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Rob McMillan, EVP and founder of Silicon Valley Bank’s Wine Division, writes one of the wine industry’s most authoritative annual reports that assesses current conditions and provides a unique forecast based on micro- and macroeconomic and behavioral trends. In this latest report, he says that successful wineries 10 years from now will be those that adapted to a different consumer with different values — a customer who uses the internet in new and interactive ways, is frugal and has less discretionary income than their generational predecessors.
This consumer rotation, along with several other indicators that point to reduced direct-to-consumer success, has specific implications for small wineries. Action is required now to stay ahead of these changes.
In this 17th annual State of the Wine Industry report, Rob McMillan finds that while business overall is projected to increase, the growth rate is slowing. He also offers perspectives on how the industry may sustain growth by embracing new demographic segments.
The report findings were discussed in a January 2018 webinar featuring Rob McMillan. Industry leaders joining him were Gretchen Boock, Chief Executive Officer, Dobbes Family Estate/Wine By Joe; Mary Jo Dale, Marketing Director, Americas, Vinventions/Nomacorc; and Paul Mabray, Wine Industry Digital Futurist and Director, Getemetry.com.
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After more than 20 years of straight-line growth, total volume growth is leveling off. Premiumization is still the dominant trend, so volume drops in lower-priced generics are part of the explanation for flattening volume; but in a more recent development, even premium wine growth is slowing.
The premium wine segment — which we define as wine above $10 per bottle — dominates sales and is responsible for all the growth in the wine trade today.
Retiring baby boomers are starting to have an impact: They are evolving to lower-price premium segments in place of the higher-price segments they previously dominated.
With respect to varietal segments, reds are still dominating premium wine growth, but chardonnay has emerged as the second-highest growth varietal, moving ahead of red blends.
Today, Gen Xers lead in income and spending. Their presence has been below the radar, but their consumption continues to increase. They are perfectly positioned to surpass baby boomers as the dominant cohort in fine wine consumption around 2021.
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Founded in 1994, SVB’s Wine Division offers financial services and strategic advice to premium vineyards and wineries. With one of the largest banking teams in the country dedicated to the wine industry, SVB’s Wine Division has offices in Napa and Sonoma counties and primarily serves clients in the fine wine–producing regions along the West Coast of the United States.
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