Long-time 1WD reader and tirelessly inquisitive wine guy Bob Henry recently asked for my thoughts on an article published by wine data maven David Morrison, titled The perilous state of the US wine industry?. Go read it; it’s important.
My first thought about said article is that I love said article; it’s well-written, interesting, and cites actual numbers to back up the conclusions therein. My second thought is basically “Oh, holy sh*tballs!“
The crux of the article’s matter is that the U.S. wine market is potentially in for some very hard times, primarily due to unsustainable trends. Among Morrison’s conclusions, after adjusting wine sales data for inflation:
“If the US population is continuing to grow, then sales of all goods can be expected to grow with it — and the population has been growing at c. 0.65% per year for the past 5 years. The wine industry is currently not keeping pace with the population.”
“…there have been times when the increase in total wine value did not keep pace with inflation.”
“…a healthy industry needs an increase in the actual number of consumers through time; and the current wine industry in the USA does not seem to have this.”
If these dire conclusions about the wine business sound familiar, it’s probably because some of us [raises hand] have been sounding similar warnings for literally almost an entire decade…
Let’s recap some of 1WD’s largest rants in the U.S. wine market area:
- In general, the U.S. wine business has relied too much and too long on a consumer base (Boomers) that is aging out (literally and financially) of its wine buying power.
- At the same time, outreach by the wine biz has largely been ineffective at capturing consumers in other buying age groups.
- The wine biz in America more-or-less got caught with its pants down when it comes to positioning itself defensively against the cannibalization of wine consumer dollars by other goods such as beer, weed, and even coffee.
- The wine business is now in a state of playing catch-up in trying to pull younger consumers’ dollars away from other luxury goods, at a time when those consumers have tighter budgets.
Morrison’s analysis seems to strongly support the notion that the fine wine business in general has failed to attract enough enthusiastic, younger consumers to support its continued growth.
None of that is handsome news, but it’s all even uglier when combined with the warnings issued recently (and cited in Morrison’s blog post) from Sonoma State University’s indefatigable Professor Damien Wilson. Wilson has noted that the U.S. wine market’s focus on premiumization (driving higher revenues via higher prices) looks an awful lot like what France did (raise prices) in the last several years in response to a declining wine consumer base, which resulted in marginalizing younger potential consumers even more (to the point where 80+ percent of wine consumed in France is by people aged 55+).
Little has been done by the wine biz in the last ten years to change the fact that (as reported by Wine Business and emphasized by Bob Henry in the comments section of Morrison’s post): “SIXTEEN PERCENT OF CORE WINE DRINKERS consume wine once a week or more frequently, which ACCOUNTS FOR AROUND 96 PERCENT OF CONSUMPTION. Thirty-five million adults drink virtually all of the wine sold in America.”
It seems that, in focusing on selling higher and higher priced wine to a dwindling set of older consumers, the U.S. wine business has painted themselves into a corner; they now have to grow the market with a younger consumer base which they have largely ignored, increasingly via social tools that they have largely misused, at a time when competition for a smaller set of consumer dollars has never been more intense. Holy sh*tballs, indeed.
Cheers!
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source http://www.1winedude.com/the-us-wine-markets-impending-hangover/
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