Monday, January 9, 2023

Long-term negative trends for wine in the USA

The USA has one of the world’s biggest two Gross Domestic Products (along with China), which means that its people have the most money to spend at the end of the pay week, on average (this is called Purchasing Power Parity). Some of this money is spent on discretionary things like wine and other alcoholic beverages, such as beer and spirits.

With this in mind, we could usefully look at how big the U.S. wine industry might be, in relation to the rest of the alcohol industry. For example, concern has recently been expressed about a decrease in relative wine consumption (A response to wine's diminishing place in the society, by Tom Wark):
There is and has been for some time, a distinct feeling in and around the wine world that wine is losing ground; that its share of the consumer mind and pocketbooks, is being diminished from what it always has been. I think those feelings are based on sound observations and grounded in reality.
So, I think that it we should have a look at this for ourselves, as part of the New Year (see my Gott nytt år! post).

As an interesting preliminary note, the USA differs from most other countries in one notable way. Almost all governments have a department with some official control over those things that their citizens put into their bodies, which in the USA is the Food and Drug Administration (FDA). However, the USA puts alcohol under the control of the Alcohol and Tobacco Tax and Trade Bureau (TTB), instead. So, it is this latter department that we must consult about data concerning trends in U.S. wine production.

This governmental anomaly arose at the end of Prohibition (1933). Instead of being sensible about repealing the federal restriction on the sale of alcohol, the US national government simply handed control back to each individual state. So, to this day, each state is potentially different concerning over-sight of alcohol sales. American citizens cannot necessarily even transport alcohol across state borders (whereas European Union citizens can receive alcohol from anywhere within the EU — the European Union is thus more united than is the United States!).

More importantly, for our purposes here, the TTB was set up mainly, as far as I can see, to make sure the feds get some tax money out of the newly created situation. Sadly, the TTB has not always been able to deal with all of its role, especially with regard to human health, which has got to be at least as important as taxes. For example, only in 2017 was it given an explicit budget to chase commercial wrong-doers (The TTB ramps up enforcement over trade practices).

One of the things that the TTB has always done is formally approve the labels on containers of alcohol. Each year, the producers need to get a new Certificate of Label Approval (COLA), if they have changed anything at all since the previous year. Similarly, there is an Alcohol Beverage Formula Approval (via laboratory sample analysis), which may be required before the COLA application. Note that, since approval is needed only for new or changed labels, this applies to only a small percentage of the number of alcoholic beverages fighting for shelf space each year.

COLA applications

Moving on to the main topic of this post, there are various sources of TTB data, including annual reports (2016—2021), and an Open Data web page. Unfortunately, the types of data that are reported do vary considerably from year to year; but we can do our best to look at some of the trends this century.

The first graph (above) shows the total number of COLA applications since 2009, along with the separate numbers for the three beverage categories that the TTB recognizes. Note that wine greatly exceeds the other two, comprising 85—95 % of the applications. However, you will also note that the number of wine applications has not actually increased recently, whereas spirits applications and especially beer applications have definitely been on the way up.

Moreover, only a certain percentage of the applications are actually approved by the TTB. This information is shown in the second graph, for both the total applications and for the wine subset. The percentage approved has increased through time, which I presume means that the producers are getting better at submitting approvable beverages. Wine does quite well, in this regard.

COLA approvals

However, if we look at the actual number of wine approvals over a much longer time, we see a definite ongoing trend. This is shown in the third graph (below). Since 2015, the number of wine approvals has not really changed at all, even though the total number of approvals has continued to rise. As noted above, it is the number of spirits and especially beer approvals that have increased.

This means that wine comprised > 85 % of approved alcohol labels until 2007, after which time the percentage has continually decreased. This is shown in the second graph (above; the green line), which shows an ongoing linear decline in wine COLAs as a percentage of the total. Current approvals are now c. 60 %, but will presumably be less than this soon. Beers are at c. 25 % and spirits at c. 15 %.

COLA percent approvals

So, what are we to make of this situation? The basic pattern is that wine label applications in the USA have not increased, whereas spirits and beer labels have done so. In this sense, wine is definitely “losing ground” in the USA, as Tom Wark put it in the quote above. This has involved 15 years of steady decline, so we are not talking about a recent event.

Tom is concerned about what (if anything) can be done to “stave off further erosion of wine’s place in society”. However, the issue seems to be that wine is not growing, whereas its competitors are doing so. That is: “wine has been losing its diversity and variety advantage over its main beverage competitors”. Consequently: “over the past two decades the amount of editorial coverage beer and spirits have received in the media has increased significantly”. This sounds very much like the infamous Parkerization of wine (that is, a strong conforming force turning wine into a mass of sameness).

If beer and spirits are expanding, and wine is not, then there are only three alternative responses: expand wine, contract beer and spirits, or do nothing. Wine as a commercial product has not changed much over the past century, whereas beer and spirits seem to have done so (eg. many new styles of beer, many new spirits mixers). It may therefore come as no surprise to you that some wine producers have taken a leaf or two from the latter two books. For example, the number of RTDs and cocktails involving wine are increasing, as are the number of fruits / varieties from which wine is being made. There are also premiumization trends, and low alcohol trends; there are popularization trends, and social media trends. *

Apparently, the Do Nothing option is not the default one. This is good to know. However, the young people are always the future; and thus seriously engaging them in wine, in whatever way they choose, is the only way to go, long term.

* Wholesalers want TTB and Treasury to investigate how soft drink companies market new alcohol crossover products.

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