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 has not yet been reported, but in 2018 it totaled 41.7 million cases at a value of $1.46 billion, according to the Wine Institute. Top export markets were the European Union, including the UK, followed by Canada, Hong Kong, and Japan.

The US still ranks as #1 in terms of creating the top global wine brand for volume in 2018. The winner is, once again, Franzia, at 26.5 million 9-liter cases, created by The Wine Group. This is followed by Don Simon from Spain, Barefoot (USA), Concho Y Toro (Chile), Robert Mondavi (USA), Yellow Tail (Australia), Sutter Home (USA), Carlo Rossi (USA), J.P. Chenet (France), and Martini (Italy), according to the 2019 Impact Databank report.

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

 

 

 

 

Profile of the US Wine Consumer in 2014

(Originally published in Wine Business Monthly as “Snapshot of the American Wine Consumer” in 2014 by Liz Thach, Janeen Olsen & Tom Atkin)

Wine with FlagWho is the American wine consumer today? What types of wine do they prefer and where do they purchase their wine? How much do they spend on a bottle of wine in a restaurant? These and other questions are addressed in a new annual survey that researchers at Sonoma State University Wine Business Institute have recently designed.

About the Sample

The online survey was launched in early 2014 with a total of 1028 wine consumers responding to the questions. The data was gathered by a third party market research firm supplying panel data of household wine consumers in America. All fifty states were represented, with more consumers responding from states with higher wine consumption rates. For example, 12 % of the sample were from California, 9% from Florida, 7% from New York and Illinois, and 6% from Texas.

Demographics showed 49% male and 51% female respondents; 59% had a college degree; and 61% made over $50,000 per year. In terms of age, 36% were Millennials (21 – 36), 22% Gen Xers (37 – 48), 34% were Baby Boomers (49 – 67) and 8% were Traditionalists (68 +). The ethnic breakdown of the sample was 72% Caucasian, 12% African-American, 8% Hispanic, 5% Asian with the remaining 3% Mixed or other. These demographics are very similar to other research portraying the American wine consumer.

Wine Consumption Frequency and Preferred Varietals

When asked how often they consume wine, 20% of the sample reported drinking wine on a daily basis, 48% several times a week, 18% once a week and the remainder were occasional drinkers at 14%. Respondents were given a list of the 12 most popular varietals in the US, according to Nielsen scan data and asked to select their favorites. Results were slightly different than current scan data with 55% selecting Merlot as a top favorite, followed by Chardonnay at 52%, Cabernet Sauvignon at 45% and Pinot Grigio at 44%.

Average Price Spent on Wine

When buying a bottle of wine to drink at home, the most common price point was $10 – $15 per bottle with 35% of the sample, whereas 22% spend $8 – 10, 16% spend $15 – 20, and the remainder spent either less or more. When dining at a restaurant, the most common price was $20 – 30 per bottle at 27% of the sample, 17% spending $30 – $40, 12% spending over $40, and the remainder spending less or more. Interestingly, 21% of the sample reported only buying wine by the glass at restaurants. The most common price point for this was $5 – 10 per glass at 61% of the sample.

Preferred Location to Purchase Wine

Since this was a national sample, and wine is not sold in grocery stores in every state, it was not surprising to see that the most common location to purchase wine was in a Wine or Liquor Store. Participants were asked to rate how often they purchase wine at these locations with possible responses of Never (0), Rarely (1), Sometimes (2), Often (3), and Almost Always (4). In this study, 25% of the respondents said they purchase wine in a Wine/Liquor store almost always, which caused the overall rating to be 3. 6, whereas only 17% said they almost always purchase wine in a Grocery Store, resulting in an overall rating in that category of 3.21. Online wine sales is still quite small with only 4% of the sample reporting they almost always purchase wine Online.

Decision-Making Cues to Buy Wine

In addition to using Price and Varietal as decision-making cues when buying wine, 74% of the sample reported that wine Brand was very important, followed by Country at 52%, then Region at 44%. The way the Label looked was important to 38% of the respondents. Least important was Appellation at 12%.

Organic, Sustainable and Biodynamic Wines

Though the Organic Trade Association reports that 41% of American consumers are now buying organic food, this number is not as high with organic beverages. That could explain why only 16% of this sample said they look for organic wine as part of their decision-making process. Listing “sustainable” on the label only was important to 10% and “biodynamic” to 6%. Other research indicates that many Americans assume that most wine is organic anyway and therefore don’t look for these cues, and some consumers confuse the term “biodynamic” with “genetically modified,” which can be a deterrent to purchase.

Social Media and Wine Apps

Social media is being adopted in large numbers by American wine consumers with 80% of the sample reporting they use Facebook, 41% Youtube, 39% Twitter, 28% Linked-In, 25% Google+, 24% Pinterest, and 20% Instagram. Only 9% of the sample said they don’t use social media. Of those that do, 13% reported they frequently use social media to get information about wine, look up wine pricing, and ask friends for wine recommendations. An amazing 76% of the sample own a smart phone with around 24% using wine apps.

Table 1: Use of Smart Phone & Wine Apps

Have a smart phone 76%
Use smart phone to check prices on wine 36%
Have wine apps on smart phone 24%
Use apps to get coupons on wine 24%
Use wine apps to decide which wine to buy 23%

Wine Tourism

Wine Tourism Word Cloud

Wine Tourism Word Cloud

Reports about wine tourism growing appear to be true, according to this sample. When asked if they had visited wineries in other regions to taste wine, 67% of the sample responded positively. They were then asked to type in the names of some of the regions they had visited for wine tourism, which resulted in the “word cloud” picture below. This diagram illustrates the 27 most important words listed, with the larger and darker the font reflecting a higher number of responses. The statistical analysis confirms that in the US, Napa was typed into the data box slightly more times than California, followed by Sonoma (misspelled a few times), New York and Oregon. Outside the US, France was documented slightly more than Italy.

Ongoing Research on Wine Consumers – Additional Questions?

This article reports on the highlights of the American Wine Consumer Survey for 2014. Additional research questions were included on other wine business topics and will be analyzed and published in the future. Researchers at the Sonoma State University Wine Business Institute have received grant money to conduct this American Wine Consumer study on an annual basis. If you have suggestions on additional questions or topics to include, please do not hesitate to contact the authors.