Wine is seeing volume declines around the world as its marquee consumption occasions come under attack from a variety of innovative beverages. Should the industry be scared?
For those in the wine industry worrying about consumers falling out of love with wine, there is plenty of grist for the mill right now. Wine volumes are declining in major consumption markets, even in the US where a 30 year growth story appears to be coming to an end, while China’s continuing battle with the Covid-19 virus is proving to be catastrophic for wine sales in 2020 (on top of a decline in imports in 2019). Other categories such as hard seltzer in the US, craft beer in Canada and Germany, gin in the UK and – more recently – in Brazil, appear to be eating wine’s lunch.
However, beyond the headlines, multiple factors are at work, and wine probably needs a more nuanced picture of what is driving changes in consumer relationship with the category. Some of the latest data and thinking will be showcased at a joint Wine Intelligence-IWSR briefing at this year’s ProWein, happening at the Wein + Markt Pavilion in Hall 16 on Monday March 16th. By way of preview, here are a few themes that my IWSR counterpart Thorsten Hartmann and I will be talking about:
- Alcohol is becoming a more complex and interesting category. “Sophisticated beer” used to be an oxymoron – but no longer. The advances made by craft beer, and latterly craft spirits, have captured a new audience for drinks categories among thinking and high spending consumers. In an irony not lost on wine producers, the success of these categories has come at least in part from appropriating the wine marketing playbook: talking up provenance, quality of ingredients, and the genius of the blender/brewer/distiller.
- Consumers are just drinking less. Participation in the alcohol category is falling in some key markets, including the UK, while the frequency of alcohol consumption is also falling. Our recent US Wine Landscapes report revealed that those saying they drink wine at least once a month has fallen by 12%, or around 11 million consumers, since 2015, even as the total number saying they drink wine at all has stayed steady.
- Consumers are spending more per unit. Several alcohol categories – including wine – have proven to be skilled at getting consumers to pay more for the same volume of liquid, by promising a better experience – and largely delivering on that promise. The net result, as any economics student will tell you, that a finite and largely fixed budget applied to more expensive per unit product will result in fewer units sold. This needn’t be a problem, as the economics of wine (and any other flat-taxed beverage) yield much greater profit margins once the price rises beyond a certain point.
- Conscientious consumerism is on the rise. Whether it is avoiding meat certain days of the week, or opting to go on holiday nearby rather than a plane ride away, or choosing not to drink alcohol at certain occasions, the idea of going without is fashionable. Markets have responded by providing new products to meet this need, as the dazzling array of teas, flavoured non-alcoholic beverages and non-meat products available on my local shopping street this past weekend demonstrated to me. As well as fighting a revitalized beer and spirits sector, wine now needs to compete with kombucha.
We hope to see as many of you as possible at the ProWein event on Monday March 16th. Later that day, we can all research the pressing need to switch categories that overtakes most exhibitors at around 6pm – when, after a day talking wine, we all reach for the nearest beer.