2024-12-20
The U.S. wine industry faces a challenging outlook heading into 2025, grappling with an oversupply of inventory and insufficient demand. This combination has led to declining sales in recent years. Preliminary data and projections suggest that the coming year may see stabilization, though an immediate recovery remains uncertain.
Jon Moramarco, founder of research firm bw166 and associate editor of Gomberg, Fredrikson & Associates, notes that while sales declines appear to be slowing, the market has yet to find a balance. To provide deeper insights, the second annual BMO Wine Market Report is underway. This report will include detailed market analysis for the U.S. and Canada, along with surveys of wineries in both countries.
Adam Beak, managing director of BMO's Wine & Spirits group, emphasizes the importance of this report for the industry during a time of economic, political, and cultural shifts. Beak explains that the report aims to deliver data-driven insights to help stakeholders make informed decisions.
The wine market has experienced a notable decline in recent years. In 2023, total sales volume reached 377 million 9-liter cases, but projections indicate a potential 5% drop by the end of 2024. Although the total market value may have grown by 1% due to inflation and rising prices for premium brands, this minor gain has not offset the loss in volume. Preliminary data show that off-premise sales dropped between 5% and 8%, while direct-to-consumer (DTC) shipments from wineries saw a 6% decline in value and a 10% drop in volume.
This downturn is not unique to the wine sector. Beer and spirits sales have also fallen by 3% over the past 12 months. Although wine spending in on-premise locations like restaurants and bars has grown by 5% in the same period, this increase has not compensated for the overall decline in consumption.
The lack of interest among younger consumers and reduced consumption by baby boomers, historically loyal to wine, exacerbate the issue. Additionally, growing anti-alcohol messaging, driven by organizations like the World Health Organization, has disproportionately impacted wine consumption. This narrative, which discourages alcohol under any circumstances, has contributed to a drop in per capita consumption.
The fourth quarter, typically critical for wine sales due to holiday demand, is expected to reduce some of the inventory accumulated since the pandemic. However, projections indicate that sales will not surpass 2023 levels. This has created tension between distributors and wholesalers, who are contending with high inventory levels and rising financing costs due to increased interest rates.
Despite these challenges, there are signs that 2025 could bring some recovery. A potential decrease in interest rates might revive consumer spending, which has been constrained by inflation. Ready-to-drink (RTD) beverages, including wine-based flavored options, have shown significant growth, potentially attracting new consumers and renewing interest in wine. While still a small segment, RTD products offer an opportunity to diversify and capitalize on excess raw materials.
Market dynamics are also shifting in terms of purchasing locations. Club stores like Costco have increased their share of wine sales, while traditional grocery stores have seen minimal growth over the past year. This change in buying habits may be contributing to declining supermarket sales, reflecting broader trends in consumer preferences.
Founded in 2007, Vinetur® is a registered trademark of VGSC S.L. with a long history in the wine industry.
VGSC, S.L. with VAT number B70255591 is a spanish company legally registered in the Commercial Register of the city of Santiago de Compostela, with registration number: Bulletin 181, Reference 356049 in Volume 13, Page 107, Section 6, Sheet 45028, Entry 2.
Email: [email protected]
Headquarters and offices located in Vilagarcia de Arousa, Spain.