Fine wine lovers in the US buy more, but there are fewer such drinkers around.
And high-end beverage manufacturers should pay more attention to changing consumer demographics.
That was the sobering message Danny Brager, alcohol industry analyst, delivered this week to wine industry professionals gathered in the heart of the country’s high-end region for a two-day conference.
“The basic and marginal wine consumer base is shrinking. Now there aren’t as many as there used to be,” Brager said, citing research from the Wine Market Council during his speech Wednesday at the Wine Industry Financial Symposium, hosted by WBM Events at the CIA at Copia in Napa.
But the good news, Brager said, for the wine business’ “premiumization” movement — toward higher prices and higher margins — is that core and fringe groups are drinking more expensive selections.
Core wine consumers are those who drink at least one glass of wine a week. They are considered such because they buy most of the wine.
But of the roughly 240 million adults of legal drinking age in the United States, they are estimated to make up just 18 percent, or about 44 million, according to the Wine Market Council survey from fall last year through this spring. That’s more than 14% in the organization’s 2018-2019 survey.
“Marginal” wine drinkers raise a glass at least once a quarter and make up 15% of adults in the country aged 21 and over, or 35 million. That’s down from 25% before the pandemic.
The problem is that the share of these major and marginal wine drinkers in the consumption of all adult beverages is highest for the older segments (19% for 60-69 year olds and 23% for those over 70), then decreases mainly in younger generations (at 16% core and 13% marginal for ages 20-29).
At the same time, “non-adopters” — those who drink only beer, liquor or other alcohol — make up the largest proportion of US adults of age: 29 percent, or 70 million. That’s a 26% increase in the Wine Market Council’s 2018-2019 survey.
And these non-wine drinkers make up increasingly large shares of overall beverage alcohol consumption among the younger generation (from 14% over age 70 to 35%-36% aged 21-49) .
“Infrequent” drinkers – less than one adult drink per quarter – still make up 10% of the legal-age population, or 25 million, and their share of total alcohol consumption is around 10% across all age groups of age.
A growing challenge for winegrowers, brewers and distillers is the rise of the teetotaler. These “abstainers” have grown to become the second-largest group of adults of legal age in the country, surpassing marginal consumers, data from the council showed. This year they account for about 28%, or 66 million. It’s up from 25% – equal to the marginals – in the council’s 2018-2019 data.
And this alcohol-free demographic is gaining a larger share of each older age group, from 25 percent aged 21 to 29 to 37 percent over 70.
“A lot of that is in the older age group, but there’s also a growing amount of evidence of younger consumers not drinking at all — in that 21 to 24 age range,” Brager said.
While the wine industry has been looking to grow its consumer base in the younger generation, it should also be looking to expand its cultural reach, Brager said.
“The high-end consumer, the high-frequency wine consumer is definitely not multicultural,” he said.
Beer and spirits are beating wine in reaching younger Black and Hispanic consumers, according to data Brager cited from NielsenIQ, which tracks sales in stores and establishments such as bars and restaurants.
The wine industry has for years looked to millennials (born 1981-1996, now ages 27-41) as key to growth due to its comparable size to the baby boom generation (1946-1964, age 58 -78).
The 21-34 age demographic, including millennials and older Gen Z (1997-2012, ages 10-25), makes up a quarter of the US legal-age population. Wine’s share of all alcohol sales to that age group accounted for 19.2%, while spirits commanded 28.7% and beer 29.4%, according to NielsenIQ.
Wine and beer underperformed with blacks, according to NielsenIQ. Although they represent 11.5 percent of U.S. residents age 21 and older, that ethnic group accounted for only 9.7 percent of the amount of wine sold nationwide and 10.7 percent of beer. Spirits is outperforming with this 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 more likely to buy beer (21.7%) and spirits (18.5%).
These statistics should be a wake-up call for the wine business, Brager said.
“We have to do a better job of competing in a society that is getting bigger and bigger in terms of diversity,” he said.
Poll: Napa Valley is getting too expensive
Also presented at the symposium were the recently compiled findings of an annual survey of industry executives by Sonoma State University’s Wine Business Institute.
The main challenges cited for profitability reflect those facing the global economy: costs rise, if you can find what you want to buy. A third of 292 respondents said supply chain was hitting bottom line hardest, followed by cost and availability (29%).
“We’ve heard it several times: ‘The cost of visiting the Napa area is becoming prohibitive for many visitors who then go elsewhere,'” said Emily Porter, who directs admissions for the university’s executive and graduate programs. .
Other perceived top barriers to profitability: regulations (14%), brand proliferation (9%) and wholesale consolidation (9%).
Most of the respondents were small-scale vintners, producing 1,000 to 5,000 cases a year and bringing in revenues of $1 to $5 million annually.
The majority (52%) did not focus much on direct-to-consumer sales on younger consumers, with less than a quarter of those sales going to drinkers aged 21-40. While the majority (61%) in last year’s survey said they didn’t follow this age group last year, the majority (52%) this year are.
“That speaks volumes about our aging population of wine consumers and how we’re slowly courting that younger consumer,” Porter said. “But we still have a long, long way to go.”
Jeff Quackenbush covers wine, construction and real estate. Before joining Business Journal in 1999, he wrote for San Francisco’s Bay City News Service. Reach him at [email protected] or 707-521-4256.