Napa Valley wine growers are struggling to survive as their grapes are left to rot on vines due to demand plummeting.

Rancher William Hill opened up about the devastating impact it’s had on his business, saying it is one of the worst downturns in his 50 years in the industry.

He told CBS News: “We left about 30 or 40% of these grapes unpicked. You have these grapes that’ll make this great wine, and instead we’re just going to leave them there, you know, and let them dry up. That hurts. Yeah, that hurts.”

According to Silicon Valley Bank’s 2026 wine industry report, roughly half of California wineries are currently operating without a profit. In 2025, the industry lost $1.2 billion in revenue compared to the year before.

Direct-to-consumer sales have weakened, tasting-room traffic has slowed, wine-club memberships have flattened, and vineyard land values have fallen as buyers retreat from the market.

Silicon Valley Bank‘s Rob McMillan told the station that there will be a decline in both dollars and volume again this year.

He said that there’s multiple reasons for the downturn, including people drinking less and generational differences in habits and preferences.

“We’re being replaced with consumers who like beer, wine and spirits, cannabis. You can’t just lose one older consumer and replace them with the younger consumer,” he said.

A persistent oversupply of grapes makes the problem even worse, CBS reported. McMillan, however, says he thinks the downturn is approaching its lowest point.

To make matters worse, farmers across the Northern California enclave say they are staring down financial disaster as the state moves to crucify them for their use of groundwater.

Under a new law, wineries will have to pay just under $99 per acre per year on land they irrigate as part of Gov. Gavin Newsom’s sustainable water initiative.

Beckstoffer Vineyards, one of Napa Valley’s largest and most respected grape growers, estimates the new fee will cost the company about $25,000 a year for its 12,000 acres in the Napa region.

“Right now we’re looking at these extra costs at a time where all of our clients are asking for price reductions and less fruit due to the downturn in the market,” general manager Jim Lincoln told The California Post.

His company supplies grapes to about 120 wineries producing cabernet sauvignon, chardonnay, pinot noir and sauvignon blanc.

“We’re not making a profit right now. Labor’s going up and every client that we have has asked us for a price cut. Costs are going up, prices are going down … see where this ends,” he said.

The new fees stem from California’s 2014 Sustainable Groundwater Management Act, which requires local agencies to develop long-term plans to protect groundwater supplies.

It was also announced that the county would charge farmers $98.74 per planted acre, while homeowners with private wells will pay $62.58 per parcel.

It was only after a massive backlash that officials agreed to temporarily ease the pain for the first year by absorbing 50% of the costs while the region transitions to the charges.

The county will also contribute $500,000 annually to offset the cost, leaving about $2.17 million to be recovered through fees charged to agricultural users, private well owners and public water systems.

The fees are expected to begin appearing on property tax bills in December.

Officials say the fees are necessary to protect Napa Valley’s groundwater supply while keeping management under local control instead of risking intervention by state regulators.

Yet growers are concerned future budgets, and the fees needed to support them, could increase even further as the program expands.

Lincoln said premium vineyards already have a financial incentive to conserve water because overwatering can damage grape quality.

“We don’t want to put excessive water on our wine grapes. We are not big water users.”

He said he gave a demonstration to the board on Wednesday holding his thumb and index finger several inches apart showing how little water premium vineyards actually apply.

“If you hold your thumb and index finger as far apart as you can do it, that’s about three, maybe four inches. We don’t apply that much water to our vines,” he said.

Lincoln said most people assume Napa’s famous vineyards are insulated from economic hardship because of the region’s luxury reputation. He says that’s simply not the case.

“The reality is everything just seems to cost a fortune.”

A 2025 Cal Poly study commissioned by the Napa County Farm Bureau found regulatory compliance already costs a large Napa vineyard about $1.7 million annually, $1,744.87 per acre, equal to roughly 12.5% of total production costs.

Even a typical 200-acre family vineyard spends more than $226,000 each year, or $1,131 per acre, complying with regulations.

Growers must comply with a mountain of regulations including air quality rules, water quality permits, groundwater monitoring, pesticide reporting, workplace violence prevention plans, wildfire smoke protections, heat illness standards, paid sick leave laws, Affordable Care Act mandates, worker safety training, farmworker housing assessments and a lengthy list of state and federal reporting requirements.

The report concluded the combination of slumping wine consumption, an oversupply of grapes and soaring compliance costs is crushing profit margins “beyond the point of maintaining viability,” warning that the growing regulatory burden “may have a withering effect on the industry.”

Download The California Post App, follow us on social, and subscribe to our newsletters