Silicon Valley Bank Predicts 2016 Decline in Wine Consumption after Decades of Growth
Company news | January 21, 2016
Total and per-capita U.S. consumption to see first drop in more than 20 years; Domestic fine wine shows modest sales growth
ST. HELENA, Calif. – January 21, 2016 – Silicon Valley Bank (SVB) released its annual State of the Wine Industry Report today. Silicon Valley Bank offers financial services and strategic advice to more than 300 premium vineyards and wineries on the West Coast. The 15th annual State of the Wine Industry report combines SVB's expertise in the U.S. wine business with proprietary research to deliver forecasts and predictions for the year ahead in wine.
Highlights from the 2016 report suggest changes for both consumers and wine businesses:
- SVB predicts a decline in U.S. per capita wine consumption after more than 20 consecutive years of growth
- Imported bottled wine will resume the prior trend of eroding U.S. fine wine market share
- Domestic wine priced higher than $10 per bottle will still show modest sales growth of 4-8 percent
- Fine wine sales will end 2016 with growth between 9-13 percent, a slight decline from the roughly 14 percent sales growth in 2015
"While demand for premium wine will increase this year, there are clouds on the horizon that should be considered. We believe total and per capita wine consumption in the U.S. will drop for the first time in more than 20 years due to emerging generational shifts in consumption patterns that we see accelerating in the near term," said Rob McMillan, founder of Silicon Valley Bank's Wine Division and author of the report.
"We believe this is the case, since there is a permanent shift from generic wine, and aging baby boomers are being replaced by frugal millennial consumers. Millennials, at this point in their development, have proven more agnostic in their choice between beer, spirits or wine compared to retiring boomers."
Additional findings and predictions for 2016:
- Large and notable sales of premium vineyards and wineries, will drive an active M&A environment throughout the year
- Volume and price drops will occur below the $8 bottle price
- Tens of thousands of additional grape acres will be permanently removed from the California Central Valley
- Supply of arable land suitable for higher-end wine production will narrow and drive vineyard prices higher
- The lowest price generic segment that appealed to the entry-level consumers of the 1960s has permanently lost its appeal
- The Gen X cohort will surpass the baby boomers around the year 2021 to become the largest fine wine consumer demographic in the U.S., and the millennial cohort will surpass the Gen X cohort around the year 2026
"While retail bottle prices will modestly increase this year, the consumer will still benefit from three consecutive large and excellent harvests in 2012, 2013, and 2014," McMillan said. "Not all of that wine will make it into branded premium labels and that will leave plenty of great juice available for domestic négociants who will repurpose it into imaginative labels."
McMillan is discussing the annual report and the state of the wine industry in a live videocast with Paul Mabray, Chief Strategy Officer of VinTank, Amy Hoopes, Chief Marketing Officer/EVP Global Sales at Wente Family Estates and Jeff Bitter with Allied Grape Growers online today at 9:30 a.m. Pacific time. A replay of the discussion will be available after the event.
Founded in 1994, Silicon Valley Bank's Wine Division has one of the largest teams dedicated to the wine industry in the U.S. and offices in Napa and Sonoma counties. It serves clients in the fine wine producing regions of California, Oregon and Washington.
To participate in Silicon Valley Bank's annual Wine Conditions Survey in the future, contact the author Rob McMillan at email@example.com or on Twitter @SVBWine.
About Silicon Valley Bank
For more than 30 years, Silicon Valley Bank (SVB) has helped innovative companies and their investors move bold ideas forward, fast. SVB provides targeted financial services and expertise through its offices in innovation centers around the world. With commercial, international and private banking services, SVB helps address the unique needs of innovators.
With one of the largest banking teams dedicated to the wine industry in the United States, SVB's Wine Division offers financial services and strategic advice to premium vineyards and wineries.
Learn more at svb.com/winedivision.
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