When Silicon Valley Bank (SVB) was shut down by regulators last March, the news shook up both the finance world and the wine community. Sure, there were valid concerns about a potential economic collapse, but the uncertain future of SVB’s annual State of The U.S. Wine Industry report presented another potential loss. Well, don’t worry — SVB’s wine report is back for 2024 without skipping a beat, as the bank released its latest iteration Thursday.
The report is widely regarded as the leading source for market trends in the wine world, providing an overall assessment of the industry as well as analysis of pricing, sales data, and the most promising marketing strategies for wineries in the coming year. The data presented in 2023 was a wake-up call to many in the industry, as it indicated that the wine category as a whole was in decline. Unfortunately, the 2024 report echoes the previous year’s findings, and its gloomy outlook is summed up in the report’s overall theme: survival of the fittest.
One of the report’s key takeaways is that consumer demand for wine continues to dwindle in favor of alternatives like RTDs, spirits, and cannabis. Further, more people are choosing not to drink altogether. In line with this, 2023 will mark the first time in 45 years that the volume of spirits sold will surpass the volume of wine sold. The report goes on to share that the U.S. is not alone in this shift, with other traditional wine-drinking countries including Germany, France, and Italy also seeing a decrease in consumption.
Another major point: there is currently an oversupply of planted vineyards in the U.S. compared to the present sales volumes. This could create conditions for overproduction, leading to inventory excess, discounting, and price reductions. This, too, is also a global trend, with France notably spending 200 million euros in 2023 to fund the destruction of the nation’s surplus wine production. With a decrease in bulk wine consumption, the industry will need to correct itself to avoid the issues of oversupply.
Similarly, SVB concluded that the premiumization trend is persisting. The data shows that slowing demand for value wines under $12 is pulling the entire category of wine down, while wine volume sales of bottles above $12 have remained positive. Over the course of 2024, SVB predicts that total premium wine sales by value will improve.
In light of these findings, SVB suggests that adaptation is key. While many believe wine is struggling due to its core set of drinkers aging out of the category with Gen Z having yet to age in, waiting for a new generation to come around is not the answer.
“Waiting for a fictive cohort to age sufficiently to discover wine or believing that our strategies ‘have always worked before’ is toxic to adaptation when the context driving demand changes,” the report says. In short: wineries might need to get a little creative in the coming year to attract new consumers.
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