Is the Global Wine Industry Facing a Permanent Downturn?

The global wine market in 2023 has been marked by a significant downturn in both export volumes and value, prompting questions about whether the industry is facing temporary disruptions or longer-term structural shifts. A recent study published on September 16 in Wine Economics and Policy, authored by Professor Simone Mueller Loose and Rafael del Rey, provides a comprehensive analysis of the factors behind the sharp decline in global wine trade. Titled "State of the International Wine Markets in 2023. The wine market at a crossroads: Temporary or structural challenges?", the report sheds light on both cyclical and foundational changes that have impacted the wine industry over the past year.

The figures from the report paint a stark picture of the global wine market's contraction. In 2023, wine exports fell by 6.5% in volume, reaching 98.3 million hectoliters—a loss of 12.9 million hectoliters compared to the market's peak in 2021, when the industry rebounded after the pandemic. The value of global wine trade followed a similar downward trajectory, with a 4.6% reduction, representing a loss of €1.8 billion. The overall value of wine exports dropped from €37.8 billion in 2022 to €36 billion in 2023. Compounding this challenge was the global inflation rate of 6.8%, which exacerbated the real decline in the value of wine traded internationally.

This marked the end of a decade-long trend of "premiumization," where the market was increasingly driven by higher-priced wines, particularly in developed markets. The only interruptions to this trend had been the economic crises of 2009 and 2020. However, in 2023, the downturn was driven by several key factors: the decrease in real income among consumers in major wine markets, an oversupply of wine due to post-pandemic inventory build-ups, and weaker demand for mid-range and premium wines.

While the drop in global demand could have led to a dangerous oversupply, a particularly low wine harvest in 2023 prevented the situation from spiraling. Global wine production was down 9.6% from the previous year, totaling just 237 million hectoliters. This lower yield, though detrimental to production, helped balance the market by preventing a significant surplus that could have placed further downward pressure on wine prices.

Sparkling Wines Hold Steady

Not all wine categories were impacted equally by the market downturn. Sparkling wines remained a bright spot in the global trade landscape. Although the volume of sparkling wine exports fell by 4%, the value of these exports actually grew by 0.8%, reaching €8.9 billion in 2023. This was largely driven by price increases rather than volume growth, as consumers continued to show an appetite for sparkling wines despite economic pressures.

Italy, in particular, saw its sparkling wine exports increase in value by 3.3%, buoyed by the continued global popularity of Prosecco. France and Spain, on the other hand, experienced declines in the value of their sparkling wine exports, with drops of 1.1% and 0.9%, respectively. The price elasticity of sparkling wine was a key differentiator: while the higher prices for French Champagne (which rose by 10.2%) led to a proportional drop in volume, Italian Prosecco and Spanish Cava showed more resilience, maintaining volume better despite price hikes.

Bottled Still Wines See Sharp Declines

By contrast, bottled still wines, particularly reds, faced steep declines. In 2023, the value of bottled non-sparkling wines fell by 5.3%, while volume decreased by 7.6%. This resulted in a €1.4 billion loss in value and a 4 million hectoliter reduction in volume. Red wines were particularly hard-hit, with demand suffering more than that of whites and rosés. Despite this, prices for bottled still wines continued to rise, with the average price per liter increasing by 2.6% to €4.69. Yet, this price increase was not sufficient to offset the decline in sales volume, indicating a growing disconnect between consumer preferences and the supply of traditional wine categories.

Bag-in-Box Wines: A Pandemic-Era Star Stays Strong

One format that has shown resilience in recent years is the bag-in-box (BiB) category. Although BiB wines represent a relatively small share of the total global wine market—accounting for just 2% of value and 3.8% of volume—they have performed notably well in 2023. While volumes of BiB exports dropped by 2.4%, the value of these exports grew by 0.9% to €707 million, thanks to a 3.5% rise in prices.

This format, which gained considerable traction during the pandemic, continues to be popular in markets like Sweden, Norway, Germany, and the United Kingdom, where consumers appreciate its convenience and affordability. Though historically concentrated in Nordic countries, BiB wines are beginning to penetrate less traditional wine markets, signaling a potential shift in consumer behavior toward alternative packaging formats.

U.S. and China Stand Out

The decline in wine trade was particularly pronounced in key markets like the United States, which remains the largest importer of both sparkling and still wines. U.S. wine imports slowed in 2023 as retailers and distributors grappled with excess inventories from the post-pandemic period. Moreover, younger consumers in the U.S. are showing a growing preference for alternative alcoholic beverages, such as beer and spirits, and are increasingly responsive to public health campaigns highlighting the risks of alcohol consumption.

In Europe, the UK—another major importer of wine—saw a modest recovery following the pandemic, while Germany continued to struggle with declining demand since 2021. The German market, in particular, has been affected by the economic fallout from the ongoing conflict between Russia and Ukraine. Other important markets, including Canada, Japan, Belgium, and China, also experienced significant reductions in wine imports.

China, which had been one of the fastest-growing wine markets earlier in the decade, continued its downward trend in 2023. Since peaking in 2017, Chinese wine imports have decreased by 56% in volume and two-thirds in value, falling to a new low of €1.4 billion.

On the supply side, nearly all major wine-exporting countries experienced declines in 2023. Chile, the United States, Argentina, and Australia were among the hardest hit, with Chile's exports falling by 23% in value and U.S. exports by 20%. France and Spain saw more moderate declines of 1.8% and 2.6%, respectively, while Italy, the world's largest wine exporter, managed to hold steady with only a 0.5% reduction in exports.

Chile's troubles were particularly notable, with significant declines in key markets such as China (-33%), the UK (-19%), and the U.S. (-29%). The country's reliance on these large markets left it vulnerable to shifts in global demand, and its double-digit declines in both value and volume underscore the fragility of its export strategy.

Changing Consumer Preferences and Sustainability Pressures

One of the most significant challenges facing the global wine industry is the changing preferences of consumers, particularly younger generations. These consumers are increasingly favoring lighter, fresher wines with lower alcohol content, as well as alternative wine-based beverages like spritzes and wine cocktails. This shift has fueled demand for white and sparkling wines, while traditional red wines, especially those with higher tannin levels, have fallen out of favor.

At the same time, the growing importance of sustainability in both wine production and consumption is reshaping the industry. Consumers, particularly in developed markets, are placing greater value on environmentally friendly and socially responsible practices. As a result, wine producers are being forced to adapt not only to new taste preferences but also to stricter sustainability standards.

The global wine market in 2023 finds itself at a crossroads. Temporary factors such as inflation, inventory overhangs, and the lingering effects of the pandemic have certainly played a role in the market's contraction. However, there are also signs that deeper structural changes are underway, from shifting consumer preferences to the growing importance of sustainability.

For the global wine industry, these challenges will require careful navigation. Adapting to evolving consumer tastes, embracing new packaging formats, and meeting sustainability demands will be critical for the industry's long-term success. As wine producers and exporters grapple with these headwinds, the future of the global wine trade remains uncertain, with both risks and opportunities on the horizon.