The US Wine Industry in 2020 – Slowing Sales, but Opportunities Still Present (with COVID-19 Update)

UPDATE: Impact of COVID-19 on US Wine Sales – a Silver Lining?

When I first wrote this annual article in February 2020, who knew that in just a few weeks the world would be ravaged by the COVID-19 virus, causing most major countries to shelter in place and global stock markets to fall. Despite the fact the restaurants, bars, and winery tasting rooms were forced to close, causing US wine sales in on-premise establishments to plummet, the uptick in off-premise wine sales was amazing. People flooded to grocery and discount stores to stock up on food and alcohol, with a stunning 66% increase in off-premise wine sales by the end of the week March 21, and an even more jaw-dropping 225% increase in online retail wine sales, according to Danny Brager in an April 3 webinar sponsored by Wine Market Council.

Though these numbers are startling, experts predict that they are not sustainable as noted in this article by Adam Andrews of Wine Analytics Report. Instead, it is considered to be a similar phenomenon as the increase in wine sales seen at major holidays, such as Thanksgiving and Christmas, which fade back to normal after the rush. Despite this, there seems to be a silver lining in all of this worry and upset:

  • It Has Forced US Wineries to Market and Sell Wine Online – which is something they needed to spend more time doing in order to reach new consumers. Now the innovation seen in virtual tastings, social media ads, and unique virtual experiences such as that offered by Gary Farrell this week, is causing wine consumers to purchase more wine online from wineries.
  • It Has Encouraged New Consumers to Buy Wine Online – apparently there has been a 72% increase in new alcohol buyers online compared to this time last year, with a large increase in seniors who had not previously purchased this way in the past. According to Brager, “once buyers go online for the first time, they tend to repeat.”

Though this is a very stressful time, with many people negatively impacted by this terrifying virus, it has forced some changes in the US wine industry, that may be considered, in the long run, to be a faint silver lining.

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A faint silver lining?

ANNUAL US WINE SALES REPORT FOR 2019-2020

It’s true. Wine sales volume is slowing in the US market, and there is currently an oversupply of wine grapes, but that doesn’t mean there are not opportunities for increased wine sales. With more than 270 million Americans of legal drinking age, and only around 49% consuming wine, there is room to grow the market. However, wineries need to pay attention to changing consumer trends, which means modifying products and packaging to meet their needs.

Wine statistics from 2019 have been reported by most of the major research firms, and they confirm less volume in wine sales, but still show decent revenues. According to bw166, total US shipments in 2019 were 409.1 million cases, a modest increase of 1.1% compared to the previous year. Of these, 277.8 million cases were domestic wine, with 131.3 million cases of imported wine.

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Gomberg-Frederickson shows preliminary consumer expenditures for both on and off premise wine sales were $72.4 billion for 2019 compared to $69.7 billion in 2018, or a 3.9% increase. Of this figure, domestic wine revenues were $47.9 billion, or a 3.7% increase over the previous year, and imports totaled $24.5 billion, a 4.1% increase over 2018. This illustrates that even though volume is down, the US wine consumer is still spending a positive amount.

Best Selling Wine Varietals in the US Market

US consumers primarily purchase wine by varietal, and it is also tracked this way by Nielsen scan data. The graph below illustrates the top 5 best-selling varietals in both volume and dollar value, with chardonnay still in first place, followed by cabernet sauvignon, red blends (a new category in the past decade), pinot grigio/gris, pinot noir, and fast-growing sauvignon blanc. In terms of wine color, in 2019 red wine comprised 46% of volume sales, white wine 44%, and pink wine 10%. See bottom of article for more information on Hot Wine Trends in the US market.

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Wine Sales Channels & Major Distributors in the US

Approximately 80% of wine in the US is sold in off-premise establishments (bw166), with the remainder sold on-premise, via export, and winery direct to consumer (DTC). According to Sovos, winery DTC sales grew to $3.2 billion in 2019, a 7.4% increase at a volume of 6.6 million cases.  Wine ecommerce sales are slowing increasing, with more grocery stores and wine shops shipping directly to consumers, along with wineries; however, the overall rate is still estimated to be around 5%.

According to Wines & Vines Analytics, there are 958 wine distributors in the US market. The five largest are: 1) Southern Glazer’s Wines & Spirits, 2) RNDC/Young’s Market Co,    3) Breakthru Beverage Group, 4) Winebow Group, and 5) Empire Distributors.

US Wine Imports/Exports & Top 10 Brands

The top 5 countries from which the US imported the most bottled wine by 9-liter case volume for 2019 are: Australia at 11.7 million cases, Italy at 10.4 million, Chile at 3.8 million, New Zealand at 3.6 million, and Argentina at 3.5 million, according to Nielsen.

US export data for 2019 was 41.3 million cases shipped at a value of $1.36 billion, with the majority of the wine coming from California, according to the Wine Institute.  This is down slightly from 2018 statistics showing 41.6 million cases shipped at a value of $1.46 billion. Top export markets were the European Union, UK, Canada, Hong Kong, and Japan.

Number of US Wineries

 As of February 2020, there were a total of 10,472 US wineries up from 10,043 year to date (Wines & Vines Analytics). California has the largest number at 4,613 wineries, producing 86% of wine, followed by Washington (812), Oregon (809), New York (411), and Texas (406). All 50 states produce wine.

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 Wine Consumer Demographics

Each year the Wine Market Council in the US conducts several very useful research studies on the US wine market and consumer. Following are high-level results from their 2019 US wine consumer segmentation study. Some of this information is also displayed in the corresponding Infographic above.

  • Percentage of Adult Americans who drink wine= 49% of legal drinking population
  • Wine Consumption Frequency: High Frequency Wine Drinkers= 14%, or those who drink wine more than once a week, and Occasional Wine Drinkers = 35%, or those who drink wine once a week or less
  • Gender of Wine Drinkers= 54% female and 46% male
  • Age/Generation of Wine Consumers= Matures: ages 74+, 5% of wine market; Baby Boomers: ages 54 – 73, 34% of wine market; Gen X: ages 43-54, 21%; Millennials: ages 25 – 42, 34%; Gen Z: ages 21 – 24, 7% of wine market.
  • Per Capita Wine Consumption= 11.17 liters per person (2.95 gallons). Even though US is largest wine consuming nation by volume, per capita rates are less than many other countries (Wine Institute, 2018)

Ten Hot Trends in US Market

Every year at the Unified Wine & Grape Symposium, Danny Brager from Nielsen shares the latest hot trends observed in the US wine market. These are based on Nielsen Measured Off Premise Outlets, and include a large majority of US wine sales.

  • Rose Continues to Gain Favor – rose has become a staple in US market, with all styles, but especially Provence rose. It continues to grow at double digits in both volume and value
  • Sparkling Wine Shines On– wine with bubbles continues to captivate US consumers, with Prosecco still widely in favor, along with American sparkling and Champagne.
  • Private Brands Grow by 17% – an increase in private wine brands from super markets, restaurants, and other establishments is occurring in the US wine market
  • Sauvignon Blanc Accelerates – as the trend for fresh and light wine styles expands, sauvignon blanc has increased in value and volume, especially those from New Zealand
  • Oregon Grows at Double Digits – though still at a small volume compared to California, wine from Oregon – especially pinot noir – continues to be well-regarded by Americans, and grew at double digits in both value and volume in 2019.
  • Portability More Important – consumers have embraced wine in cans and tetra packs, and appreciate the smaller serving sizes of 187 ml as well as portability. Non-glass packaging grew at 22% of volume and 11% of value in 2019.
  • Small and Large Sizes Attractive – both 375 ml bottles and 3L bottles/boxes have experienced positive growth in the past year
  • Wine Cocktails, Sangria, and Flavored Wine Growing – as younger consumers seek new experiences, the growth of wine cocktails, sangria and flavored wines, such as E&J Gallo’s reintroduction of Bartles & Jaymes wine coolers, have increased 20 to 30% in dollar sales in the past 2 years.
  • The Sweet Spot for Wine Pricing – the sweet spot for wine pricing in US off-premise continues to be $11 to $14.99 and $15 – $19.99, with both growing 5% to 6% in value and volume. Wine priced at under $10.99 continues to be negative in both value and volume, but still comprises 74% of all wine sold in the US. Wine priced at $20 – $24.99 showed around 6% value and volume increase, but at smaller quantities.
  • Fear of Cannabis Over-Inflated – only 2% of wine drinkers report they will drink less due to cannabis usage; whereas 2% report they will consume more wine with cannabis.

Other New Trends Presenting Opportunities for Wine

Health & Wellness Trend Impacts Wine – the US consumer is now more concerned with health and wellness. A joint survey by Nielsen and the Harris Poll shows that almost 50% of American alcohol drinkers say they are trying to reduce alcohol consumption, but this number escalates to 67% with younger drinkers aged 21 to 34. Beer and spirits companies have responded by introducing new lower alcohol and lower calorie drinks, such as the widely popular White Claw at 5% alcohol and 90 calories, but the US wine industry has been slow in responding to this trend. There appears to be an opportunity to create more “low or no alcohol” wines for the US market, as is being done in Europe and New Zealand.

Desire for Ingredient Labeling – The joint Nielsen/Harris Poll survey also shows that 67% of Americans want to know everything going into their food and drink. However, US law does not require ingredient labeling for alcohol, though it is optional to include on packaging. This presents an opportunity for wineries to include this information to meet consumer needs, and could assist many dry wines, which at only 87 to 120 calories per 120 ml serving and relatively low carbohydrates, could be appealing for consumers. Likewise, information on organic, biodynamic, or sustainable winemaking practices, and labels such as “paleo-friendly, gluten-free, plant-based, natural flavors, no artificial sweeteners, low carb and low calorie” – which are often true for wine – would be useful to add.

Online Purchasing – Wine Ecommerce – More than 80% of Americans now shop online, according to Pew Research, and online wine sales are growing slowly, but not as fast in other countries, due to complex regulatory issues. More grocery stores are now delivering wine with groceries, and winery DTC sales, many of which are online, reached 7 million cases in 2019 – a 4.5% increase over 2018. However, there is still plenty of opportunity in this channel for innovation and expansion. According to Rich Bergsund of Wine.com, only 3% of wine is currently sold online in both DTC and off-premise retail. Furthermore, in a comprehensive review of online alcohol sales, Rabobank recommends that the US wine industry “take assertive action” to improve online wine sales as soon as possible, or risk “profound consequences.”

References

The US Wine Industry in 2019 – Slowing but Steady, and Craving Innovation

After 24 years of continuous growth in wine consumption the US market slowed to only 1.2% in volume in 2018 (bw166). Despite this flattening of volume growth, dollar value still grew at a 3.7% suggesting that, though Americans may be drinking less, they desire higher quality wine and are spending more per bottle. This indicates that wine still maintains it place as an important American beverage, but wine marketers need to get more creative in order to bring new consumers into the category. The total dollar value of the US wine market in 2018 was $69.7 billion, with $23.3 billion (33%) derived from imported wine (Wines & Vines Analytics, 2019).

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Why the Decrease in Volume Growth?

Experts suggest a series of reasons for the decrease in volume growth: 1) the aging Boomer generation who are drinking less wine due to health reasons; 2) Millennials not adopting wine as much as had been predicted; 3) the growth of new substitute products, such as cider, cannabis, and creative entrants from craft beer and spirits (see Hot Trends  below); and 4) a growing focus on healthy food and less alcohol (McMillan, 2019).

US Still Largest Wine Consuming Nation and a Target for Exporters

Despite these challenges, the US remains the largest wine consuming country in the world, and therefore is a target for many foreign wine producers. Indeed, 26% of the wine volume sold in the US last year was imported, with Italy in the lead for overall sales, followed by Australia, New Zealand, France, and Argentina (Swindell, 2019). The following paragraphs provide a high-level overview of the current state of the wine industry in the US, including “hot categories” desired by American consumers.

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Wine Case Volume by Channel

Total volume of wine sold in the US in 2018 was 408 million 9 liter cases (bw166, 2019), up 1.2% from 2017.

Off Premise – wine sales via grocery stores, wine shops, and other off premise establishments remain the largest channel in terms of both sales and volume in the US market. Volume was 331 million, according to Wine & Vines Analytics, but this figure included the 6 million sold DTC, so this was updated to 325 million. There are an estimated 194,000 off-premise establishments that sell wine (Brager, 2019).

On-Premise – wine sales at restaurants, bars, and other on-premise establishments is the second largest channel at around 77 million cases, according to Wines & Vines Analytics.  There are around 373,000 on-premise establishments that sell wine (Brager, 2019).

DTC (Direct to Consumer) – selling wine directly to consumers via winery tasting rooms, events, ecommerce, and other direct methods continues to be a fast growing channel in the US market, but still at a very small percentage of overall volume. According to Sovos, volume increased by 9% to 6 million cases shipped, and value increased by 12% to achieve $3 billion in sales. The price of the average bottle sold DTC was $39.70, and Sonoma, Oregon, and Washington wineries showed the most volume growth in this channel in 2018. There are currently 9997 US wineries (Wines & Vines Analytics, 2019b).

Exports – US wine exports fell slightly in 2018 to $1.47 billion, down 5% in value from the previous year. Case volume was also slightly down to 41.7 million cases, a 1.2% decrease. Part of this had to do with higher tariffs in China. The top export markets for US wine continue to be the European Union, including the UK, followed by Canada, Hong Kong, and Japan (Wine Institute, 2019)

Top 5 Most Popular Wine Varietals in the USA

The most popular wine varietals/styles in the US market based on volume continue to be: 1) Chardonnay, 2) Cabernet Sauvignon, 3) Red Blends, 4) Pinot Grigio, and 5) Pinot Noir (Nielsen, 2019b).  It should be noted that this year cabernet sauvignon ($2.595 billion) has just inched past chardonnay ($2.549 billion) in dollar value. It is expected that cabernet sauvignon will be the number one varietal in volume as well in the next year or so.

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Number of Wineries and Wine Consumer Demographics

US Wineries = 10,043 as of February 2019, up from 9645 year to date (Wines & Vines Analytics, 2019b).  California largest at 4,425 wineries, producing 85% of wine, followed by Washington (776), Oregon (773), New York (396), Texas (323) and Virginia (280).

Percentage of Adult Americans who drink wine = 40% of legal drinking population (240 million) (WMC and bm166)

Wine Consumption Frequency: (WMC- 2018)

  • High Frequency Wine Drinkers = 33% drink wine more than once a week
  • Occasional Wine Drinkers = 67% drink wine once a week or less

Gender of Wine Drinkers = 56% female and 44% male (WMC, 2018)

Age/Generation of Wine Consumers = Matures (ages 73+, 5%), Baby Boomers (ages 54 – 72; 34%), Gen X (ages 42-53; 19%), Millennials (36%, ages 24 – 41), I-Generation (ages 21 – 23; 6%) (WMC – 2018)

Per Capita Wine Consumption = 11 liters per person (2.94 gallons). Even though US is largest wine consuming nation by volume, per capita rates are less than many other countries (Wine Institute, 2016)

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 Hot Trends & Opportunities in the US Wine Market

A major benefit of attending the Unified Wine Symposium (largest wine conference in America) each year is the keynote speech delivered by Danny Brager with Nielsen. He analyzes top wine sales trends in the industry and shares the results. Here are some of the highlights (Brager, 2019):

  • Pink Wine – rosé wine continues to be extremely popular, with double digit growth across all price points.
  • Bubbles & Freshness – Sparkling wines and zippy sauvignon blanc wine continue to show growth, especially in dollar value.
  • Big Reds – Cabernet Sauvignon and red blends continue to be very popular, with cab starting to inch out chardonnay as the favorite US varietal
  • Cider, Sangria & Wine Cocktails – are gaining ground as variety-seeking Millennials explore new beverage options
  • Healthy Wines – though it is not legal to advertise health benefits of wine in the US, consumers are becoming more attracted to wines that use these types of descriptors: “no taste additives, gluten free, low carb, vegan friendly, sulfite free, low calorie, low alcohol, light, lighter, organic, paleo friendly, etc.” This is because of the new focus on healthy food and beverages that is sweeping the nation.
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Hot Trends: Rosé, Sparkling & Wine Cocktails. Photo Credit: Pexel

  • Cans & Creative Packaging – wine in cans is no longer a fad. It is here to stay and growing at double digits, achieving $70 million in sales by the end of 2018. Other alternative containers (tetra, box, and mini-bottles), as well as clever packaging, such as augmented reality labels (see 19 Crimes and Bogle Phantom), are capturing the attention of younger wine consumers. I-Generation is especially fascinated by the AI labels.
  • $11.99 – $19.99 Sweet Spot – the sweet spot for off-premise sales continues to be $11.99 – $14.99 with 8% volume growth and $15 – $19.99 at 10% volume and value growth. Wine priced at less than $10 showed no volume growth, indicating that premiumization continued to thrive during 2018.
  • Oregon, NZ & France –continue to show most volume and value growth, maintaining their popularity with US consumers during 2018. Oregon led with pinot noir, NZ with sauvignon blanc, and France with rose and sparkling wines.
  • Cross-Overs & Cannabis – when the car industry introduced “cross-over vehicles” several years ago (SUV/car hybrid), they started a trend that has crossed over into food and beverage. Thus the US market has seen hundreds of new beer, spirit, juice, and now even cannabis beverages in which wine is a featured ingredient. Consider Oenobier beer aged on muscat wine and Rebel Coast Cannabis infused sauvignon blanc. This type of creativity is very attractive to many buyers who enjoy experimenting with new products.

References

About the Author: Dr. Liz Thach, MW compiles this data each year to assist in teaching wine business classes at Sonoma State University.

Which Wine Varietals Do Americans Prefer in 2018?

Every few years at Sonoma State University Wine Business Institute we launch a survey of the American wine consumer in order to understand their wine drinking preferences and shopping behavior. This year we surveyed a representative sample of 1,191 American wine consumers living in all 50 states. The results of the survey – some quite surprising and others similar to previous years – have been reported in an article with WineBusiness.com entitled “Snapshot of the American Wine Consumer in 2018.” To read the article, CLICK HERE.

Choosing wine for dinner.

American Wine Consumers. Photo Credit: Fotolia

But What Varietals Do Americans Prefer?

However, one item we left out of this year’s survey was a question asking Americans about the wine varietals they prefer. Instead we asked them about preferred style of wine. The reason we left out the varietal question was because every year we received the same exact response as that reported by Nielsen Scan Data in Wine Business Monthly. Therefore in order not to duplicate questions, we refer people to this great magazine. Despite this, I still receive numerous emails from people around the world asking me about the varietals that Americans prefer. So, here is the answer to the question based on the Nielsen Table Wine Category Segments for 52 weeks ending Sept. 9, 2018. This information was published in table format in the most recent issue of WBM January 2019 on pages 216-217.

Most Popular Wine Varietals in the US by Volume

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Figure 1: US Wines Sales By Volume for 52 weeks ending 9/9/18. Source: Nielsen & WBM

From this chart, we can see that chardonnay is still number one in terms of volume, followed by cabernet sauvignon, pinot gris, red blends, and merlot. Volume is reported here in 1’000s of 9-liter cases. The most growth in terms of volume in the past 52 weeks was sauvignon blanc at 4.3%. The biggest losses were syrah at -7.4%, white zinfandel at -7.4%, and malbec at -6.3%.

Most Popular Wine Varietals in the US by Dollar Sales

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Figure 1: US Wines Sales By Dollar Revenue for 52 weeks ending 9/9/18. Source: Nielsen & WBM

Figure 2, illustrating sales volume during the past 52 weeks in the US market, reported in US$ millions, shows that cabernet sauvignon edged out chardonnay by $26 million to assume first place. This is followed by reds blends, pinot gris, and pinot noir. Predictions that cabernet sauvignon may soon replace chardonnay as America’s favorite wine varietal appear to be coming true in terms of sales revenues, because chardonnay showed zero growth in sales in the past 52 weeks, whereas cabernet sauvignon showed a sales growth rate of 3.7%. The other winner here was sauvignon blanc that grew at 5.7%. Biggest losers were white zinfandel and malbec that both lost -7% in sales during the past 52 weeks.

Top 5 Best Selling Wine Varietals in US Market by Volume and Sales

In combining these two graphs, keeping sales in US$ millions and converting volume to 10,000s 9-liter cases, it becomes clear that currently the top 5 best selling wine varietals in the US market for the past year are: 1) Cabernet Sauvignon, 2) Chardonnay, 3) Red Blends, 4) Pinot Grigio/Gris, and 5) Pinot Noir.

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Figure 1: Top 5 Selling US Wine Varietals by Volume & Value for 52 weeks ending 9/9/18.     Source: Nielsen & WBM

One caveat about the Nielsen wine scan data is that it primarily reflects off-premise wine purchases, and doesn’t include direct to consumer wine sales from wineries or restaurant/bar wine sales. However, since more than 80% of wine in America is sold via off-premise (grocery stories, wine shops, etc.) this is still a good reflection of wine sales in the US. Furthermore, the Nielsen scan data has always reflected the same preferences as we receive on our surveys.