Canada’s wine market has been in growth during the Covid era. Still wine volumes grew overall by 5% in 2020 compared with 2019, and sparkling wine by 4% over the same period, according to IWSR data.
There are plenty of broader contextual explanations for this growth – a resilient economy, relatively few job losses, and the retail sector largely remaining open, even as the on-premise largely shut down. Households benefited from government relief packages, particularly targeted at lower income households, and overall, Canadians saw household incomes rise by 9.95% in 2020, according to Statistics Canada. Combined with restrictions on outbound tourism, which is a key budget item in most Canadian households, particularly in cold weather months, meant that there has been significant surplus cash in Canadian pockets, with relatively little to spend it on.
The biggest beneficiaries in the wine sector have been locally-produced wines, which are typically more expensive than imported wines and have been sold through a combination of state-controlled retailers such as LCBO in Ontario, supermarkets, independent liquor stores (such as in British Columbia and Alberta) and through direct-to-home retail. This latter channel has expanded rapidly during Covid-related lockdowns, with 14% of Canadian regular wine drinkers saying they have purchased wine using e-commerce in the past 6 months, according to Wine Intelligence data.
However, within this overall positive trend, there has been a distinct shift within the Canadian wine drinker population. For some consumer segments, restrictions on socialising, eating out, plus cash in pocket, have fostered a doubling-down on their commitment to wine; for other, more marginal wine drinkers, the lack of a social opportunities to drink wine has allowed them to migrate into other categories such as hard seltzer, spirits and beer.
The latest update of Canada Portraits, the Wine Intelligence wine consumer segmentation model for Canada, illustrates this contrast. The relative buoyancy of off-premise wine sales during the pandemic can be accounted for by a notable doubling-down on the category by Canadian wine drinkers who were already fully engaged in wine. These drinker archetypes, known in our model as Engaged Explorers and Enthusiastic Treaters, account for just 18% of drinkers but over $4 in every $10 spent on wine in Canada.
As to why, the Covid-era restrictions on socialising and eating out appear to have fostered an innovative approach to wine drinking occasions amongst the committed drinker groups. New wine consumption occasions emerged from the pandemic. After an initial surge in lunchtime wine drinking, this habit has reduced, and instead, consumers appear to be bringing forward ‘wine o’clock’ to late afternoon, and also deploying wine in online socialising.
Crucially, both segments have opted to recycle their disposable income normally spent on a bottle in a bar or restaurant into a higher quality and more expensive bottle in the LCBO, liquor store or supermarket. The result has been a sustained boost in spend per bottle in off-premise over the past year, particularly for Engaged Explorers, the most involved and knowledgeable segment, though in both cases their frequency of wine consumption has not changed much.
Where frequency of wine drinking has increased – and therefore most likely the drivers of volume in Canada over the past year – is amongst Mainstream Suburbans, the archetype representing the older, settled middle ground of Canadian wine drinkers. Whilst this group has largely resisted the temptation to spend more per bottle on wine in off-premise, the Covid effect here has been an increase in consumption for occasions outside of mealtimes at home.
However, the Covid effect on younger drinkers, and those whose connection with the wine category was more tenuous, has been somewhat more negative. The segment representing the wine category’s future in Canada – Social Newbies – has shrunk in size from almost a quarter of Canadian regular wine drinkers in 2018 to a fifth in 2021. In part, this is a demographic issue, with an ageing population weighting the wine drinker profile older. However, there is also a noticeable Covid effect, with Social Newbies less likely to have transferred their normal wine drinking in social situations – typically in on-premise – into at-home lockdown settings. Instead, they have migrated more to beverage categories such as beer and hard seltzer – single serve, cheaper, and more aligned with non-social at home consumption, or outdoor socializing.
Connected with this, the least engaged archetype of Canadian wine drinkers, Kitchen Casuals, have seen their numbers boosted from 22% of all drinkers in 2018 to 29% in 2021. As with previous segmentations, this group is more dominated by older consumers on low or fixed incomes, and characterised by a distant relationship with the wine category. This group buys wine when it has to, but tends not to choose it actively or regularly – typically the prompt is a social occasion when wine is the most appropriate choice. They rarely drink wine in out-of-home situations. It’s likely that the boost in their numbers is partly down to closure of on-premise during Covid, and we expect this segment’s size to reduce slightly over the next few years.
In summary, Canada’s wine category has had a ‘good’ 2020 and 2021, with a large swathe of consumers emerging from the various lockdowns of the past 18 months with a more cultivated and premium repertoire of wine choices. On the other side of the coin, lower involved consumers have used the lack of socialising to drift away from the category, and develop better relationships with other beverages. As a more familiar pattern of socialising and going out returns, some of the pre-pandemic habits will return, though there may be some bumps in the road, such as resistance to paying high prices in on-premise for high quality wines which may have become the norm at home.
Perhaps the biggest long-term consideration for the Canadian industry is the loss of younger legal drinking age consumers from the wine category. With lots of choices (including the choice to moderate or avoid drinking alcohol altogether), younger adults in Canada were already, pre-2020, proving to be a tricky market to recruit into wine; the pandemic appears to have accelerated this trend. The key to bringing them back may be the efforts wine is making to connect with issues that matter to younger adults: a focus on sustainability, organic and better-for-you products, lower alcohol options and single serve packaging.
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