Drinking on the beach 222073762 640x427 - Changing of the guard

Millennials are slowly taking their place at the centre of US wine culture. Will they “ruin” the American wine market?

The New York Post was typically forthright in its headline: “Millennials are ruining the American wine industry”. The story that followed was actually a far more balanced account of the latest annual Silicon Valley Bank State of the Industry report, written by veteran industry commentator Rob McMillan, whose views are widely followed in the US wine community. The headline arose from McMillan’s contention that the rise of Millennial wine consumers – those born after 1980 and so now in their 20s and 30s – would lead to the first fall in per capita wine consumption in America in over two decades.

This is serious stuff, particularly in the number one consumption market for wine in the world, which in 2014 took care of nearly 315 million 9L cases, or approximately 10% of global wine production. Are the wheels about to fall off the American wine wagon?

Not quite. The first thing that is important to acknowledge is that per capita consumption by itself isn’t the only variable to calculate total market volume – US population is growing and so are the number of regular wine drinkers. Wine Intelligence’s view, most recently expressed in our US Future Consumers report, is an expected regular wine drinking population (i.e. drinking at least once a month) of 109 million by 2025 while at the moment this value is of around 93 million.

Both ourselves and Silicon Valley Bank agree on the next point: the growing importance of Millennials in the market is leading to a different sort of wine consumer. The Baby Boomers, many of whom are now about to enter their 70s, are evolving from a mature segment into a declining one whilst Millennials are growing in number in the wine drinking market as they start to enter the workforce and build spending power. The crucial difference between the two groups at either end of the age spectrum is their need states, and their purchasing behaviour. In a nutshell, Millennials tend to drink a bit less, but spend a bit more.

There are some more nuances here. According to Wine Intelligence’s US consumer data, Older Millennials (those born between 1980-85) that drink wine regularly are spending on average $527/year on wine, while Boomers spend an average of $250. They will typically prefer to have 1 bottle of an interesting/good quality wine above $15 than 2 bottles of cheap and cheerful $5.99. Millennials are (much) more open to try new wines – and in doing so, are therefore not always seeking the lowest price.

While we may be some way away from a meltdown in the US wine market, there are some emerging signs of trouble as the generational guard changes. Whilst not an exhaustive list, here are five to think about:

  1. Millennials openness to new stuff is also apparent within other beverage categories such as spirits, craft beer and hard cider – will this be a risk for wine consumption? Or a positive synergy?
  2. What will happen to Millennials’ love for wine if anti-alcohol campaigners succeed in restricting supply and imposing punitive taxes?
  3. Ten years from now we will be dealing with an important new segment in the wine category: the Next -Gens (those born after 1995). As we demonstrated in US Future Consumers report, Next-Gens are more money-conscious and typically more value-seeking. By 2025 they will be around 22-23 million regular wine drinkers and will have a relevant impact in the industry – will they be as generous as their older peers when it comes to wine buying?
  4. Hispanics are expected to be 29% of the total US population by 2050 and with increasing purchasing power. Will this fact drive unexpected trends on wine styles and consumption behaviours? (for instance, our data shows that Hispanics drink significantly less white wine than all US regular wine drinkers)
  5. What will be the future of wine made in US? There is a growing trend of locals visiting their local wineries (US winery numbers are now approaching 10,000, and while the bulk of them are still in California, there is now at least one winery in all 50 states). For the moment, the motivations to visit are primarily tourism, and the wine is not produced or bought in significant volumes (with the notable exceptions of Washington, Oregon and New York).

Author: Luis Osório

Email: luis@wineintelligence.com