In the USA, of course, there is currently a sea of grapes that exists throughout California for the current vintage, but even that may be only short term, as has been recently suggested (Dan Berger’s Wine Chronicles: The glut); and as was discussed 25 years ago by Lewis Perdue (as presented in the Footnote below). Anyway, here I will look outside of that situation.
There is an observed decrease in wine consumption, as I have covered before (Is the global wine slump almost solely due to China?). Well, The International Wine and Spirits Record has presented us with a list of reasons for this decline (Four reasons for the decline in consumption):
- Consumers are increasingly interested in a healthy lifestyle, and are more inclined to socialize without alcohol
- A shift between product categories, and a desire to experiment, especially among Millenials and Gen-Z drinkers (considered to be key demographic groups these days)
- Younger adults generally participate less frequently in wine consumption
- When consumers do drink alcohol, they seek out higher-quality wines (more sophisticated brands and categories), with the emphasis on good value not premiumization (or luxury positioning).
The above graph tells the story. The top three consuming countries are all showing continual declines in recent years (much of it pre-dating the Covid pandemic, which is often cited as a key event). However, the next six countries are all fairly stable. This distinction between the top three and the others is important — the biggest markets dominate the industry, of course, but it is not all gloom and doom.
Sadly, though, this decline is not just in Europe, as last year global wine consumption dropped 2.6% to 221 million hectolitres — the lowest volume recorded since 1996 (see the IWSR reference above). In the USA, wine sales from wholesalers to retail stores, restaurants and bars dropped 8% in the 12 months that ended in August (Wine and spirits struggling in US retail).
The obvious thing to think about, then, is what sorts of responses are possible. One person who has recently offered some suggestions is Lulie Halstead, who founded the research firm Wine Intelligence back in 2002 (Lulie Halstead identifies the opportunities in the beverage alcohol market). Five of her important points include (along with my added comments and links):
- Volume is dropping but value is increasing — a 1% decline in total beverage alcohol consumption in 2023 but a value increase of 3%, with the emphasis on good value, as above (The US wine market faces an unwelcome new normal)
- There is an increase in moderation rather than an increase in abstention; so, people are still drinking wine but just not as much per person (see, for example: Alcohol-free brands urge health minister to update outdated drink labels), and sales of strong wines (ie. fortified wines) have been decreasing for many years (Is there a future for fortified wine?)
- Distinctiveness is the key driver of brand growth, not differentiation — the former concerns making the brand easy to identify, while the latter concerns the different features of a product (one example: Alsace wines stripped back to just ’Gewurz’)
- Diversity is critical for success — there is a growing desire for refreshing styles, rather than focusing on one product, so that adaptability is the name of the game (as one example: A new dawn beckons for the Médoc’s white wines), including alternative packaging (bag-in-box, cans, tetrapaks, etc) for superior wines (Premium bag-in-box wine — has its time finally come?)
- Watch what consumers do in real life — this leads to the conclusion that, for example, there are big opportunities for spritz-style wines, at least in the short term, as well as for cocktails-in-a-can (Maturing RTD category poised for sustained growth).
To finish off, we might look briefly at wine production, since there is no point in this increasing while consumption is decreasing. The above graph tells the story for the European Union. Production in France and Italy is certainly heading in the same direction as their consumption trends.
Obviously, these top three countries are the largest producers in the world. If we look further, then the top 10 wine-producing countries outside of Europe, as a percent of total production in 2023 were (Top 10 wine-producing countries outside of Europe revealed by Audley Travel):
- United States – 9.2%
- Chile – 4.6%
- South Africa – 4.2%
- Australia – 4.1%
- Argentina – 3.7%
- Brazil – 1.50%
- China – 1.30%
- New Zealand – 1.00%
- Georgia – 0.80%
- Mongolia – 0.50%
Footnote: A quarter of a century ago, Lewis Perdue published The Wrath of Grapes: The Coming Wine Industry Shakeout and How to Take Advantage of It (Spike Books / Avon, 1999). He discusses exactly the same sorts of problems that the wine industry is discussing (again) right now. We were reminded of this recently by Mike Veseth (Wine books revisited: Lewis Perdue’s “The Wrath of Grapes”):
The Wrath of Grapes was one of the first books I read when I started studying the wine business. Going back to it now I am impressed with how relevant it remains today and how much it has obviously shaped my thinking about the wine industry.
Although some parts of The Wrath Grapes have naturally aged better than others, the book’s overall argument remains timely and relevant. Most of the big problems that Perdue wanted us to take seriously 25 years ago remain at the top of the agenda. No wonder the book is still in print.So, what comes around once, comes around again. The book is available on Amazon (here and here).
