Time for a rethink?

As US wine sales slow and may even go into decline, Robert Joseph raises the possibility that would-be exporters may need to reconsider what they are offering.

Robert Joseph asks, if producers need to create new wines to appeal new customers
Robert Joseph asks, if producers need to create new wines to appeal new customers

For too many members of the wine industry, their favourite beverage – and ideally, serious iterations of that beverage – has seemed predestined to take over the world. Wine, for them, lies somewhere along the journey followed by any citizen of a developed or developing nation on their way to maturity. You may take your early steps with milk, fruit juice and Coke, pass through beer and spirit-based drinks, via some branded ‘industrial’ – possibly sweet – wine, before eventually ending up enjoying a daily glass or two of a serious red or white with at least a trace of terroir.

For a while, in the US, the world’s biggest market since 2013, that seemed quite plausible. Wine sales grew annually, as did the range of bottles on the shelves and the number of pages in restaurant wine lists. Even when craft beer became more popular and prices of tequila and bourbon rose, there was still a sense that people were taking alcoholic beverages more seriously. A sense that was reinforced by the media buzz around natural wine and offbeat varietals and origins.

 

Wine faces tougher competition

Unfortunately, the hard data reveals a rather different picture. As Impact Databank statistics reveal, while wine sales grew by a healthy 3% annually from the millennium to 2010, since then, the foot has been removed from the accelerator pedal and growth has slowed to under 1%. Now, according to Shanken’s Impact Databank Review & Forecast, they may actually go into reverse. Between now and 2025, US sales volumes could drop by 2m cases. Wine, the report states bleakly “continues to lose market share to spirits and flavored malt beverages.”

Drilling down into the kinds of wine Americans have been drinking is even more depressing for believers in the ‘road-to-Terroir’. The limited growth achieved by the industry has not been created by enthusiasm for zero-SO2 orange wine and Croatian Plavac Mali. It has come from what Impact calls ‘various hot segments’ – notably Prosecco, New Zealand Sauvignon Blanc, California red blends, rosé, canned wines and wine-based cocktails/RTDs. Traditional routes to market have shrunk too, as distributors continue to devour each other. For anyone looking to enter the US market, the picture looks daunting.

 

Less but better

But there is another way of looking at this picture. Growth in total wine consumption may not be the ideal goal; it may make much more sense to focus on the ‘less but better’ mantra the industry often talks about. But this won’t happen by itself.

To secure a place on, and sales from, any shelf is going to require higher quality marketing than in the past. And that will cost money which, in turn, means raising prices and profit margins.

And here, the Impact Data statistics have some good news. US consumers are apparently increasingly happy to pay more for their wine. Where last year saw a trend-bucking 2% growth in total wine consumption (due to the increase in home-consumption during Covid lockdowns), sales of ‘premium-plus’ wine selling at over $10 a bottle, rose by over twice that rate – at 4.4%. Twenty years ago, wines in this sector made up less than 10% of the table wine market. Today, they represent one in every two litres sold. 

Sales at these higher price points do not necessarily reflect a greater demand for ‘serious’ wine, however. Meiomi, Constellation’s $22, off-dry, multi-regional California Pinot Noir that saw sales growth of nearly 18% last year, would not appeal to many traditional wine drinkers. And nor might many of the red blends and bourbon-barrel-aged wines that commonly sell for $20-35 or more. But these wines all help to open the market for other higher-priced examples.

 

New wines

Of course, raising prices is not simple for any product with an established place in the market, and it is even harder for European wines that are constrained by the ‘going rate’ for a particular appellation or varietal. One solution will be to look for different routes to market, ideally selling as directly as possible within the complex structure of the Three Tier System.

Many producers may also need to think seriously about creating new cuvées – majoring on older vines or specific vineyards – in order to create new price points. Some may go as far as to invent blends that step outside the traditional AOP system. 

According to Business France and French Customs, over the first four months of this year, Vins de France saw an 11% increase in exports, with value rising by 12%. Strikingly, a category launched in 2009, as a defensive move against cheaper New World varietally-labeled wines, is now described as offering “entry level, premium and super-premium wines.” 

Even in France where respect for legally-recognised regions is more firmly established than in the US, it is not uncommon today, to find producers who make and offer wines with and without an appellation. And, quite possibly, it could be the latter that carries the higher price tag.

Future citizens may, indeed, encounter and enjoy drinking wine on their journey through life. And they may well be prepared to pay significantly more for it than their parents. Whether it will be the kind of wine some members of the wine industry might have in mind today remains to be seen.

 

Robert Joseph

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