Mixed Times for Wine

As 2024 approaches, the American wine industry isn’t sure how things are going—much like the American consumer. Contrary to most economists’ predictions last year, the U.S. economy has not entered a recession so far. Inflation has slowed; consumer spending continues to be strong. At the same time, costs are still higher than a year ago, wages have not kept pace and most Americans are still feeling uncertain. Economic weakness in other countries as well as conflict overseas are adding to the anxiety.

Leading members of the wine industry say they are feeling all of those factors. In 2022, the U.S. wine market declined by 10 million cases, or 3.2%, according to Impact Databank, a sister publication of Wine Spectator. Value-wise, wine was flat. Sales of wines priced $15 a bottle and higher grew, but wines under $15 declined by more than 4% by volume and 3% by value. 

This year has not been better. Impact predicts that the U.S. wine market will have grown slightly by value in 2023, but declined by volume. That echoes what sources like Nielson and SipSource are showing for the first nine months of 2023, for both retail and restaurant sales. Sovos ShipCompliant shows similar declines for direct-to-consumer sales from wineries. All signs point to 2023 being a tough year for overall wine sales.

“Everything I’m seeing is kind of pointing in the same direction right now, which is that sales are declining across channels,” said Chris Bitter, an economist who analyzes the wine market for Terrain, a division of American AgCredit. “Everything is declining at this point.”

Bitter and other industry analysts are quick to point out that much of this is a symptom of the pandemic-hangover economy we’re living with. “We had some distortions during the pandemic—a bit of a surge in premium and luxury wine sales,” he said. “And part of what’s happening now is we’re just kind of coming back to normal. And then we have this inflation and economic uncertainty.”

But even once the global economy is back on a more normal track, most experts think the wine market is not going to surge. Slow growth is the most likely option for the next few years. A recent report by IWSR, a U.K.-based drinks industry analysis firm, concluded, “Overall, the short- and medium-term trend for wine is challenging, with the long-term trend of slowly declining volumes in many markets expected to continue.”

One reason for that is Americans are drinking a greater variety of beverages. While beer has been the drink of choice for decades, it has been on the decline. Wine gained a bigger share of the market for nearly three decades, but spirits have been on a rise as of late, and now fermented malt beverages like hard seltzers and pre-mixed cocktails, aka RTDs or ready-to-drinks, have grabbed sizable shares of our palates.

There has also been a growing trend toward moderation. Americans are drinking less—and less often. Low-alcohol and nonalcoholic wines have seen growing sales in the past three years. Both in the United States and in Europe, consumers are increasingly opting for buying less wine but buying more expensive wine.

If there’s one bright spot on the horizon, it could be that the fear that younger people over 21 are not interested in wine is proving wrong. Bitter and others are seeing increasing data that millennials and legal drinking age Gen Z consumers are opting for wine when they drink.

As IWSR’s analysts noted, “The number of regular wine drinkers grew by 14 million between 2021 and 2022. This momentum is mainly coming from those under the age of 40. This suggests a younger population that might not be engaging with wine as regularly as older drinkers, but that is nonetheless discovering the category in greater numbers than it did pre-pandemic.”

It’s not yet clear how wineries should market to these younger drinkers. Better quality wines, organic and sustainably made wine, lower calorie and…


Source : https://www.winespectator.com/articles/mixed-times-for-wine-123123

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