The headline made me laugh out loud. “Millennials are ruining the wine industry”, screamed the New York Post, the day after Silicon Valley Bank published its annual State of the US Wine Industry Report in January last year. The story that followed was actually a far more balanced report on the views of veteran industry commentator Rob McMillan, who is widely followed in the American wine industry and beyond. The tabloid treatment 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 2016 took care of 330 million 9L cases, or approximately 10% of global wine production, and has posted epic – for wine at least – growth numbers in the past 15 years. Are the wheels about to fall off the American wine wagon? And is it the fault of those darned Millennials, with their gadfly attitudes, slack attitude to work, general lack of organisation (and all those other accusations that annoyed – and nostalgically envious – Gen-Xers like me tend to lob in the direction of our younger peers).
So far the jury is out, and in fact the bulk of evidence is in fact pointing in the other direction: far from “ruining” the wine industry, the new generation of wine drinkers may help rescue it from the dodgy economics that have hampered the wine category’s progress for the past 30 years.
Let’s get the prejudices about Millennials out of the way first. No, they are not all the same. It turns out they do watch television almost as much as their parents, they do in fact read books from time to time, own homes and cars (though admittedly not to the same extent as their parents). Some of them do not have tattoos, or blogs, and many don’t live in boho urban chic neighbourhoods.
However collectively they do act in ways that show different tendencies from their parents, or even those a few years older than them. This is perfectly normal – and hardly news. All generations respond to the influence of contemporary culture, which by its nature changes. My job is to observe the wine drinkers, and I can report that the Millennial wine drinker, for whatever reasons, clearly presents a different attitude to the category, playing in large part by a new set of rules (some of which they have made up, others thrust upon them).
What’s more remarkable, in the US and increasingly in other markets (China, UK, Germany, Japan, among others) is that those who have entered the wine category are proving to be astonishingly good wine consumers. They are more likely than any previous generation to care about wine, to be interested in learning about it, and to enjoy applying that knowledge in their tasting and buying patterns. Largely as a consequence of this attitude, they are more likely than older folks to spend a bit more on a bottle (either in off premise or on premise) and perhaps – miracle – tweet about their new discovery or post it on Instagram, delivering free advertising to the grateful brand owner.
So what about the second accusation: that Millennials will cause wine consumption to fall? Here we need to acknowledge is that per capita consumption by itself isn’t the only variable to calculate total market volume – the 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, we expect a total 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 Wine Intelligence 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. In other words, a Millennial wine drinker will typically prefer to have 1 bottle of an interesting/good quality wine for $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 this may not be good news for the bulk wine producers, it sounds like an attractive consumer for any brand owner hoping to create a bit more value.
Before I lull you into too much complacency, there are a few clouds on the horizon. Whilst not an exhaustive list, here are four to think about:
- 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?
- What will happen to Millennials’ love for wine if anti-alcohol campaigners succeed in restricting supply and imposing punitive taxes?
- 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 our US Future Consumers, 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?
- 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)
Author: Richard Halstead