Marina Velez | January 15, 2024
The Wine industry had been on an upward growth trajectory since 1997, averaging growth levels over 2% through 2018, although decelerating since 2004. Baby Boomers began drinking less wine, and alcohol in general, while younger consumers continued to explore other beverage alcohol categories. In the growing spirits category, consumers drank more Ready-to-Drink cocktails, tequila, straight whiskey, and Irish whiskey. In the beer category, hard seltzer growth stalled, but Mexican imports continued their
long-term growth trend. As consumers increasingly switched between categories, wine volume had been mostly flat since 2018. Growth stalled in 2019 but rebounded in 2021, particularly as the
on-premise returned once Covid-19 was being effectively managed. But, after bars and restaurants initially re-stocked their inventory, sales of wine decelerated while sales of spirits rose.
Then in 2022, total wine contracted by -2% as volume consumption returned to normal pre-pandemic levels. Selling wine has become more challenging as aging baby boomers, currently the primary market for wine, are drinking less overall and nearing retirement age when typically, their spending declines and they buy less wine. Gen Xers and Millennials have grown up in an entirely different world. Beers now come from hundreds of small breweries and a variety of created styles. Cocktail-making has become a respected craft in which creativity and the quality of every ingredient matters. Additionally, the growing interest in a year-round lifestyle that embraces health and wellness, and social moderation is having a notable impact on the wine industry.
The wine industry had hoped that Millennials would become the generation to lead the industry into the new era of growth. However, these younger consumers have shown no indication yet that they are interested in having significant engagement with the category to the extent of the boomer generation. Instead, they buy much less wine than boomers while increasingly turning to distilled spirits, Ready-to-Drink cocktails, hard seltzers, and low/non-alcoholic beverage options.
Millennials are a more discerning generation, at a younger age, having grown up in a world that has encouraged being more of a connoisseur than when boomers were young. Social media has also given everybody the opportunity to voice their opinions. Millennials have less disposable income than their parents, are mostly incumbered by student debt, have fewer middle-class job opportunities, and lack optimism they can ever afford real estate. That’s a primary reason that millennials have gravitated to beer and spirits rather than wine. A high-end beer or a craft cocktail at a restaurant can cost the same as a glass of ordinary wine. Generally, good wine is more expensive than beer or spirits of comparable quality, and prestige wines are expensively unaffordable.
Generation X, the generation between the boomers and the millennials, has often been overlooked by the wine industry. While Gen X has less buying power due to its smaller population proportion versus boomers, its wine-buying behavior does not seem that different from boomers’.
Younger people are not interested in wine, and the wine industry has not done enough to entice them to become regular consumers. By some industry projections, sales of American wine could fall by about twenty percent in the next decade. It’s clear that something must be done to reach young wine drinkers. But how can the wine industry become more relevant to young consumers, or any consumer for that matter? One of the shortcomings of the wine industry in appealing to younger consumers is that hasn’t recognized the changing demographics that younger consumers represent. For example, although only 28% of the boomer population is nonwhite, 45% of the millennial population and almost half of Gen Z is nonwhite. The wine industry has been slow to diversify its appeal to make it a more welcoming and inclusive place, for its work force and multi-cultural consumers. Younger consumers have taken note of this. They are more concerned with social justice and with health and environmental issues, including climate change. The social values a brand or company represents are increasingly connected to a consumer’s decision to purchase those products. Wine is not exempt from this sentiment.
One solution for wine brands to resonate with younger consumers, as many spirit brands have already done, is to be well-defined about their social values, and their efforts to address environmental concerns, such as their strategies for lowering their carbon footprints. Providing transparency regarding product ingredients and nutritional data, including calories per serving, can help dispel the long-held misconception among consumers that wine is very high in sugar. In fact, younger people have demonstrated they are drawn to natural wines and to traditional styles. The appearance of goodwill will not suffice at this point but rather demonstrating a commitment to action and change will. The wine industry may have resisted addressing these critical changes in the past, but it is evident it can no longer remain complacent without losing more category share into the future.
Although younger wine drinkers are drinking wine on a much more occasional basis, they have exhibited a propensity to spend more money when they do buy wines that appeal to them. They’re more adventurous, but they know less about wine regions and varietals. They are also becoming less interested in well-known name brands and varietal pedigree, rather opting for smaller, niche brands with a backstory. Brands should be creative in their brand and messaging and convey the value of each product, particularly more premium wine offerings. They’re also interested in moderation. Low-alcohol wines have tracked well in that demographic, particularly products that use low-ABV as a marketing point and differentiating factor. Alternative packaging--wines in cans or boxes--or any packaging that promotes small-consumption or on-the-go drinking will increase wine’s appeal.
Younger wine drinkers are enticed by experience-led drinking occasions that provide an alternative to the at-home drinking occasion. This can be accomplished by more creative tasting experiences in the on-premise that showcase a wide range of wine varieties to create excitement amongst drinkers. These events should be affordable and accessible, ideally aligned with a venue’s menu to pair food with wines and highlight the wine’s origins. This experience can even be elevated further by integrating art or music or having an education session that includes the wine makers.
It’s important to embrace current trends and listen to what younger consumers are asking for. They want real experiences with the brands, whether in person or digitally, to drive meaningful authentic engagement that builds long-term customers. For wineries, attracting younger visitors involves providing a complete experience of interacting with the brands, not just a particular bottle. Young visitors desire more from their tastings. Having the opportunity to walk through the vineyards and see the grapes that make the wine; learning about the behind-the-scenes winemaking processes and tasting the wines alongside ethically sourced and locally produced artisan foods allows for consumers to be more personally connected with what they are consuming. Brands and wine suppliers should also be leveraging their social media platforms as a resource for young consumers to explore and experience the fun of wine via an accessible approach. For example, several wine brands are now utilizing a QR code on their back labels to provide easy access to the wine’s backstory, tasting notes, pairing suggestions and information on winemaking practices and regions.
Given that there is more competition for alcohol market share with a greater variety of alcoholic beverages for consumers to select from, the wine industry needs to spend more on advertising and promotional programs that accentuate the fun and social aspect of wine. Depicting trendy and relatable imagery in entertainment shows and movies, through advertising or product placement, is a good strategy to convey wine’s modern appeal.
The factors holding back the wine business today need to be critically assessed to convert the younger demographics as they grow in purchasing power. Wine is a vibrant, dynamic industry with potentially as much modern appeal to younger consumers as any other beverage alcohol category. It just must do a better job at listening and responding to today’s consumer to grow its future.