Jacob Wolinsky
Hedge fund expert

Post-War Israel Wine Industry: Growth and Global Support Opportunities

As businesses across Israel operate under complicated circumstances, winemakers in the north and the south of the country are feeling mounting pressure as the upcoming harvest season could see them losing months worth of grape production due to labor shortages and vineyards being located near, or within conflict zones.

For winemakers in the north near the border of Lebanon, months of violence between Israeli forces and the Iran-backed militant group Hezbollah have left vineyard owners and farmers worried that a full-scale war could completely tarnish their harvest season and ruin the coming vintage.

The outbreak of tension at the border can be seen from some vineyards, including on top of the fermentation tanks of Dalton Winery. In February, Alex Hurani, the vineyard’s owner, said that he is worried about escalating terror at the border, and how this could impact the country’s wine industry in the months ahead.

While not on the level of the tech industry, the wine industry in Israel produces 40 million barrels a year and netted revenue of around $200 million in 2023.

A shortage of hands brings new challenges

Wine production facilities across the country have been dormant for much of the year and since October. Many producers have been struggling with labor shortages, as hundreds of employees have been called up for military service or have been evacuated from high-conflict areas.

The wine industry is one of several others that have been impacted by labor shortages since the start of the war. Although, unlike other industries that can pause or continue production at any given time, grapes ripen on their own schedule.

Harvest season in wine-growing regions usually starts early February and March, with most of the grapes already picked before the start of spring. Shortly after, sorting and other wine-making activities will commence, including the distribution of new vintages to restaurants, bars, and grocery stores across the country.

However, this year is looking to be a lot different for many wineries and winemakers across the country, as many are having to face the uncertainty of their crops, their employees, and their business.

Thousands of agricultural employees have been evacuated from their homes in both the north and the south. Foreign workers have fled Israel since the start of the war, and the government has barred tens of thousands of Palestinian workers from the West Bank and Gaza from entering Israel, many of whom worked as agricultural laborers for vineyards in the south. The workers were barred after concerns and documented cases that they helped Hamas plan and launch its October 7th pogrom.

With the harvest season on their heels, and vineyard workers struggling to keep up with the increased workload, many winemakers are extremely concerned about this year’s production output and the quality of wine that will come from the late-harvested grapes.

Sales and consumption decline

As one can imagine, wine is perhaps one of the last remaining items that consumers are looking to purchase amid the ongoing tension and uncertainty. According to the Israeli Wine Producers Association (IWPA), wine sales have dropped more than 60 percent within Israel – where the majority of wine producers sell their wine.

Elsewhere, restaurants and bars that usually serve Israeli customers and tourists remain closed for the time being. Staff shortages and supply chain disruptions are only a few of the issues many owners had to deal with in recent months.

Boutique upscale wine-tasting rooms that usually draw in thousands of Israelis and tourists over the warmer seasons have temporarily shut their doors, some as early as last year already.

Declining tourist numbers and hotel bookings have meant that the tourist industry has been hit hard by the war. The few restaurants that have since reopened are seeing less business than usual, and have fallen behind from what they were last year this time.

Online sales haven’t done much to remedy the situation. Eyal Miles, a cultivator of vines and cherries around Kerem Ben Zimra, a farming hamlet with four wineries located six kilometers from Lebanon, said that he’s seen a sharp decline in business since October, with online sales doing little to pick up the slack or make up for losses.

Despite Israeli wine being some of the best, the unpleasant atmosphere across the country isn’t seeing as many people heading out to buy a bottle of wine in celebration or enjoy a glass or two with their friends over a meal.

Yet, many wine producers remain very optimistic that the conditions will begin to improve over the coming months, especially near the border of Gaza, where ceasefire negotiations are currently underway and Hamas terrorists are running out of missiles.

Those who are still around to assist with in-house winery work, which can often be extremely labor intensive, continue to push forward and finish up as much of the picking, pruning, and sorting before having to dispose of thousands of tons of grapes.

Uplifting growth in the U.S.

The silver lining is that support for Israeli wine has been picking up among American consumers, who have now been stepping up and purchasing Israeli-produced wines in solidarity with the broader industry.

Following the outbreak of the war in Gaza, the Israeli Wine Producers Association launched the “Sip for Solidarity” campaign in an attempt to help raise relief efforts for Israeli winemakers, producers, and merchants.

The IWPA campaign was launched across all 50 U.S. states and worked with distributors across all these markets to help sell and distribute wines from more than 35 Israeli wineries that were included in the program.

The campaign not only helped raise awareness for these wineries in overcoming their current challenges but also committed to donating 10% of every case shipped between November 2023 and December 2023.

In late May, the annual Kosher Food & Wine Experience (KFWE) was hosted at the Meadowlands, outside of New York City, by Royal Wine Corp., a family-owned company with a dominant share of the kosher wine industry.

I attended the event, which was open to trade partners, industry leaders, and members of the press, and showcased more than 1,000 kosher wines, and a variety of spirits.

Talking to Jay Buchsbaum, Vice President of Wine Education at Royal Wine Corp., about current problems facing the harvest season in Israel he told me, “Vineyards across Israel have been affected by the ongoing conflict, and now especially those in the north that have gone unpruned due to daily rocket attacks by Hezbollah.” He further continued, “These vineyards produce some of the highest quality vintages in the country. If producers are unable to prune very soon, within the next few weeks, production from these vineyards will contribute meagerly, perhaps nothing to the vintage 2024 delivery.”

Before the event, we were concerned that the current state of affairs would permeate a sparsely attended conference, as winemakers, producers, and industry leaders are concerned over the current economic and political climate looming over Israel’s wine industry.

Yet, despite winemakers and producers echoing current challenges, the event was well-attended, with an upbeat and generally confident atmosphere. Buchsbaum left a resounding comment that left us surprised, “We’re substantially ahead of previous years in terms of sales and delivery. American consumers are stepping up big time regarding sales of Israeli wine, for now at least.”

Despite all the ongoing challenges, it may seem that the Jewish diaspora and allies are helping drive record sales of Israeli wines, bolstering sales and further beating estimates.

A sip of uncertainty

With Passover around the corner, merchants are beginning to ramp up their supplies of kosher products, including kosher wines and spirits.

As support for Israeli wine sees steady growth among international consumer markets, back home the future of the wine industry is being questioned as mounting tension and months of violence, terror, and bombardment are leaving a dark cloud of uncertainty over Israeli vineyards.

Winemakers remain optimistic that ceasefire negotiations could help buy them more time around growing regions in the south, however, in the north these talks are still far from being held. Yet, despite the challenging conditions, winemakers continue to forge ahead, picking, sorting, and making wine for a country and its people, that will once again rise, and lift its head from the ashes.

About the Author
I am the founder and CEO of ValueWalk - a popular financial information company. Before launching ValueWalk, I was first an equity analyst at a micro-cap focused private equity firm and then moved to a small/mid-cap value-focused research shop. I also have experience working in business development for hedge funds. I live with my wife and four kids in Passaic, New Jersey.
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