A less robust wine market. Growing sales of premium wines. Concerns about millennial engagement with wine.
These were the top three trends identified by Jon Moramarco, a partner in Gomberg, Fredrikson & Associates noted in his annual review, released in early March.
The wine industry has done little to grow its consumer base over the past decades and that may lead to less consumption as baby boomers age, noted Moramarco, adding that around 35m consumers drink 85% of wine. The good news is that more of this is premium than ever before, with the under $9.00-a-bottle category stagnating.
What will attract new consumers?
Prior to 1993, Moramarco noted, wine coolers and red, fizzy Lambrusco served as gateway products for new consumers. However, as the baby boomer generation has aged, there are fewer entry-level products to drive millennials’ interest in the wine category.
He questions if the newly popular hard seltzers (flavoured alcoholic water) will turn out to be the wine coolers of this decade. If so, how will they bring new consumers to wine? Expensive Prosecco, on the other hand, may be a possible gateway product. Moramarco adds that both Italian and Spanish sparkling wines have also seen sales upticks.
The number of wine drinkers is, nevertheless, set to decline as boomers exit the market.
“Going forward [there is] little real growth,” of the market in under-40s. In the past quarter century, 50% of wine market growth came from the 50- to 70-year age demographic, and in the next 25 years, 60% of growth will come from the over 70s.
Fragmentation and social mores
Other challenges include a growing focus on social responsibility, clean living and sustainability—all of which have anti-wine elements to them.
The market is also consolidating and fragmenting; the Tobacco Tax and Trade Bureau (TTB) regulatory agency released 118,000 new labels last year. Even the different age cohorts are “actually becoming more diverse.”
Moramarco adds that many brand owners have not invested a lot of time in figuring out what will keep their customers brand loyal. ”They need to be able to stay relevant to both Boomers and the younger demographic.”
For foreign producers looking to enter the competitive American market, Moramarco suggests that they focus on how they are going to differentiate themselves.
California-based Gomberg, Fredrikson & Associates is a provider of wine industry data and analytics that performs extensive market research and data collection to create the wine industry’s leading databases and reports.
Liza B. Zimmerman