What are the current causes for optimism in the wine industry?

Last week I looked at the wine industry in different countries (Is the global wine slump almost solely due to China?), and pointed out that the data show static wine consumption through recent times in all major countries except China, which has a 25% decrease over the past few years. So, while the industry is not booming, it is not heading for bust either. I am not the first to have noticed this (Is the future of wine really in trouble?).

This week, I will look at a number of other issues that provide cause for optimism, if you happen to be in the wine industry.

As Tom Wark has noted, the basic issue is to distinguish between what are called structural changes versus transitory changes (The structural and transitory changes to the wine industry):

Structural conditions impacting the health of the wine industry are those factors that set the guardrails for the industry and are unlikely to change without considerable effort if at all. Then there are transitory conditions such as interest rates, inflationary trends, general economic growth patterns, weather-induced catastrophes, and tariff policies. All of these can impact the health wine industry negatively or positively, but they also are subject to eventual change or mitigation.

Tom notes that many of the recent changes in the wine industry have been transitory changes, which have certainly severely impacted the wine industry, but that they will eventually change again, for better or worse. We do not have to assume that latter.

One of the obvious changes has been the rise to dominance of younger people — notably, younger generations (Millennials and Generation Z) are drinking less wine than the generations before them (Can the wine industry adapt to the ‘lifestyle generations’?). This is the so-called “Life-style generation”, whose impact is greater and greater — they are dealing in their lives with a combination of health concerns, social media and public image, variety and choice, and also financial insecurity.

Of this list of topics, the obvious one for the wine industry is health. As Katherine Cole has noted: We are all doomed to die; but wine won’t do us in. Sure, hard-drinking is risky, but hundreds of studies show that moderate tipplers enjoy health benefits. Katherine cites some useful data in this regard.

Similarly, in this blog I have discussed the World Health Organization’s recent scare campaign (There is much medical evidence that wine consumption is good for your health). Some other good discussions of different parts of this topic include:

• Scientists prove drinking good wine ‘makes you happier’
• Couples who drink together live longer, study suggests
• Why social drinking is integral to a longer life
• We don’t drink wine just for intoxication

Importantly, the concept of Wellness wines, loosely defined as “better-for-you” wines, has taken off over the past half-decade, or so:

The audience for better-for-you wines is generally younger—Millennial and Gen Z drinkers—and is often comprised of people who desire to maintain social interaction and enjoy wine while adhering to health values or goals ... Twelve leading brands combined for an 14% increase in 2023, reaching 2.07 million cases, according to Impact Databank. Volume of those leading 12 brands has more than quadrupled since 2020.

Also, it has been noted that: Pemiumisation remains the key driver in on-trade drinks sales:

The trend to premium drinking is predicted to continue as consumers continue to drink less but better, according to the latest insights from analyst CGA by NIQ. Moreover, while ‘value-for-money’ remains key, this is about drinks ‘worth the price’, rather than ‘cheap’.

Another optimistic note is in the 2024 Tasting Room Survey Report: revenue steady amid rising stakes for direct sales. That is, while visitation and wine club recruitment declined slightly in 2023, wineries appear to have been able to hold the line on direct sales revenue.

As I have noted before, Global wine production has exceeded consumption for decades. However, that is not an insoluble problem. The basic issue is that the back-log of inventory will not go away if sales volumes are flat, as shown in the graph immediately above (from Silicon Valley Bank), so presumably distributors will pursue discounts and promotions to reduce the back-log.

The alternative is to remove actual vineyards (Digging deeper into wine's vine-pull battle). This is one reason why the industry is concerned (The story behind the American wine crisis). This is a global issue, not a local one.

As recently noted: Are things getting better for the wine industry? SVB says yes — and no. Let us focus on the Yes part, shall we?