Millennials aren’t embracing wine as many had expected, Silicon Valley Bank says in its 2019 State of the Wine Industry report. The result: the premium wine segment (above $10 a bottle) will grow 4% to 8% in 2019, about the same as last year.
That’s a problem, because Baby Boomers are now moving into retirement, adjusting to living on a fixed income level and cutting back on wine purchases, SVB says.
“Despite the positive year in 2018 and 25 years of great growth for the US wine business, I believe sales growth forecasts for the next five years should be tempered,” said Rob McMillan, founder of Silicon Valley Bank’s Wine Division and author of the report.
“The fundamental underpinnings that created the industry growth are changing, which means the tactics that were relied upon to ride this wave of success to this point will slowly prove flawed without business adaptation. To continue its growth in the years ahead, the US wine industry needs new direction and a changed focus.”
McMillan notes wineries need to deploy new and undiscovered direct-to-consumer marketing strategies in order to find this growth – online and in person. Going forward, brands will have to be built in more regions by bringing an experience to the consumer, instead of expecting that they come to the tasting room.
Off-premise sales, the majority of wine sales, will grow between 0.5 percent and 2.5 percent. Volume sales will deliver a growth rate between negative 0.5 percent and positive 1.5 percent.
SVB also says mergers and acquisitions “will slow noticeably in 2019 as many major buyers continue to digest earlier purchases and execute new brand strategies.
All of this will lead grape and bulk prices to drop noticeably in the California market in 2019. Also contributing to the slowdown: Bottled imports will continue to take share.
Premium wine pricing will be flat, but there should be some limited price reductions in the $15-$17 bottle price range. Wine below $9 will continue to shrink in volume and value.