This can’t be good news for anyone in the wine business: Bureau of Labor Statistics data show the under 25 age group is spending “less and less of their hard earned income on any kind of alcohol,” Rob McMillan, SVP of Silicon Valley Bank and founder of its Wine Division, told clients this morning.
That’s bad enough. Even worse: Millennials haven’t increased their share of premium wine purchasing in four years. “They just aren’t engaging with wine yet,” he writes, “except on special occasions. But they are drinking craft beer and craft spirits more often.”
Some vintners, most notably Constellation Brands, are counting on premium wine to boost revenue and profits. Maybe it will. But, McMillan notes, premium wine’s growth is slowing.
McMillan echoes our belief that young consumers are being frightened away from beverage alcohol by the hijacking of science and negative press from anti-alcohol activists.
“Without any kind of response from the wine community to reference science that shows moderate wine consumption is healthy, we will see negative trends continue,” he warns.
Bottom line: “Don’t be surprised if young consumers drink less alcohol tomorrow, and those who do drink continue to embrace craft spirits and beer instead of wine,” McMillan writes.
There are four challenges wine marketers need to overcome:
- Wine is more expensive than craft beer and craft spirits.”One 750ml bottle of a well-known pinot noir costs $30 and has 5 servings that have to be consumed that evening or oxidize. The same size bottle of Makers Mark bourbon can be found for the same price, has 25 servings and will stay drinkable for months,” he writes.
- Millennials are more health conscious that earlier generations.”The wine business is being out-marketed by spirits producers who tout health-related features of their products such as low calories, no added sugar, gluten-free, non-GMO, organic, sustainable, etc. Wine? We don’t yet put calories on our labels, we stopped promoting the massive body of science showing the health benefits of moderate wine consumption.”
- Millennials are renting more than past generations, aren’t expected to own their homes as much as in the past – and when they do buy, they buy compact spaces.”A premium liquor bar takes up less room than a wine cellar but still supports a family who entertains.”
- “Today, the typical beverage alcohol consumer drinks across categories – beer, wine, and spirits. Only 7% identify as pure wine consumers today.”
But won’t Millennials mature into premium wine. Maybe. Maybe not. McMillan notes that after World War II, they bought beer and spirits. After Prohibition, they bought beer and spirits. “They bought alcohol beverage with a practical approach of ethanol per dollar.”
McMillan calls on the wine business to “stay focused on our strengths” and to “begin engaging the young consumer now. We can’t afford to wait until they can afford wine because the rest of the alcohol beverage industry is already changing their games to take away the option.”