Wine Industry Looks Past Headwinds

Research shows that premium wine sales are making up for demographic changes, as wine companies diversify

6/4/2024

Recent research affirms that the wine audience is skewing older, as younger consumers opt for other alcoholic beverages or are not imbibing.

Is the glass half full or half empty for the wine category? Recent market research shows that younger consumers are expanding their palates and wallets to purchase other adult beverages, but winemakers and retailers are working hard to maintain sales or tap into new markets.

Despite upticks in consumption during the pandemic when people stuck close to home, the last few years have been challenging for the wine sector. The “State of the U.S. Wine Industry” report from Silicon Valley Bank (SVB) found that total wine volume dipped 3% in 2023 following a 3.2% loss in 2022 and a 1.3% slide in 2021, as many winemakers experienced overproduction and U.S. consumers shift to alternatives like RTD cocktails and spirits, avoid or lower their alcohol intake or replace these drinks with cannabis.

That said, a new report from BMO Financial Group suggests that the slowdown in the wine market is stabilizing. According to BMO’s first wine market report, 71% of wineries surveyed predict year-over-year revenue growth in 2024, while 22% anticipate flat revenue and 6% foresee a decline.

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E&J Gallo Winery shortened its name to GALLO and is expanding into other adult bev categories, including beer.

BMO describes the market outlook as “cautiously optimistic,” with a predicted return to total market volume of between 400 and 415 million cases by next year. In addition, the report shows that although wineries have experienced a dip in volume, sales of premium wine are helping make up for gaps. According to BMO’s survey of 630 wineries, sales of all wines in food stores priced more than $10 rose to 34% from 2019 to 2023, and sales of such items are expected grow through the end of 2024 and into next year.

The Aging Process

Demographics remain a hot topic in the wine industry. According to BMO’s study, Gen X, Gen Z and Millennials now comprise 61% of all wine drinkers and Baby Boomers are still a big audience for wine.

Still, young people are not drinking wine in the same way or frequency as older consumers. As the SVB analysts wrote in their report, “The younger demographics consume wine differently, on dissimilar occasions compared to the past, or, in some instances, abstain from alcohol altogether.” According to SVB, 58% of consumers over age 65 prefer wine over other alcoholic beverages but every younger cohort indexes nearly 30 points lower.

Younger consumers have changing attitudes towards adult beverage consumption in general. As BMO’s survey revealed, 52% of U.S. consumers between the ages of 18 and 34 years think moderate drinking is detrimental to health, compared to 39% of all U.S. consumers.

There are other demographic shifts in the wine category as well. BMO’s survey found that Hispanics are the fastest growing ethnic segment of wine drinkers, comprising 15% of the market in 2023, up 2% from 2015.

Uncorking New Opportunities

Winemakers, while reporting more optimism this year per BMO’s survey, are increasingly diversifying. Earlier this year, E&J Gallo Winery simplified the company name to GALLO, focusing on the family involvement and the company’s broader portfolio of wine and spirits.

On that point, GALLO is indeed expanding. The company recently partnered with the founders of Montucky Cold Snacks to offer Montucky’s American Style ‘Cold Snack’, a light lager.

“Today’s consumer is shopping brands, flavors, and occasions across beer, wine, spirits, and RTDs. At GALLO, we focus on serving the consumer and expanding the boundaries of what is expected,” said CEO Ernest J. Gallo. “With Montucky Cold Snacks, combined with our expansion of High Noon into vodka iced tea, our partnerships with Canelo Álvarez on VMC and with Lotte on Soonhari Soju, our recent acquisitions of Fishers Island Lemonade, Salt Point, and Waterbird, and our continual wine innovation, such as VIBE by Vendange, we are constantly trying to bring new and better experiences to the consumer.”

Wineries are expanding their horizons in other ways to sustain and grow demand. In May, Robert Mondavi Winery, part of Constellation Brands, teamed up with VII(N) The Seventh Estate in a multi-year collaboration aimed at expanding the appeal of wine to diverse audiences.

Ode to Soul is the first offering from that partnership, a proprietary red wine that reflects the winemaking expertise of Robert Mondavi with the innovations from VII (N) The Seventh Estate, which was founded by basketball star and entrepreneur Carmelo Anthony and his business partner Asani Swann.

"We are proud to introduce a partnership with Robert Mondavi Winery aimed to produce incredible wines, prioritize innovation in the industry and foster a more welcoming wine community,” said Anthony. “Our strong and growing relationship is reflected in our inaugural wine, Ode to Soul, and is a testament to both the power of collaboration and our commitment to expanding horizons in the wine space.”