|Photo by Mohau Mannathoko|
I don't like it but...
it's true. I might have missed on a prediction that I made.I held firm to my forecast and underscored it further in a March blog post. There were so many positives to support my faith in our industry's 2021 opportunity, how could I not be optimistic?
The Wind's At Our Back
We are sitting with the highest GDP in decades. Fiscal and monetary stimulus from the government is being delivered in trainloads. Restaurant and tasting room sales are being added back to the calculus. Internet sales are at records. Frustrated and cooped-up consumers with exploding personal savings are desperate to spend it on experiences like travel and tourism. The jobs numbers are increasingly positive. And, the stock market is at record highs producing even more discretionary income.
But, I Underestimated the Impact of a Simple FactWhen looking at all of the positive factors noted above, I ignored the fact that still wine sales have been plagued by declining growth rates since 2017. Even before the Pandemic, growth was effectively zero for the category. The headwinds creating this demand issue haven't changed:
- Younger frugal consumers are consuming spirits over wine.
- Aging consumers that drove the growth of wine sales are cutting back.
- Alcohol is losing popularity in the face of a health movement that puts even moderate consumption in a position of being a questionable choice.
- In the 'better for you' contest, wine has lost its prior status as a beverage with health attributes due to our industry's inattention.
- Spirits have adapted their marketing effectively for a new consumer, while the wine industry has not.
Even though I knew all the headwinds facing the wine industry and have extensively reported on them, I believed we would see a bounce from reopening - at minimum from existing wine consumers, if not from new consumers too.
In making my prediction of positive sales growth this year, I postulated if growth was zero at the start of 2021, growth should be something more than zero as we moved into a better economy, but thus far in 2021, that's not turning out.
The Most Important Chart So Far This Year
SipSource is a company that aggregates the wine and spirits distributors depletion data. That data is trended for both on and off-premise, removing much of the channel shifting impacts. So total depletions from distributors - at least on a volume basis are a good relative measure of trends over the prior twelve months. Sadly, it's not pretty.
I'm not the only analyst to notice this. Dale Stratton; a highly experienced alc. beverage professional who works with SipSource, started talking about this decoupling with me about sixty days ago and has publicly shared those concerns recently in his own speaking engagement. Industry vet Danny Brager and I have been sharing a few Zoom engagements lately, and I found that he arrived at the same conclusion from his research. Andrew Adams provided his thoughts on the same SipSource data set on June 25th in an article on Wine Business, and Jon Moramarco in his videocast in mid-June looked at a different data set and still came to the same conclusion: Wine is losing market share to spirits.
End of the Line for Wine's Category Share Growth in Alc. Bev?
What's Your Opinion?
- Will still wine as a category end 2021 in negative growth territory,
- If the above is true, what should be done?
- Why are spirits showing such strong growth in the recovery already, and not wine?