Concern grows over state of U.S. wine market

The latest figures from the United States alcoholic beverages market highlight troubling signs for the wine industry. According to IWSR, a global provider of market analysis, total alcohol sales volumes have dropped more than expected in the first seven months of this year. The overall decline stands at -2.8%, a sharper decrease than the -1.9% analysts had forecast. Wine has been hit even harder, with a -4% drop in volume sales, particularly affecting key markets.

In New York, wine volumes have plummeted by -5%, while other states like Washington, D.C., Idaho, Kansas, Maryland, and Oregon also reported declines exceeding -5%. New Mexico was the exception, experiencing a less severe decline of -2%, which, while negative, is better compared to the broader sector trends.

Data from the SipSource report, released by the Wine & Spirits Wholesalers of America, echoes the industry's difficulties, showing an -8% drop in sales volume across a sample of 450,000 retailers nationwide. One of the most concerning issues is the impact on high-priced wines, a category that previously drove growth. Dale Stratton, a SipSource analyst, emphasized the pressure on the "premiumization" trend, which is now struggling in a shrinking market. For instance, the segment of spirits priced above $100 in bars and restaurants saw a sharp -12.5% decline, while wines priced between $50 and $99.99 experienced a more moderate drop of -3.9% in on-premise consumption.

The off-premise segment has not been immune to these trends. Sales of wines priced over $100 dropped -8.5%, which is significant given that around 80% of wine consumption in the United States happens outside restaurants and bars.

Even industry leaders are feeling the squeeze. LVMH, a major force in the wine and champagne sector, reported a -7% global sales decline in the first nine months of the year.

Still, there are glimmers of optimism. Prosecco sales have risen by 2%, and wines priced between $50 and $100 have shown a slight 1% increase, with U.S. wines in this range growing by 3%. Among collectors, white Burgundy sales have climbed by 9% year over year, and Oregon Chardonnays are gaining market share.

One segment experiencing robust growth is non-alcoholic wine. The pandemic has accelerated demand for alcohol-free options, which have surged by double digits in 2023, according to IRI. Consumers are not necessarily replacing alcoholic wine but are supplementing their habits in line with a broader trend toward health and moderation. The most popular non-alcoholic wine varieties—Chardonnay, Sauvignon Blanc, and rosé—mirror traditional preferences.

While the wine industry faces significant challenges and a complex path to recovery, there are promising signs in specific niches. The upcoming holiday season and a potential boost in consumer confidence could present opportunities for improvement. High-end wines and strategic investments in champagne might continue to show resilience as the industry adapts to evolving consumer behavior.