Our annual exercise in soothsaying 12 months ago predicted investment and upheaval in e-commerce, more wine in cans, plus growth in the ‘wine seltzer’ category. So what did 2021 bring?
After the rollercoaster of 2020, our main prediction for 2021 was that some kind of normal service would resume in the world economy, particularly once vaccination rates climbed towards the middle of the year. For wine, this would mean volumes stabilising in key markets, and a return of on-premise sales.
According to IWSR data released in October, global wine sales by volume are up approximately +5% in the first half of 2021 compared with the same period in 2020, though category volumes remain below 2019 levels. However, the crucial Christmas season for wine may be disrupted by supply chain issues, particularly lack of transport, so it’s entirely possible that the year will end with year-on-year volumes flat or even negative for the wine category.
As with our previous predictions, it appears we have had some hits, and some misses. Ahead of the 2022 predictions, coming next week, here is our critique of what we said would happen in 2021.
- Wine volumes will decline and spend per bottle will rise – though this may be largely due to rising alcohol taxes
There is widespread evidence from Wine Intelligence tracking data that spend per bottle is rising in major consumption markets such as US, Canada, UK, Brazil and Germany. This is mirrored in IWSR value data for wine in the first half of 2021 showing growth in premium and super-premium and above wine sales in major markets compared with the same period in 2020. The effect of taxes is less apparent than two much more powerful forces: pent-up consumer demand for more premium product – a trend seen across beverage alcohol in 2021, and price inflation stoked by a global supply chain struggled to deal with the post-Covid economic recovery. We were already seeing markets increase their spend on wine in 2020, and this positive trend has continued in 2021, much to the delight of more high-end producers, while the biggest losers seem have been undifferentiated, low-priced wines with little or no brand equity, and therefore most susceptible to switching behaviour from value-seeking consumers.
- Alternative packaging formats will make serious inroads into the traditional glass bottle market
Alternatives to glass remain a small fraction of most markets compared with glass. However the trend towards non-glass packaging is gathering speed, particularly within cans and bag-in-box, where innovation in existing formats and new products coming to market have built momentum. The glass bottle’s primacy in the wine world is not yet under threat, and it is still seen by consumers as a more environmentally sustainable choice compared with plastic and metal. Wine (and related products – see trend #5) have overcome some of the technical issues around product freshness in cans, and have proven a hit in markets such as the US and Brazil. The key to the can’s success lies in three Ps: portability, portion control and preservation, all of which appeal to Millennial and Gen-Z legal drinking age consumers. There is also increasing pressure from within the supply chain for traditional glass packaging to be made more lightweight to reduce its carbon footprint – more on this in our predictions for 2022, out next week.
- Wineries will forge more meaningful and lasting direct relationships with their consumer bases, but wine tourism will take a long time to recover
For a terrible year for the travel industry, 2021 appears to have been a good year for wine tourism, so long those tourists could get to the winery without getting on a plane. While final numbers have not yet been published, anecdotal evidence from the major wine tourism areas of the US, Australia, France and Italy suggest that the loss of international tourists has largely been offset by increased footfall from the local population. The key differentiator between success and failure in 2021 was therefore the extent to which wineries relied on international visitors to begin with. Where wineries have had strong direct ecommerce relationships with consumers, the consumer need to connect with local products has combined with their inclination to treat themselves, resulting in a substantial growth in value in online direct sales.
- The surge in online retail usage will continue, and investment and growing competition will reshape the online channel and enhance delivery speed
In December 2021 we predicted that the key e-commerce offer for 2021 would ‘not be range or pricing so much as immediacy: the traditional e-commerce model of order today, get it sometime next week, will be overtaken by operators who can fulfil today’s orders today.’ The surge in wine e-commerce during the pandemic has subsided in 2021, however the habit remains, and growth is now coming from innovation within the channel, particularly around delivery speed. If 2021 is recalled for anything other than Covid, it will be for the emergence as a mainstream force of the delivery app. Prior to the pandemic, the ability to order single bottles for delivery in minutes had already transformed the market for beverage alcohol in China’s major cities. In 2021, one of the growth drivers in beverage alcohol e-commerce was apps such as Drizly, Doordash, Deliveroo and UberEats, according to the IWSR. Despite the relaxation of Covid-era restrictions, and the opening of on-premise, our worlds remain far more home-centric than they did prior to the pandemic.
- The ‘wine seltzer’ market will take off
In December 2020 we wondered ‘where is the wine seltzer market?’ Given the remarkable surge in the broader RTD category, particularly in the US market where the hard seltzer category exploded in 2019 and 2020, growing by over +60% in volume in 2020 alone, according to analysis from the IWSR, it was a fair question to ask. So did wine-based hard seltzers take off? On current evidence, the answer is….not yet. There has been an extraordinary amount of innovation and new product launches during 2021 in the broader RTD market globally, particularly in the US. The hard seltzer category remains highly skewed towards alcoholic beverages based on malt alcohol (ie a beer base). IWSR predicts that the most likely candidates to disrupt this domination will come from the spirits sector, while wine is currently a minority player. However, wine spritzers (RTDs that are wine-based with added carbonated mixer and flavour), are gaining traction – in 2018, the sub-category grew by less than +1% in volume globally; contrast this with almost +5% growth in 2019, according to IWSR. These findings suggest that wine spritzers may be leading innovation for the wine ready-to-drink category.
You may also be interested in reading:
- The great ‘natural experiment’: how has consumer behaviour with wine changed during 2020 and 2021
- The Covid accelerated shift to local wine is set to continue
- Millennials drive the sparkling wine category