An inaugural survey of the US wine industry conducted by BMO Financial, America's eighth-largest bank, reveals promising signs of stabilization and potential growth after a period of fluctuating demand caused by the pandemic.
The survey, the most comprehensive to date, involved more than 600 wineries and used data from WineBusiness Analytics and bw166.
Pandemic Boom and Subsequent Normalization
During the pandemic, wineries experienced an unprecedented surge in demand, with annual case sales increasing from 410 million to 445 million in 2022. However, as the market began to normalize in response to inflation and changing consumer behaviors, retailers were left with excess inventory, causing overall sales to drop to 377 million cases last year.
Current Market Dynamics
The US wine industry, the largest and most dynamic in the world, is valued at over $107 billion and includes more than 11,000 wineries spread across all 50 states. The report suggests that the demand is now stabilizing and may enter a growth phase as 2024 progresses.
Key findings from the survey indicate that:
- 71% of US wineries anticipate increased sales this year, driven by product innovation, enhanced on-premise and direct-to-consumer sales, and further premiumization of wine.
- 22% of wineries expect their revenue to remain flat.
- 6% of wineries predict a decline in sales.
Optimistic Growth Projections
Despite the challenges, the survey reveals a cautious optimism within the industry:
- More than 25% of the largest producers are forecasting growth exceeding 10%.
- Millennials, Gen Z, and Gen X now constitute 61% of all wine drinkers, highlighting the industry's appeal across various age groups.
On the flip side, there is a growing awareness of health concerns among younger consumers, with 52% of 18- to 34-year-olds viewing moderate drinking as detrimental, compared to 39% of all US consumers.
Premiumization and Boutique Wineries
The trend towards premiumization remains robust:
- Sales of wines priced at USD 10 and above are expected to grow through 2025.
- 40% of smaller boutique wineries (producing 1,000 to 5,000 cases) and 34% of wineries targeting high-end wines (priced over USD 50 per bottle) anticipate growth exceeding 10% this year.
In 2023, retail sales for wines priced above USD 10 reached USD 4.8 billion, a significant increase from pre-pandemic levels.
Evolving Market Strategies
The industry is also adapting its routes to market:
- 24% of wineries plan to boost sales through wine clubs and expand memberships.
- 15% of wineries are focusing on increasing direct-to-consumer sales.
Producers of commodity wines (priced below USD 10 per bottle) are looking to grow their revenue through expanded wholesale sales and distribution.
Conclusion
While the US wine industry faces ongoing challenges, including shifting consumer preferences and economic pressures, the findings from BMO Financial’s survey highlight a cautiously optimistic outlook. With a focus on premiumization, innovation, and direct-to-consumer strategies, wineries are positioning themselves for steady growth in the coming years.