Ok, Boomer. As hard as it is to believe, the younger generation of consumers doesn’t share your penchant for wine, and it’s raising concern among winemakers.
Part of the reason could be the growing sober-curious and mindful drinking trends.
According to the UK’s Totaljobs, a leading jobs board, younger consumers are more likely to identify as mindful drinkers than the Baby Boomer crowd. A recent study by Totaljobs found that 37 percent of Baby Boomers (b. 1946-64) described themselves as mindful drinkers, compared to 48 percent of Generation X (b. 1965-80) and 56 percent of Millennials (b.1981-96).
Improved weight management and physical health were cited as the top two reasons for consuming less alcohol or eliminating consumption entirely.
In the State of the US Wine Industry 2020 report, Silicon Valley Bank’s Rob McMillan, executive vice president, explained that Baby Boomers, who control 70 percent of discretionary income and half of the net work in the U.S., are heading towards retirement and dwindling in both their numbers and per capita wine consumption. At the same time, Millennials aren’t drinking as much wine as predicted.
McMillan pointed to other “headwinds” in the report, especially when it comes to younger consumers. These include the wine industry’s need to effectively promote the health benefits of moderate consumption, to recognize the growing threat from wine imports and substitutes, and better understand younger consumers’ values in order to give them a reason to buy wine over spirits.
Despite the headwinds, the report revealed some finer notes, too.
Last year’s strong economy is helping Gen Xers and Boomers alike increase wine purchases above the $9 bottle price, and led to record U.S. wine sales by value in 2019 (although the impact of COVID-19 going forward could be a spoiler).
Furthermore, “The large Millennial population hasn’t begun to embrace wine. While that’s a negative, if we look at it from the other side, it’s also the wine industry’s largest opportunity,” noted McMillan.
An oversupply of wine in the market currently will also “allow for better-quality juice in lower-priced bottles, which improves value and will provide an incentive for some Millennials to become more consistent wine buyers,” he added.
Direct to Consumer (DTC) sales remain promising in the overall wine market, and that’s good news for logistics providers that specialize in handling wine, especially for the DTC segment.
“Luxury wineries sell most of their wine through DTC channels,” stated McMillan. “Prior to 2016, there was significant channel shifting away from wholesale and over to the DTC channel, as SVB (Silicon Valley Bank) survey results showed. Since 2016, the shifting has stabilized, and DTC sales have remained right at 60 percent.”
Meanwhile, “It should be noted that with only seven states still prohibiting direct shipment of wine to consumers, the potential expansion of direct sales from the opening of new states to direct shipping is now more limited than in the past decade. Growth in this segment will come from new subscription models and from wineries growing their sphere of influence and taking their direct sales efforts and winery experience on the road,” he stated.
Nonetheless, “One of the more interesting growth opportunities comes via the U.S. Supreme Court’s ruling in Tennessee Wine & Spirits Retailers Association v. Thomas in 2019. It’s a crack in the wall that could help unwind other protectionist barriers against direct shipments of wine from retailers. That ruling may provide other sales options for luxury wineries, particularly for larger retailers with a strong existing experience shipping wine direct,” McMillan concluded.