In the last 24 months there have been some major changes in the wine industry. If you are a wine drinker some of these changes might affect you and me in the coming year.
Changing Wine Market
In 2018 wine sales in the U.S. peaked after 25 years of annual growth. Sales figures are being released now for 2019 which show wine sales were down 0.9% over 2018 sales.
There are several things that caused this downturn. First, baby boomers are retiring at record numbers. Many of the retirees are drinking less wine because of lower incomes, plus smaller homes or apartments make wine harder to store. Many also have health concerns that have caused them to either cut back on consumption or stop drinking wine all together.
The second major problem is a demographic issue. The number of millennials is now surpassing baby boomers. Millennials are just not embracing wine as perhaps their parents did. They are consuming malt-based seltzers, craft beers and ciders…all products with lower calories and alcohol levels.
There Are Too Many Grapes
Due to the ever-growing wine market since 1994 and the demand for red wine, especially Cabernet Sauvignon, pressure was put on wineries and vineyards. Sometime around 2016 growers began tearing out vines that weren’t Cabernet Sauvignon and replanting them with thousands (or more) acres. New vines and more efficient harvesting methods have led to larger grape harvests. In 2019 this has led to an oversupply of grapes and wine.
The best guesses are that 200,000 tons of wine grapes were left on the vines in 2019 due to a lack of buyers. It’s estimated that 30,000 acres of wine grapes need to be taken out of production in the coming years to balance demand and supply. For the grower who planted extra vines from 2016 on, this could cause a large financial loss. It is also said that there could be as many as 25 million extra cases of wine that remain unsold in the U.S.
The large demand for California wines over the past years drove up the price of grapes per ton, the price per gallon on the bulk market and the general cost of the wine produced.
Many retail outlets stopped buying as much California wine as it priced itself out of the general market. This caused pressure on the distributors who, in-turn, either fired many wineries or cut their purchasing back dramatically. This forced wineries to cut production which caused the huge over-supply of grapes and wine.
Another issue that effected distributors is the quantity of wine produced. In my own situation we have been dropped by two different distributors in the last eight months. One in Michigan and one in Chicago. The Michigan distributor commented that his situation was there were 3,000 bottles of wine available and only 1,000 places to sell them. The quality of the wines didn’t seem to matter, it was the cost to carry the inventory and what the retail price would end up.
My good friend Kelly Peterson, founder and partner at Switchback Ridge Wines, has been dropped by a number of her distributors causing her to drop production by 1,000 cases annually. It has also forced her to increase her sales efforts directly to the consumers by traveling the U.S. to attend wine dinners and private events. The cost to her operation has been substantial.
It has become quite clear to me that some changes are going to have to be made in the wine industry to regain sales. Let’s take a look at some of the items that are being mentioned and discussed at length:
- The normal wine buyer has evolved, and old-fashioned wine sales are being tested. Wineries are going to have to change their products and market strategies to keep increasing existing sales levels.
- There is a major disconnect between millennials and the wine industry. This generation is a huge, untapped opportunity for the industry. What needs to change to take advantage of this opportunity is to produce a wine with less calories, less alcohol, natural flavors and produce less expensive wines. Many of these items need to be communicated to the millennial wine buyers.
- Today the wine supply chain is stuffed with excess wine. This over-supply of wine in conjunction with less consumer demand must lead to the discounting of the price of finished wine as well as bulk wine and grapes.
It is my opinion that as prices come down, and they certainly will, U.S. wine consumers of any age will see unprecedented retail value in the coming months and should be prepared to stock up on their favorite wines as well as some they haven’t tried. 2020 should be a good year for consumers.
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Upcoming LEX 530 Events – Mark Your Calendars!
Spring Wine Dinner – Friday, April 17, 2020 — CANCELLED
High Tea – Sunday, April 26, 2020
Mother’s Day Brunch – Sunday, May 10, 2020
LEX 530 Wine & Dinner Club Dinner – Wednesday, May 20, 2020
LEX 530 Wine & Dinner Club Dinner – Friday, June 26, 2020
LEX 530 Wine & Dinner Club Dinner – Wednesday, July 22, 2020
LEX 530 Wine & Dinner Club Dinner – Friday, August 21, 2020
LEX 530 Wine & Dinner Club Dinner – Friday, September 25, 2020
Oktoberfest Dinner – Tuesday, October 27, 2020 — with Elkhart’s Iechyd Da Brewing Company
LEX 530 Wine & Dinner Club Dinner – Friday, November 20, 2020
Important Wine Holidays
- April 17 – International Malbec Day
- May 1 – International Sauvignon Blanc Day
- May 9 – World Moscato Day
- May 21 – International Chardonnay Day
- May 25 – National Wine Day
- June 26 – International Rosé Day
- June 21 – Lambrusco Day
- August 1-5 – International Albariño Days
- August 4 – National White Wine Day
- August 18 – International Pinot Noir Day
- September 3 – International Cabernet Day
- September 18 – International Grenache Day
- November 7 – International Merlot Day
- November 12 – International Tempranillo Day
- November 18 – National Zinfandel Day
- November 19 – Beaujolais Nouveau Day
- December 4 – Cabernet Franc Day
- December 20 – National Sangria Day