US wine market volumes will be flat in 2020, with coronavirus-related off-premise surge balancing out 29% on-premise volume decline, according to Wine Intelligence modelling
Total wine consumption in the US will show static volumes for 2020, with consumers broadly drinking the same amount of wine, but inevitably drinking proportionally more at home versus in the on-premise. This is the main headline from the data modelling we have been doing using the insights collected from US regular wine drinkers for the US Covid-19 Impact Report, released in May 2020.
The basis for the model was a survey of 2,000 US adults who drink wine at least once a month, conducted in March and April 2020. They were asked to describe their normal wine drinking behaviour, how their wine drinking had changed as a result of lockdown and what their intentions were once lockdown restrictions were eased.
The model then cross-references recalled behaviour and intended behaviour with the published sales volumes that have been reported in the media from IWSR, Wines & Vines Analytics and others. The result is an estimate of volumes through to the end of 2020, and an estimated split by on- and off-premise channels.
The ‘base case’ or default position of the model is that the US coronavirus restrictions will continue to be relaxed through July and the on-premise will be largely reopened, albeit with reduced capacity due to social distancing needs. In this version of the model, off-premise volumes are estimated to grow by around 10% year on year, while on-premise volumes for 2020 will be 29% below last year.
Crucially, the base case model assumes no second wave of coronavirus infections hitting the US in the second half of 2020. A worst case model, assuming a second virus wave with a lockdown in October and November, suggests we would see a decline of around 2-3% in total wine volumes, with the on-premise seeing a year-on-year decline of closer to 50%.
In its current form, the model does not account for change in overall value of wine sold due to the complexities of channel pricing. However, we have noted that the implications of a switch from higher value on-premise product to mainstream priced off-premise product would lead to a ‘significant’ value decline in the US market this year, even though overall volumes are predicted to remain stable.
We also looked at how wine volumes have changed during previous crises – particularly the global financial crisis of 2008-10, which hit the US economy particularly hard. During that 3 year period, wine volumes were also broadly flat, and value per bottle sold declined, though by 2010 the growth path for both volume and value had resumed.
Clearly the historical parallel isn’t wholly comparable – the global financial crisis was an economic emergency, not and economic and public health emergency. It is also true to say that the US economy recovered very quickly from a deep recession, and it remains to be seen whether the US economy can be managed back to health in the same way this time.
If one accepts the premise of a broadly flat 2020 overall for wine volumes, the question then becomes which products, price points and styles will be winners and losers within this picture. This is still a work in progress, and we hope to be able to update our subscriber base following our next US market survey in July.
The evidence so far? Domestic brands seem to be benefiting most, in part because tariffs are making some Old World imports more expensive – though there is also a strong sentiment among consumers towards buying local, a phenomenon that is often associated with times of crisis. There is also evidence that consumers are reverting to more familiar, reliable and perceived good value brands, though the evidence also is that ‘value’ can be associated with brands costing $20 or more as much as those costing $10 or less.
This all adds up to a challenging environment for exporters to the US, especially those whose products are affected by tariffs or are not widely distributed in off-premise. The situation may be temporary (though in the case of tariffs, it may get worse before it gets better), but will require active management and effort from export teams and importers alike in the coming months.