Entry-level wine has been declining for years as those who lived through the Great Depression, who “often bought alcohol on an ethanol-per-dollar basis,” gave way to younger boomers “who aren’t frugal at all,” says Rob McMillan, svp, Silicon Valley Bank Wine Division. But now those boomers are maturing, and their children are turning out to be more like their grandparents, and wine isn’t their preferred alcoholic beverage.
In SVB’s 2021 State of the Wine Industry report, McMillan said 2021 may have been the restaurant business’s worst year in history, certainly its worst since the Great Depression. But with reporting wine sales through on-premise wholesalers seems to have rebounded, but only until the fall when the Delta variant emerged: Seated diners on Christmas 2020 was down 85% from 2019, he says. That rebounded in 2021, but restaurant wine sales didn’t, falling 8.7% from 2020’s already depressed level.
Why? McMillan concludes that wine is simply too expensive. Indeed, citing Nielsen calculations McMillan says wine on a per-ounce basis is 72% more expensive than spirits. Especially troubling to McMillan is the loss of wine share in on-premise “because it has nothing to do with reopening (after Covid) or health orders. New consumer behaviors and changing industry practices are the root causes, and they will make growth of of wine in the segment difference in the coming years,” he warns.
He notes that in casual restaurants, space devoted to wine “has been on a downward trend at least since the great recession, having been replaced with a beverage list that includes beer, spirits and, more recentluy, RTDs. spiked seltzersand ciders. Each of those beverages is a substitute for wine.” The message restauranteurs are giving, he says, is “diners want less wine than before, and their is no sign of that view changing.”
Unless a solution is foound, he adds, “there is every reason to believe wine will continue to lose share to spirits and other beverages on-premise. The solution he suggests is a Market Order administered by the USDA. More about that on Monday.
