Forecasts for 2020:
- Acute oversupply will allow for better-quality juice in lower-priced bottles, which will improve value and may provide an incentive for some millennials to become more consistent wine buyers.
- The oversupply will lead to vineyard removals — and fallowing in some cases — and reduced returns for growers.
- Grape and bulk prices will stabilize at lower levels than we’ve seen in the past five years. It will be well beyond 2020 before we see grape prices stabilize.
- Baby boomers are moving into retirement and declining in both their numbers and per capita consumption, while millennials aren’t yet embracing wine consumption, choosing to stick with spirits or abstain altogether.
- On the other hand, millennials represent the wine industry’s largest opportunity.
- Premiumization is nearing its apex as a trend, indicated by the decline in total wine sales volume, the decline in premium wine growth rates and the difficulty in passing price increases on to consumers.
- We have entered a period where the cumulative negative messaging about alcohol and health is impacting demand from young consumers. They have stalled in growing their wine preference, leaning instead toward premium spirits and craft beer.
The solutions are apparent. We need to address the important attributes of the new consumer, which vary substantially from those of the boomer cohort, which has driven growth in wine for the past 30 years. We have to market and sell wine with evolved messaging. And we must change the direct-to-consumer model, which depends on the consumer coming into your winery. What other industry requires their customer to come to the factory to purchase a product?
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HOW WAS YOUR YEAR?
There are winners and losers, with nearly a quarter of the industry still reporting a record year while another 25 percent of wineries are reporting increasingly difficult times.
TRENDS OF INDUSTRY SENTIMENTS
(Total "Positive" responses to each category minus total "Negative" Responses to each category)
Despite resilient performance, the mood and sentiment of the industry has shifted decidedly into negative territory, with 49 percent of winery owners now expressing a pessimistic view of future conditions.
WINE GROWTH BY VOLUME
On- and off-premise depletions have turned negative in volume, according to wholesale depletion information.
VARIETAL GROWTH RATE AND SHARE OF MARKET
Chardonnay, red blends and pinot noir, among others, have trended negative. Wines with lower alcohol content and lower price tags, such as sparkling wines, rosé and sauvignon blanc, are still trending positive.
SVB Wine News
July 19, 2019 - The Wall Street Journal
(Requires subscription) This Banker Gets to Drink Wine All Day More
- May 22, 2019 - Forbes How The Wine Industry Can Do A Better Job Of Attracting Millennials More
- February 8, 2019 - Forbes Silicon Valley Bank Addresses Current And Future Wine Trends More
- January 18, 2019 - Wine Enthusiast Millennials to Blame for Expected Shrink of Wine Sales in 2019 More
- January 18, 2019 - Forbes The Next 5 Years Will Challenge the U.S. Wine Industry, Says Report More
- January 16, 2019 - Forbes How Family Wineries Will Get Your Attention In 2019 More
- January 16, 2019 - Napa Valley Register Napa premium wine industry challenged to appeal to millennials More
- January 16, 2019 - North Bay Business Journal Millennials still missing as fine-wine core consumers, says Silicon Valley Bank report More
About SVB Wine Division
Silicon Valley Bank’s Wine Division
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.
Learn more at www.svb.com/winedivision.