, labor shortages and a housing crisis. And as noted in our memo, these costs are squeezing margins for everyone from small family estates to our largest producers. The second challenge is the shift in consumption. We have a demand deficit more so than a supply of production. This demand deficit has come about because of what I've termed the premiumisation mirage. Because while direct to consumer prices from wineries, which is the most valuable distribution channel, rose 40% between 2021 to 2025, that's at an average currently of nearly $57 a bottle. What that's done is effectively created a gap, or what is termed an absent welcome, for Gen Zs and millennials, the new consumers who would typically be the ones we'd expect to be coming into the wine industry. We've effectively put wine in a position where we're risking pricing it out of the next generation of Californians. People are missing out on that joy and pleasure because the cost of entry is perceived to be too high. And that leads to the third challenge, which is the paradox of prestige. We have relied on a miseducated frontline salesforce who have primarily or for too long have promoted technical elitism over consumer accessibility. This tail wagging the dog approach, where we're using the top end to lead the directions of the market, is quite simply unsustainable if we can't bring new consumers into the category. So what's the path forward? Well, we have a number of opportunities and we're focusing on them specifically. The first one is a strategic change or pivot to focus on net customer acquisition. Data and evidence from around the world, across time and geography shows that five, six or five out of six brands grow successfully over time from acquiring new consumers, not just squeezing more from the ones we have or relying on loyal customers trading up. We must instead focus on appeals that are more big, familiar and local to help rebuild our base of consumers. The second opportunity for us is the social conscience. Wines. There's a burgeoning market for wines that reflect modern values. No. And low alcohol, natural wines and biodynamic options all abound and are areas where we're seeing growth, but from a small base. And this aligns with our state's goals for health and environmental stewardship. And the third and more important option for those in business is to make evidence based decision making. We must move from opinion based traditions to evidence based reality. As described in our memo. Decisions on things such as vineyard removal or brand pivots must be backed by statistical reality, not gut feeling. So what we're doing at the Wine Business Institute is we are trying to position ourselves as the Silicon Valley of the wine world. We're breaking academic silos. We've got feedback from the wine industry that says we don't want people who are rigidly focused on one particular area in the wine industry. They need to be more adaptable and flexible. And so we're integrating students from computer science, Spanish communications and GIS as different majors and offering them opportunities that they can take up in wine business. This ensures that the coming workforce can handle everything from climate risk management to global digital marketing. And this will produce agile leaders. Our graduates contribute to a $400 billion global industry. And we are training the CFOs, CEOs and CSOs who understand that a bottle of wine is a consumer packaged good with a soul requiring both technical expertise and data driven strategy. Chair Caboldin and Assembly Majority Leader Aguiar Curry. Whether the committee's priority is economic efficiency and inflation relief for small businesses, or social progress and inclusive leadership, the Wine Business Institute stands ready as the laboratory for those solutions. We urge the committee to support initiatives that bridge the gap between agricultural tradition and digital innovation. Together, we can ensure California remains the global gold standard for the 21st century. Thank you. I yield the rest of my time to the committee and I look forward to your commitment to your questions.

Yes, Chair, members of the committee, thank you for the time. As we're already hearing today, California's wine and grape sector is a cor storm of our economy and our rural economy, rural communities. And we've already heard challenges and opportunities on the business aspects of how this industry needs to respond. What I'M going to raise is another set of factors that are threatening the industry which are going to be impacting industry boom or bust. And that is the issues of that are severely challenging this industry like grapevine diseases, extreme weather, water shortages and these pressures that are being put on the industry, raising costs and challenging them. And what I would like to point out is that the solutions to these problems are going to be extremely complex. These are problems that the industry cannot solve on their own. And the innovation that is required to solve these problems is going to take years, if not decades to realize. And as was mentioned with our partners here at Sonoma State, we're very fortunate here in the state of California to have an amazing research and education system in our CSUs and our UC systems. And I really think of that as our superpower. So California has these world class universities that are ready to respond and can approach these problems that are threatening this industry.

are asking in large part, and I don't want to kind of spout and go on and talk about all the problems that are out there, but rather the opportunities. And I think what we need to discuss is how the industry can partner with the state and federal partners as well to address these challenges. I'll give you a few examples. When it comes to research dollars for viticulture and ology research to address these problems. There's actually no state or federally funded program to address enology research. So that's on the production side. There are industry focused resources that help with disease pressures, for instance, or and we can use the Pierce's disease Glassy Wing sharpshooter board as an example of this. This is a industry funded effort. They pay, for lack of a better word, taxes or tariffs on the the grapes they're growing and selling within the industry to fund this research. This effort is commendable on behalf of the industry. It generates roughly $2 million a year for research that goes into this and is narrow in scope in terms of focusing on a single class of issues that really addresses this issue. But again is neither of the size or the capacity to really fuel the type of research that is required. And there's public funding mismatches all over the place. In terms we heard the numbers earlier about the economic impact of grapes. If you look at a federal level and the investment in other crops like corn, the mismatch is quite obvious in terms of the amount of money that's going into these other crop systems, their economic impact, if you compare it to grapes. So what I'm raising here today is Obviously, recognizing the challenges that this industry is in, the industry has work to do itself to kind of fix or address some of the structural problems that are internal to it. Again, I go back to this other issues that again are going to be here, whether the industry is booming or struggling, which are these ones that require these research solutions. So again, what I would raise is an opportunity and an opportunity to invest in research and education as a way of fueling this industry and helping it move forward. When you do this, you kind of, you realize two deliverables, which I think we all recognize the power of, which is one, highly educated people that are ready to enter the workforce and drive this industry forward and recognize the solutions that are needed. And of course, the knowledge that is key to that. Senator Gimbaldi, you referenced already these things that we're known for in California and Silicon Valley and these other ones. You know, again, at the heart of that has been our UC system and our, and our universities really driving that. So I. Yeah, we'll stop my comments there and yield the rest of the time for conversation.

Wonderful.

Thank you for inviting me here today. I'm Chris Bitter and I'm a wine economist. I work for a lender, American Ag Credit, that finances vineyards and wineries as well as agriculture more broadly here in the state of California. So my role in that capacity is to provide insights to our customers to help them make better formed business decisions. So I want to share some of those insights with you here today so that you have a better understanding, particularly the challenges that grape growers are facing in the state of California today. So growers are facing two overarching challenges. First is that grape demand and prices are deeply depressed right now. And second is that cost to produce grapes in California have skyrocketed over the last decade. So this combination has led to severe financial pressures for growers in this state. So why are we in this situation? And Damian already alluded to a few of the things, but I won't explain a little bit more detail for the grower perspective. So the root cause of the slump in grape demand that we've experienced is that California wine sales are declining. So following decades of steady growth, California wine sales have fallen by about 25% since 2019. So big drop. What that means is that wineries simply need fewer grapes than they did in the past. So this has led to a severe grape clock. In 2025, Allied Grape Growers estimates that 20% of the crop was left unpicked because there was no buyer for the fruit. And over the last several years, over a million tons of fruit were left on the vine because there weren't buyers for them. So we have a severe grape cloud. And obviously that leads to depressed places when you have more supply than demand. And it's also led to vineyard removals. So even growers that have managed to sell their fruit in recent years are struggling today because prices aren't even high enough in most cases to cover growers farming costs. And in some areas of the state, great prices today are lower than they were 10 years ago. So we've had skyrocketing costs and we had no growth in prices in some areas. Now, NAP is a little bit of an exception. And when I make these generalizations, we all have to realize that the grape industry, wine industry, is highly fragmented in each different area of the states in a slightly different situation. So a lot of growers have thrown in the tall in recent years. So Allied Grape Growers also estimates that between the 2023 and 2025 harvest, more than 50,000 acres of grapes were retired in the state of California. That's a big portion, you know, that's almost 10% of grape acreage. And those removals are continuing today. The problem with that is that there aren't a lot of viable alternative uses in a lot of areas of the state to put that land to use again. So that is a severe challenge for growers. Vineyard values have fallen between 20%, 50% from the peak a couple years ago in most areas of the state of California as well. So the slump in California wine sales, it's important to understand why wine sales are declining. So the slump was really driven by three main factors. First is that US Wine consumption is declining. So wine consumption is down by 15 to 20% over the last six years. The second is that California is losing market share in the US market. So today imports represent about a third of the market. Ten years ago that was 25% or a quarter. So imports have taken share from California wineries. And then finally, exports have plummeted. So we exported just half the number of bottles in 2025 than we did 10 years ago. And trade tensions have really exacerbated that slump. In the last year, exports to our main buyer of American wine, which is Canada, have collapsed. So rising production costs are contributing to this slump in California wine sales to some extent as well. So we want to spend a little bit of time talking about that. So cost of reduced grapes in the state of California have risen by somewhere in the range of 50 to 100% over the last decade. That's about twice the rate of general price inflation in the country over that time. So regulatory and compliance costs are the two kind of biggest areas that have been driving that increase. And these rising production costs have put California growers at a competitive disadvantage relative to imports. So it's a lot less expensive to produce wine and grapes. And some other parts of the world and competing nations, particularly those in the Southern Hemisphere, there are some foreign government assistance programs that help to exacerbate that differential. And even here in the US we have some government incentives that are potentially exacerbating the cost disadvantage as well, such as the duty drawback program. So I'm going to close by offering a couple options, things that we might be able to do to help reap growers through this challenging time right now. First of all, I would say that it would be worthwhile to review regulatory implementation and associated cost in order to potentially provide some relief on the cost front. Second, examining trade and market conditions that are affecting competitiveness with exports could help as well. Third, you might consider transitional support mechanisms to help defray the cost of removing unneeded vineyards. And if California wine sales keep declining, we're going to need to move more vineyards in the future. And that can be very expensive, 3 to 4 to 5, even higher thousand dollars an acre to remove vineyards today. And then finally, evaluating barriers to replanting grapes on land that has been fallowed. So in many areas, if you leave the ground, if you pull the grapes and you leave the ground without planting an alternative crop, that can present challenges a couple years down the road, if you want to go back and replant grapes, grape demand rebound in terms of water, in terms of permitting things like that. So considering some ways to address that issue could potentially help growers as well. And that's all the comments I have for today. I have in the packet there's a little bit more detailed handout covering some of the information that I've talked about here. I look forward to your questions.

Okay.

I'll start on that one. Yeah, they're looking at me, so it looks like. I'll start on that one. Thank you, Chair Caboldo. Thank you for the question. It's actually, I. I don't think it's. It's as difficult as made out. It's just making a lot of decisions.

You're right, it's not a silver bullet solution. There's not, there's not one thing we can do that we can just turn the volume up and everything will be fine. And I think that's part of the problem. There are a lot of industry, a lot of producers who are looking for something simple. They either want an intern to run their social media campaign or they, they want a way to them to come up with a message which is going to communicate with Their consumers. But I think a lot of it, you know, the phrase from Thomas Edison comes to mind. The problem with opportunity is that most people miss it because it's dressed up in overalls and looks like hard work. And that's, that's the problem we're facing in the wine industry. We've, we've gone so easily in the last 30 years. For the consumer who walks in lots of money, the market's growing, you can do anything you possibly want and you can pretty much sell wine easily. So what's, what we've done, we've very successfully improved the reputation, prestige and desire of California wine. It's, it's, it's up there in the world. I mean, I'm from Australia. I knew about California wine before coming here. It was something I was dying to try. I can't afford to buy it anymore. So it's a victim of its own success. And part of that problem is because the industry has grown so successfully. When the industry started slowing down, producers were focusing on the more profitable segments and they're the more expensive wines. So what we're calling the premiumization effect has effectively led producers to go for the more valuable consumers. And that's the wrong approach because we haven't made wine appealing at the entry level for consumers anymore. If you talk to anyone here, they'll tell you that they started drinking Lance's Rose or Bartles and James. Those products don't exist anymore. And the big producers have been divesting from some of those big brands because they haven't been profitable for years. Because we as an industry, we don't make them appealing. We talk about the pursuit at the top of the market. So it's an endemic changing culture that we need to be. We've had the rhetoric that we've had to make wine more welcoming for decades, and yet we're doing everything in the opposite by action. So we have to produce those transitional products that can be produced on a scale that appeals to people. And we have to welcome anyone drinking any sort of wine under any conditions, rather than telling them there is the precise way to drink this particular wine at this time with these people. And so it involves a mixture of cultural changes, innovation to create new things, and using technology to communicate with those consumers where they are. And wine's not good at any of those things at the moment.

Well, if you think of wines from other countries, they're usually the biggest brands that stick out there. I mean, from Australia, you've got Yellowtail, you're thinking of Chile, you've got Conchituro, Catena, from, from Argentina and the like. All these big brands stick out.

One of the challenges we have in number in the U.S. it's ironic that coming from Australia, where the concept of the tall poppy syndrome is endemic in Australian culture, where that, that sticks up, gets cut off, you tend to find that the wine industry, there's not enough of a focus on the success stories from the big producers. You know, I mean, I, I can't remember ever talking to anyone, particularly any of my students. They come in with an expectation, and no one wants to drink barefoot.

19 crimes. They look down their noses at it. So we need to, we need to be embracing the success of those brands, what they represent, and encouraging people to get into those. It's an open secret that most consumers prefer sweet wine. And yet if you ask them, they'd say dry, because the wine industry has convinced them that dry wine is quality and sweet wine is something of poor taste. So we need to encourage those people and kind of highlight them who are making change, they're being successful, and they're innovating to a degree that is attracting new consumers.

And I have a couple things to, to add too. So I agree with Dr. Wilson that we need to change the narrative which was developed around the baby boomers. And it's really the baby boomers who drove that three decade long, you know, increase in wine consumption. And they are moving out of the market and they're being replaced by younger generations that are much more diverse and have less experience with wine. And we still have the same narrative that we had with baby boomers and we have to approach these younger generations a little bit differently. The cost side, you know, obviously that is one way that we can help support, support our wineries and growers is addressing the cost issue, because that's part of the problem. But the kind of last points I want to make is that it's bigger than just we're telling the wrong story and we have high costs. Wine consumption has been declining globally now for almost a decade and a half. So it's a broader problem. And not only is wine consumption declining, but alcohol consumption is declining now. So if people continue to eschew alcoholic beverages, wine's going to have an upstream battle. So we have to fight. Everything we can do to increase wine's market share if we have a shrinking market is what we're going to have to do through both costs and through whatever efforts that we can do to support our industry in terms of shifting that narrative, whether it be promotional support or other things of that nature.

And to add to your point there, if you ask folks today, many folks, what is the healthiest alcoholic beverage for you? And I honestly believe that their research shows that is wine. They'll tell you a hard seltzer because on the label it says 80 or 90 calories, no added sugar, no carbs. It's so particularly with the younger generations, they don't understand the potential virtues of wine as part of a healthy lifestyle. And there is research that shows that drinking alcohol and wine particularly can improve or reduce all cause mortality, which means that people who drink wine and alcoholic beverages in moderation tend to live longer than those who don't drink at all. So there's conflicting research there and that's a really touchy subject. Individual wineries cannot make health claims. They can't talk about that. So we need a broader kind of institution to talk about the, the, the health implications of drinking wine.

Well, so I shared some figures and these are bulb estimates that costs to produce grapes have risen by somewhere between 50 and 100%. And there's a wide range because there are different ways of producing grapes, different areas. So there is no one answer to that question.

Right, so a couple points there. The growers, if you talk to growers, they will tell you that the two biggest components driving that increase are regulatory compliance costs and labor. And then other parts of the world that we compete with don't have the same level of regulations. And growers are not against regulations for health and safety and things like that. They just want a level playing field. But if we look at places like Chile or Argentina or you know, other areas, particularly in the southern hemisphere where we get a lot of cheap bulk wine, they don't have the same kind of requirements in place and they, their, their wine and grape production cost not increased by nearly the same level that ours have here in California.

So I don't work directly in other states. Our portfolio is focused here in California. I know our costs are higher, but I can't give you a specific percentage. But I would say that the rest of the nation is not been our primary competition. We've lost more market share to imports as opposed to Oregon, Washington, which is the other two main commercial wine producing regions. So I'd be happy to try to do a little bit more research and get you some figures on that cost differential between California and these other states. But I don't have that.

I was going to say it sounds like I'll preamble to that one. I think the regulations, I mean, certainly as a foreigner, I've come to the conclusion that you Can't. You can argue all you want. You've got to deal with what you presented and then work on ways to improve the situation. And I think with examples that you're putting in place, like AB720 is opening up opportunity for wine producers. They're now looking at ways that they can expand their, their awareness to different parts of the market. And certainly with SP number 1273 that some of that you currently are debating, I think that from the business perspective that really gives producers a great opportunity to promote themselves and take more control of what they're doing. So we can see that the regulations are changing. With regard to meta research, I'm always fascinated how little I perceive that there's money going into the business side of the research. There's a lot that goes into technical side with, with and is very worthy. But I, you'll find that particularly with wine producers, if you're, if you ask them about ways that they can work on generating demand, they're very scarce with their, with the money that goes into that. Whereas if they need new French oak, they'll cut a check in a heartbeat. So I think one of the ways that we can work on improving that. I am absolutely fascinated and impressed by how much, how many benefactors there are wanting to put money into research in this part of the world. There are sources of research funding. The challenge is being able to access it as researchers. And typically red tape can often get in the way of those things. So I would encourage anything that you can do that can help facilitate the investment from the industry, particularly with the individual donors to help fund that, because that's one way we can get through it. Ben, you probably want to add to that.

And that's.

All right.

I want to underscore because as we start the conversation about this particular chocolate, what I'm talking about is research that can help redesign the way that regulations are. Are crafted, how they're implemented, the. The instruments by which we detect, you know, things and what have you. So. And we're doing that in several of the food and ag sectors and. And what have you. So. So. But wine. A lot of our research has to, you know, for the last century has been focused on on how to improve production, how to fight disease, you know, how to reduce environmental impacts, all of which are critical. They're critical foundations for the conversation about regulations. But the reg. The science of regulation itself and compliance and everything else and the cost of the efficiency of regulations really has been an under, in my view, an under researched area. And it's one where we have a unique capacity in California at both universities, but particularly Lucy Davis, Majority Leader I

Hear, hear. All right. I want to say thank you to the panel. Extremely provocative and insightful. Really apprec. Both the materials, your presentation and the discussion that we've had and look forward to continuing to learn together with you and then translate some of those learnings into action. Thank you so much. Thank you, Mr. Mark.

All right.

I have 20 minutes, right?

Thank you very much. Chair members, I'm Michael Miller with the California association of Wine Grape Growers. Thank you for holding this important hearing. And thank you. Thank you, career, for joining us. I know that as I talk about farmers, this will relate to you as a farmer yourself, and I appreciate your comments and feedback today. If you speak with the average grower, they will tell you that farming grapes has always involved risk. A successful season depends on avoiding frost, disease, pressure, extreme heat, wildfire, smoke, and a long list of potential perils. Growing wine is, at a minimum, a risky endeavor. But today, growers are facing something that is very different. Growers can experience a near perfect growing season, produce exceptional fruit, and there's. And there's nobody there to buy their grape. And so what happens then is in some cases, grapes are harvested and dropped literally on the ground in the vineyard because there's simply no market for those grapes. The situation is costing growers hundreds of millions of dollars a year. Where the industry finds itself today feels much more, much greater than an industry correction. This is a. A historic problem in the industry. Growers are struggling simply to stay in business, and far too many are being forced to exit the industry entirely. If you're looking for a canary in the coal mine, look at the Salinas Valley, the Monterey County Vintners and Growers association, which represents the growers in the region's wineries. They laid off all their staff and effectively closed down in A region with more than 250 years of wine growing history. The Central coast news outlets have been reporting repeatedly on wineries and growers who've gone out of business in the last few years. And that's not a unique story to that area. It's happening all over California. As growers look ahead, they're basically focused on two simple goals. First, they just want to weather the storm. They want to get through this crisis and come out the other side. Secondly, they want to emerge from it in a place where you have a sustain, where they are sustainable in a global market, and we're having a regulatory structure in place that recognizes that they are competing in that global market. Right now, the industry is undergoing a painful process of bringing supply and demand back into balance. In 2022, California had approximately 615,000 acres of wine grapes planted statewide. In August of 25, that number was estimated to be closer to 477,000. To understand the scale of what the growers are experiencing, it helps to look at just a few key Data points. Since 2023, nearly 100,000 acres of vineyards have been removed, with the call for another 40 to 50,000 in 2025. In 2024, harvest was 2.9 million tons of grapes. That was the lowest harvest in 20 years. The 2025 harvest numbers are coming out tomorrow. It's estimated to be right now around 2.4 million tons. That will be the lowest harvest in 30 years. Over the past three years, at least 1.3 million tons of grapes have gone unharvested because there was no buyer. That represents more than $1.3 billion in lost farm revenue, or roughly 433 million per year. To put that data into perspective, that loss is roughly the equivalent nearly 1 billion bottles of California wine. Wine that's wine that's not bottled, not sold, not toasted, not anything. Those numbers reflect a massive effort by growers to reduce supply and restore balance to the market. But moving vineyards is not a simple. Removing vineyards is not a simple or inexpensive process. There are significant costs associated with taking out a vineyard. Once vineyards are removed, growers must then determine how to dispose of material. Burning is not often a feasible option due to air quality restrictions. Markets for chipping and mulching are limited, and composting can be extremely costly. As a result, some growers simply cannot afford to remove the vineyard at all, and instead, they abandon them. Those abandoned vineyards create serious risk for that vineyard and the entire region with pest and disease and other perils. Even when vineyards are successfully removed, the Future of that land becomes uncertain. If the land sits fallow for too long, it may lose its agricultural designation. What that means is that replanting in that same land is incredibly expensive due to federal, state and local permitting processes. And in many cases, it's uncertain whether they could even get the permit. To better understand things, COG partnered with the Allied RIPDORS and several regional organizations to commission a statewide vineyard acreage report from LandIQ. This work is helping our growers figure out what what the situation looks like, how to make informed decisions down the road. Even if growers successfully navigate this difficult market cycle, they will still face the challenge of competing in one of the most highly regulated agricultural environments in the world. And you asked for examples earlier. I do have some examples and I can get that fairly through the Q and A if you'd to like Growing grapes in California means operating under conditions that most global competitors do not face. For example, foreign governments often subsidize wine production, allowing those wines to be exported to the United States at a lower cost. At the same time, large volumes of imported bulk wine continue entering the US Putting downward pressure on demand for California grown grapes. Some precision viticulture technologies that are used by growers in other states around the world are considered safer workers and beneficial to the environment, yet they are restricted in California. As a result, California growers face higher production costs for their domestic product wine. Water availability remains one of the most significant challenges facing agriculture, yet current policies make it difficult for growers to invest in groundwater recharge or small scale water storage that help prepare product conditions. When states such as New York and Oregon adopted an agricultural overtime requirement, they paired those policies with tax credits that help farmers pay those wages. California did not do that. Instead, growers were left to absorb those costs while continuing to compete in a global market. That flawed policy has reduced the take home pay for our workers, causing them to get second and third jobs. Finally, we need to remind consumers that wine is an agricultural product. In California, we grow wine. Strengthening the connection between consumers, local wineries and the farmers who grow the grapes is essential to sustaining this industry. Efforts that reinforce farm to fork and bind to glass that connection that helps to support California wine. And we appreciate Senator Laird has legislation that's pending on that very issue. Chairs and Members, I appreciate the opportunity to give this very brief overview of what is a very complex situation. But if you drive through California's wine regions today, you can see the crisis unfolding as you drive by the vineyards. Vineyards are waiting to be pruned. Fruit still hanging on the vines, entire vineyard blocks being pulled out of the ground. Behind every one of those vineyards is a family, it's a farm family trying to decide whether they can continue farming for one more year. Thank you for the opportunity and I'm available to answer any questions you may have.

I'm honored Vice President of International Marketing with Institute so much for inviting me to be here today. I am going to shift the tone a little bit my comments and rather than continued focus on the problems that are significant a number of different perspectives on I'd like to talk about one of the solutions project that we put together at winest. The problem that we chose to focus on was I've heard repeatedly afternoon is declining and specifically with baby boomers which were traditionally the core of the wine market as they age out one consumption the millennial sector While they are engaged, they are a much smaller demographic cohort. So our focus is on the emerging the younger millennials Generation Z those that are above legal drink eating why we're not engaging with them General the relationship with alcohol is changing at their approach. While this cohort does have a positive image of wine, that wine is not relevant, it's not salient in their world don't see it as a part of their daily life. They don't see it as part of their life. Yet this 25 to 45 year old audience relates the world and each other fundamentally differently than any prior demographic cohort due in large part to this in the way that they engage with the world through their digital devices places. As a result, wine as a as a sector needs to adapt. We need to there they are. We need to engage with them and build a relief with them. Show up where they are, where they spend their time, what they watch, who they follow, understand what they're interested in. So solution Together we chose to dig in and better understand this problem. First thing we did was conduct our own proprietary research with Wine Institute and we worked with experts from outside of the wine industry to better understand these systems. Through this process we gained access to new information, significant insights, best practices on how to connect these consumption and great material that we are putting to work within our own communications. However, going through the through this process we realized that the information that we were gaining was too good not to share but the broader wine we recognize that wine overall and collectively needs to level up its marketing and its community to rethink how we approach and engage today's consumer. So in order to help us do this collectively, we created an online platform to share all of the expert insights, the marketing strategy, the best practices with the wine community and make it open access for all. This is the Care Wine Collab which is currently up and running and available on the Wine Institute website. Think of this as a marketing masterclass for winemous Park Think tank Park Test Kitchen. The Share Wine colab is at its heart collaborative by design. We call it the Colab partly as to play on the term collab, meaning a collaborative exercise that comes greater than the sum of its parts with everyone bringing. But even more importantly because we see it as a community laboratory where the wine community can come together to learn, to test, to share the ideas that are working as we all learn together to improve how we connect and engage. It's an online hub. It's built on a series of in depth webinars that are where we share strategy, research, thinking and execution to better understand this audience and how to reach them. Materials are available, we have case studies, tools and resources and it's all presented evenly and accessibly to the wine community as a whole. We're offering what we call office hours. These are live online sessions that we hold regularly to dig a little bit deeper and to help bring people along within their own marketing Expertise. We're hosting one tomorrow at 11am Very just welcome you to come join us. So and finally we're also doing collab live events partnering with regional organizations to be in front of their members, their winery and grower partners to help walk them through some of the background information, the insights and how they can learn to apply these. So why is this not a campaign? This is built on the whole notion of teach a person to fish and they will be able to better market their own brand much more effectively, tell their stories, be authentic, use better and more marketing approaches. It's data driven and research based waste. It's formed by experts from outside of the wine of the wine community that are bringing their own experience marketing agencies actionable. It's built on best practices and how tos. It's designed to help support wineries and winery staff from those that are two person enterprise to the most sophisticated, have their own marketing and consumer insights tips. It offers access to information that most wineries cannot get or do not have access to. We're making broadly available. The goal is to help this sector as a whole become more strategic, informed and raise the bar. Recognize that this is an evolutionary challenge and as a result we designed this to be evolving and flexible of dining. So what are the results? To date we have more than 500 people that have signed up to register to participate in Share Wine. We're hosting live events as I said, we presented at the recent DTC conference in January at Monteray, presenting at Paso Robles next month and working with our other partners in other parts of California. The biggest challenge is getting the workout. That's what we're coming constantly working out of this and building engagement within the ongoing problem. However, we're focused on investing in positive collaborative change actionable solutions. Our winers

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All right thank you. Thanks for the entire panel. There's a lot there and I know we both have we both have a lot of questions. I wanted to start with no actually with honors comments because you know, we we talk a lot about some of the generational challenges and I think we think we know what we're trying to understand and are finding easy answers for the consumption patterns of younger consumers. Both the majority landowner used to be mayors of our own communities and there's a point at which we were being asked to only zone for housing that had no parking at all, that we didn't really need roads anymore. And the reason was because the evidence was very clear. Millennials were not driving, they didn't want cars. They they had no plans on ever having any children. And so we needed to change our house, so we needed to change all. And they all, they all they intended to spend the rest of their lives living above a D. And it sounds ridiculous now, but it was really, it was absolutely true when developers came to us and said don't make us put parking in and whatever because this is the here are the facts. But of course that was the trap that we always follow into in generational analysis. We forget that folks are in any generation when they're 17 are more like other generations at 17 than they are like themselves at 40. And that is that is a fact of life. So if we had done those things back then, if we had made substantial permanent policy changes, those same millennials now want the same mostly the same things that their Gen X predecessors wanted with some changes, but mostly the same. And most of the predictions and the market signals that we were seeing back then turned out to be the signals were louder than the actual trend was happening. The other thing this reminds me of is, you know, at least among a certain but large demographic of younger Gen Z boys we've talked about, you know, our strategy should be make like we just need to focus on making sure everything is inexpensive and what have you because none of. They don't want. They don't want status symbols and they don't want to. And they don't have any money to spend. But for a certain demographic that's large of younger Gen Z boys, it's almost impossible to not have a conversation about extremely expensive men's colognes. And where many teens are, they will talk about colognes of 4 or 5 or 6 or 700, 700 an ounce with more sophistication than the best sommeliers here in Napa. And it's just a reminder that, you know, that was totally unpredictable, Mark. Cologne was out for the, for the, for the generation before them. And certainly anything that was $600 was just not. We. No one would have guessed that that would become such a trend and have such an important impact on the economics of that, even that industry. So, so I appreciate the focus not just on like, let's find the answers, but let's keep finding the answers and let's look for when the moment, you know, when some surprising moment happens or lightning or an influencer strikes that these trends are, they are not. They don't come from the Bible. They don't come from 500 years of international panel on climate change data. They are, they are mutable and we simply have to be. The industry has to be ready to take advantage of them because you, you'd be foolish over the course of human history to bet against wine. And so we need to continue to focus on that. So I really appreciated the Wine Institute's comments in that regard. I also wanted to just know. We've talked about Canada here and I think it's just a, it's a good warning for us. And I don't want to, I don't

going to say any names, but that didn't just happen. I mean, a lot of folks in our state and in the sector called for substantial tariffs. And I just want to be blunt. It was reckless, it was extremely reckless to call for a massive set of tariffs without knowing what was going to happen. And what happened was we lost our most significant export market. And so quick, radical, simplistic solutions are bad in Sacramento. We certainly both know that because that's most of what we see that we have to vote no on most of the time. But we have to be cautious as we are being bold in the answers. And that is a powerful example of what happens when we get carried away honestly and forget about the potential repercussions of the actions that we call for. So we have to fix that. That that's the truth. Canada is, as you're right to say, it's an incredibly high priority for us to fix. But then we need to understand that our as the fourth largest economy in the world, when we make calls for international trade changes and what have you, sometimes we get what we want. And so we better be sure that what we want is going to produce the outcomes that we want to see as well. And then I love this one drop five permits issue. And it connects to the conversation we were having with UC Davis as well about how do we so like, how do we avoid that. This committee and former Senate President Pro Tem McGuire did a lot of work last year on the small winery or with the state board and with the North Coast Regional Board because it is, you know, I formerly served on a regional water quality control board before I was in the Senate in a different region. And they're under very extreme expectations from both the state and the federal government. But that small winery order can't be complied with. It's just not possible on a systemic basis. I mean the industry and family winemakers in particular, but different geographies in California, it's impossible to comply with it in that way. And so while we will later on hear about some of the progress in that work and in case you leave early, I want to thank the North Coast Regional Board and the Seaboard for collaborating with us and with family winemakers and others to continue to make that better. But and it's not really about that specifically, it's just that our regulatory approaches are off. They are often over outdated. They are as the majority leader said, they are often oversized, as Julissa mentioned, and they are often based on avoiding compliance risk and therefore over way overdoing them. Or a consultant community that developed expertise in the coolest, most expensive solutions that then become expected by the regulator. So we have to get a handle not just on one regulation, but the overall way in which we write regulations, we implement them and then we as the majority go back and not 20 years later, but keep going back. Is this working? Is it getting the results we have? And by the way, are we already collecting the data? We could have you not come to the regional water board office because we've already gotten that Same data four times before. Can we use that data better? And can we develop more instruments, even just regular sensory instruments, in order to allow us to really look at the outcomes and not just at like, how much are you spending enough money to comply, but let's really just monitor the outcomes and the unique so that we can see past the unique geography to really, you know, is there, is there an impact on water quality from the, from vineyards and from other. And from wineries as well? We haven't done a good job on that. So very much appreciate the whole panel's identification of the range of problems, but also the range of opportunities that are before us and turn the majority leader.

There's no better time to introduce them to Wise. Gotta start early. Okay, thanks so much to the panel. Very, very much appreciate your, your participation today and your continued leadership and problem solving approaches. Because as the majority leader says, there isn't, there isn't quite yet a wine majority in the legislature, although everyone loves it not everybody understands how challenging it can be to and you know, I chair the New Technology and Privacy Committee in the Senate where everybody celebrates what great risk takers they are and all of that. As Mr. Miller said at the beginning, really no one, no one takes more risks every single year. You know, the Silicon Valley startups and entrepreneurs think they're putting it on the line, but no one does that more than ag and particularly grape growers in particular and the wineries that they support. And so just very much appreciate your continued engagement with us today and then throughout the year and policy and regulation to make sure that we are doing the least amount of harm and being as helpful as we can to make sure that California's premier industry thrives. Thank you so much for joining us. And we're going to turn next to panel three. And again, thanks to the majority leader for joining us. And just to reinforce she's not walking out on anyone. She's.

Thank you very much.

And as our our panels come over, I did also want to note and I'm sure this is dangerous because there is some folks that we are we are here in in Napa county today, which some people in California associate with wine appropriately. So I just want to acknowledge in addition to the our, to our panels that the the leaders of the Napa Chamber of Commerce and Supervisor Ann Cottrell from the Board of Supervisors, the Napa Valley Vintners, that they're that Napa, you know, I'm a partisan. Napa is the, is the is the beating heart of the wine industry in California and has thought carefully and hard and then taking action on these issues. So appreciate everyone that's that's here with us today. And let's turn to our panel beginning with Lindsey Gallagher, the CEO of Visit Napa Valley. Then we'll hear from Sonia DeLuca from the Napa Valley Farm Worker foundation and finish up with Annalisa Quijara from the State Water Board. Thank you for joining us.

Thank you, Lizzie.

And before we turn to Sonia, maybe I can follow because we're going to be talking about more distinct topics this time than we were in our prior panels. Just for a quick follow up, I'm glad that you just came, came from that conference. Can you give us any sense? I mean, clearly Napa is the, you know, the, the top of the game among all of the, the peer parts of California. But for Santa Barbara, for. For Temecula, for other wine parts of California, are how are they grappling to the extent that, you know, with some of these, some of these challenges and are there insights for. For them? The other members of the committee will be reviewing the hearing and I want to help as they see that. So they don't necessarily are led to believe that they're as good off as Napa and as good off by meaning they have you and your team leading this work. But what do you know about this, the state of the tourism industry related to wine in the rest of the state? If you can share anything, that's where

Terrific. Thank you, Sonia. Welcome. Sonia DeLuca.

I'm the executive director and CEO

I want to start by just saying

Napa Valley wine is a farm worker whose skill, dedication and family support make it possible. And when they struggle, the impact of is felt across our entire community. Our organization has supported farm workers through education. Over 33,000 farmworkers in total over the last 15 years and about 3,000 people annually. High quality training programs focused in viticulture and seek.

resulting in increased wages.

thriving wine and grape industry.

Sunny, would you mind moving the microphone a little closer because I know your testimony is.

It's going to be the most watched. Sorry.

Thank you very much. And the majority leader, Garakuri, wanted me to emphasize that how supportive she is in this way. She is carrying legislation this session that I know many of you are aware of in conjunction with Napa county on farm worker housing and services, and I'm a co author with her. And we also have in the statewide housing bond which I'm carrying for, for a billion dollars, the largest allocation ever for farm worker housing and this as well. So it's a critical, critical, critical, critical issue for a lot of the reasons that you said you didn't have time to talk about, which was housing affordability in particular. But the health of the industry is obviously critical too. Just over in virtually every conversation I have with growers, and sometimes vintners, but mostly growers, the topic of, of automation, autonomous attractors and what have you comes up. And obviously there's interest in the deployment of more of these technologies in order to deal with costs and productivity and what have you. And the challenge I think that's present in state law is that we're not interested in destroying work opportunities and their careers and their livelihoods of farm workers. But we've also heard from several, from lots and lots of growers that look at the edge of existing or not existing. And if we can't deploy some of these technologies that exist elsewhere, then we will be laying off farm workers because we're no longer in business. Can you give us any insight or thoughts about this question about when, how much, under what conditions we might think about increased use of or authorizing increased use of technologies in vineyards?

our

Do the. And I've been to, you know, several, several sites where folks were, are sort of giving up back breaking work and taking on remote operation, drone operation, what have you, what is the state or the capacity of upskilling programs and other things that would, you know, if a legal change made it more possible to deploy some of these technologies. How ready is the workforce development system both on, you know, on site and in the community? How ready is it to make that promise real here?

All across the board.

Perfect.

All right, thank you. And next, and finally, we're going to turn to Analisa Quihar, the Assistant Deputy Director of the Division of Water Quality at the State Water Board. And you know, we invited Assistant Deputy Director Kehar today, really to celebrate. It's probably a little strong, but to. For a status report on where we are with respect to some of the small winery order in particular, but for the purpose of also describing how we've gotten here and the collaboration, the progress, the enduring frustrations that might be happening where there might be possibilities and lessons learned here that might speak to some of the broader concerns that we've heard through the rest of the hearing. So thank you so much for joining us.

Great. And appreciate you being with us today. And thanks for the overview and the continued willingness to collaborate to work through these issues. We still have a ways to go, and I think it may not be the most fun part of the hearing, but it is a good way, I think, to close our panels today because I think part of the reason we're in this situation is that the state has a hard time time seeing the wine industry in all of its glorious diversity. And so this, as I mentioned earlier, I was a member of Regional Water Board, and they're nine regions in the state that are split up all the most half the states in the Central Valley region that I served on the board for. And it's in recognition that each of the major watersheds in California are distinct, that they are fundamentally different in very important and powerful ways. And so we should have most of the water quality regulation activities happening at that regional scale with the state board to make sure that things don't get off the rails and where appeals can be heard. And so in this situation, I think it's an example where the state board and others heard from folks in parts of the wine industry saying, you know, what's really important is statewide consistency. And if you have, if you happen to own, you know, vineyards or wineries in several regions, if you're a large player in the market, then that's a great value. Like, I don't want to have to comply with something different in the Lahontan region on the other side of the Sierras and in the north coast, and then separately for the Lamp and Somar, mostly are split between two different regions. So wouldn't it be great if we had a lot more consistency between the regions? And that's, that's often an objective in state public policy. But the trade off is then. Then it's almost impossible to see that the different regions have different conditions on the ground. Both the economic capacity, often of the wineries and the vineyards themselves, but also the actual. You know, if you're for some of the Sonoma wineries that are near, very near the coastline and have different kinds of sand in the soil, it's just. You just there. There are different conditions. And so I think one of the questions that arose during this entire process on this order was are we getting that balance right between. Because consistency is important. It's not the only objective. It's also important that we are attentive to the very local needs based both for the industry locally, but also hydrologically locally too. And so. So I hope we continue to make progress in this regard. I think this does. The order will always need to be improved and the state board's done a good job, I think, on the whole and on average. But if you are not in an average place and you are operating a relatively small, but not micro winery, there's still substantial challenges. So I very much appreciate the board being here. I think it's a good example of. Of sometimes the challenges that we put ourselves into on the regulatory space and look forward to continuing to working to improve this order, but also to help assure that future water, air and other regulations are attentive to the diversity of wine and the wine industry here in California. So thanks so much to our panel. We're going to turn next to public comment and invite folks to. To come forward to the podium and provide public comments if you would like. If you would like to do so.

Thank you.

Good afternoon. My name is Brian Shepherd. I'm from over the hill, Sonoma wine grower dependent on a winery to purchase my grapes. Very, very fortunate. I have a long term contract. But through the conversations I been hearing today, I'm thinking about what happens if that winery doesn't fulfill that contract. You're asking for immediate things that maybe can help a grower out. If a winery decides to cancel my contract, they have a lot more money than I do. They can litigate longer than I am or I would be able to. So if you guys could think of some way that we could get relief until we're done with our litigation or some some form of enabling us to hang on long enough to build our properties. What else is complicated about pulling out or what to do with our grapevines is we're not row crops. We don't do three crops in a year. We have to look ahead a minimum of three years. Where are we going to be in three years? Who knows? So those decisions are difficult. We're not in the business business because it's easy. I'm a fourth generation farmer. My fifth generation son works with me now. And right now we're just fighting open to hold that Property so my 6th generation grandkids could do the same.

Thank you very much and thank you. Thank you for being with us today and for sharing the story. But Also some ideas. So we'll follow up after the hearing as well. Anyone else should provide any testimony to the committee. All right. I'd like to thank everyone for joining us today. Again, thank you to Assemblymember Aguiar Curry, who is a stalwart advocate for wine. I mean, many folks believe the best wines come from grapes that have faced at least some adversity. Rocky soils, steep inclines, what have you. And so we are, we are making the wine industry, you know, as resilient and delicious as it can be with all of this adversity coming at once. But that said, we have to work together. The state of California needs to modernize its policies to meet the moment because the wine industry is, as we said at the very beginning of this hearing and throughout, it is so central to the state overall. But certainly, as the majority leader, I both know from representing this particular community that it is the foundation for so many of California's communities, who we are and our success and our brand in the world as California. But it is also a marker. It's not the only industry facing virtually any of these, these challenges, except maybe the, maybe the generational consumption ones, but regulatory issues, insurance issues, impacts from tariffs, we're seeing these across many of the key economic drivers in California. And so wine does not stand alone in calling for reforms and improvements in some of those areas so that we can assure that the wine industry, and including the wineries, the, the growers, the marketers, the farm workers, the hoteliers, the hospitality workers from throughout every part of the communities that make this industry what it is that California depends on them. And they can depend on California to step up. And this committee is going to be working together with many of you and with my colleagues in the Senate over the coming year to assure that we're, that we're ready to make that happen. So thanks again for joining us today. Appreciate all of the comments and all of the, and all of the panelists and feedback and the discussion. And this meeting of the Senate Select Committee on the California's Wine Industry is adjourned.