The wine business needs to reach new consumers as heavy drinkers shrink, an expert says | So Good News
Fine wine lovers in the US are buying a lot of it, but there are few who drink it to go around.
And producers of high-quality drinks must keep an eye on the changing demographics of consumers.
That was the sobering message that wine expert Danny Brager delivered this week to wine professionals gathered in the heart of the nation’s final region for a two-day conference.
“The base and bottom line of wine buyers is shrinking. There aren’t as many as they used to be,” said Brager, citing the Wine Market Council’s survey in his keynote address Wednesday at the Wine Industry Financial Symposium, hosted by WBM Events at the CIA in Copia in Napa.
But the good news, Brager said, is that because of the “premiumization” of the wine business – to higher prices and margins – the base and the middle classes are drinking higher priced options.
“Core” wine consumers are those who drink at least one glass of wine per week. They are considered so because they buy a lot of wine.
But of the roughly 240 million adults who legally drink in the US, that’s only 18% of them, or about 44 million, according to a Wine Market Council survey from last year through this spring. This is up from 14% share in the organization’s 2018-2019 survey.
Those who drink “low” wine raise a glass once a quarter, and make up 15% of adults in the country of 21 or more, or 35 million. This is down from 25% pre-epidemic.
The problem is, the share of wine drinkers is the highest among all alcoholic beverages (19% of those aged 60-69 and 23% of those aged 70-plus) and then declines sharply in younger generations. 16% peak and 13% marginal for ages 20-29).
At the same time, “not receiving” – those who drink only alcohol, spirits or other alcohol – make up the largest part of adults of legal age in the US: 29%, or 70 million. This is up from 26% in the Wine Market Council’s 2018-2019 survey.
And the other imbibers-any-but-this wine make up the largest share of alcoholic beverages among the younger generations (from 14% of the 70-year-olds to 35%-36% of the 21-49-year-olds).
Consumers “uncountable” – less than one adult drink per quarter – continue to make up 10% of the population of legal age, or 25 million, and their share of alcohol consumption is about 10% in all age groups.
A growing problem for vintners, brewers and distillers is the rise of the teetotaler. These “restraints” are growing to be the second largest group of legal-age adults in the country, surpassing non-restricted consumers, according to the Council’s data. This year, they account for about 28%, or 66 million. This is based on 25% – built and marginal – in the council’s data for 2018-2019.
And the number of people who do not drink alcohol is increasing in every age group, from 25% of those aged 21-29 to 37% of those aged 70-plus.
“A lot of that is on the older end, but there’s also a lot of evidence about younger consumers who don’t drink at all — in the 21 to 24 age group,” Brager said.
While the wine industry has been looking to grow consumers among younger generations, it must also look to grow its culture, Brager said.
“The high-end, high-speed wine buyer is not going to be multi-brand,” he said.
Beer and spirits are beating wine in reaching young, black and Hispanic consumers, according to data Brager cited from NielsenIQ, which tracks sales at stores and venues such as bars and restaurants.
The wine industry has for years looked to the millennials (born in 1981-1996, who are now aged 27-41) as the key to growth due to their size being similar to the baby boomers (1946-1964, ages 58- 78).
The 21-34-year-old population — including millennials and Gen Z adults (1997-2012, ages 10-25) — makes up a quarter of the legal-age population in the US. The wine share of all alcohol sales for the same age group was 19.2%, while spirits commanded 28.7% and beer 29.4%, according to NielsenIQ.
Wine and beer did not perform well with Blacks, according to NielsenIQ. Despite accounting for 11.5% of US residents aged 21 and over, this tribe only accounts for 9.7% of the total wine sold in the home, and 10.7% of the beer. Spirits outnumber the group, commanding 16.4% of those sales.
For Hispanics, they make up 16.7% of the legal age population but only 14.4% of wine sales. They were able to buy alcohol (21.7% share) and spirits (18.5%).
Those numbers should be a wake-up call for the wine industry, Brager said.
“We have to do a better job of competing with the increasingly diverse population,” he said.
Survey: Napa Valley is getting more expensive
Also discussed at the symposium were recent results of an annual survey of industry executives conducted by Sonoma State University’s Wine Business Institute.
The problems mentioned above in profit show those facing the global economy – the price is going up, if you can find what you want to buy. A third of the 292 respondents said supply chains are taking a hit, followed by cost and availability (29%).
“We heard this a few times: ‘The cost of traveling to Napa is too low for many tourists to travel elsewhere,'” said Emily Porter, who directs the university’s undergraduate and graduate admissions.
Other identified barriers to profitability: regulations (14%), brand density (9%) and product integration (9%).
Most of the respondents were small, producing 1,000-5,000 cases per year and generating between $1 million-$5 million per year.
The majority (52%) did not focus on direct-to-consumer marketing to younger consumers, with less than a quarter of such sales going to consumers aged 21-40. While the majority (61%) in last year’s survey said they did not follow this age group last year, the majority (52%) this year.
“That says a lot about our aging wine consumer and how we’re slowly engaging younger consumers,” Porter said. But we have a long way to go.
Jeff Quackenbush covers wine, architecture and real estate. Before joining the Business Journal in 1999, he wrote for the Bay City News Service in San Francisco. Reach him at [email protected] or 707-521-4256.