- Wine is expected to post positive year-over-year growth in off-premise accounts from January through the second week of March, according to a report from Silicon Valley Bank. But it's unlikely that positive year-over-year growth rates will continue, "given the 60% spike in sales in March of 2020 and substantial growth rates thereafter." The bank, which provides financial services to vineyards and wineries, also said the shift online will continue with many consumers turning to e-commerce in a post-COVID world.
- Silicon Valley Bank said it is hard to determine whether total wine sales were up or down for 2020, with the final figure likely depending on who compiled the data. The bank cites a preliminary report from Jon Moramarco, the managing partner of wine industry consultancy bw166, who estimated total sales will be up 1.3%. But Silicon Valley Bank estimated year-end restaurant closures, with added COVID restrictions and the possibility of lower December sales overall, might lead to downward revision of 1% to 2%.
- Even without the coronavirus curtailing away-from-home consumption, the wine industry continues to face hurdles to grow, particularly among younger consumers. Last January, IWSR Drinks Market Analysis found U.S. wine consumption decreased in 2019 for the first time in 25 years, posting a 0.8% volume loss from the year prior.
After a quarter-century of growth, the wine industry remains popular even as higher consumption rates appear harder to sustain. U.S. wine retail sales totaled $75.1 billion in 2019, according to the Wine Institute. In its 60-page report, Silicon Valley Bank said wine continues to see strong demand from retiring baby boomers who are buying at all price points — though their their buying seems to be moderating, both on price and volume, as they age. Going forward, much of the growth in the space will come from people under 40.
However, one problem is emerging: Millennials aren’t drinking wine as much as expected.
"They lack financial capacity, having been slow to get into their careers after the financial crisis that started in 2007," the report found. "They have a current preference for premium spirits and craft beers, which have a better value per serving."
As more millennials and Gen Zers become drinkers, wine succumbs to the same problems that beer has already faced with new alcohol choices and a demand for lower-calorie or nonalcoholic options. As this balance shifts further, and even more younger drinkers are inclined to reach for a beverage like White Claw hard seltzer, wine could be in for a period of prolonged declines as well.
Silicon Valley Bank said the jump in wine purchases through grocery seen during the coronavirus will eventually ease in favor of other channels like direct to consumer and a reopening of restaurants. Still, in the longer term, the permanent closures of restaurants will result in reduced selling opportunities on-premise.
The report noted that restaurants "will also incrementally move away from full-service seated models to new revenue-generating strategies, particularly home delivery and curbside to-go models, neither of which favors alcohol sales." This could explain why, last year, Constellation Brands acquired Empathy Wines, a DTC wine producer.
The challenge of recruiting younger, health-conscious, multicultural consumers into the category, coupled with an aging core drinker, continue to weigh on the wine industry. Both consumer groups have different values and spending patterns, and the wine industry "has done little to alter their marketing message to attract or retain either consumer cohort," the report said.
It's possible the wine industry benefited from a quarter-century of growth, and now is finding it can't position itself as quickly to changes in the marketplace, some of which are outside its control with others self-inflicted. Much like beer makers are rolling out more low-calorie or low- and no-alcohol offerings to cater to consumer preferences, wine is facing the same dynamics.
Large wine makers could learn a thing or two from upstarts such as FitVine, a wine maker whose offerings have less than one-third of the sugar and the same alcohol by volume as traditional options. Today, FitVine, which sells its products online and in stores such as Walmart, Kroger, Publix and Albertsons, is said to be one of the country's fastest-growing brands of alcohol and the top-growing wine brand.