Wine Demand is Turning Negative, Defying Good News

Photo by Mohau Mannathoko

I don't like it but...

it's true. I might have missed on a prediction that I made. 

Starting in January of this year, I began predicting that overall wine demand would grow through and into at least 2022. As the days passed, the better-than-expected situation with COVID vaccinations became clearer, so 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. 

Discover 2021 Consumer Trends by Participating in the Annual Direct to Consumer Survey

    Let's Never have Another Year like 2020

I opened the 2021 SVB State of the Industry Report with this line: "2020 will go down as the year in which we answered the heretofore rhetorical question, what else can go wrong? 

We are all glad 2020 is over. We are all grateful vaccinations are signaling an end to what we've endured this past year, and almost uniformly across America, there is renewed optimism that 2021 will be better as we move into spring.

What is Normal in a Post COVID-19 World?

The Coronavirus Pandemic for the wine and restaurant industries has been like getting picked up in a tornado and dropped into the Wizzard of Oz movie but without the welcoming committees. It's been dizzying to see overall demand for wine improve, at the same time premium wineries are fighting for survival. 

Get Ready For Cancer Warnings on Wine Labels

Note: There are several links to articles embedded in the post following that give more context.

Deep within the State of the Industry Report that was released in January, I discussed the Cumulative Negative Health Message that is being spread by neo-prohibitionists. That message is resonating with consumers and wine sales are being impacted, particularly among young health-conscious consumers.

In fact, the total volume growth of wine sold through distributors in the US has turned negative in both restaurants and grocery/drug store sales in the 12-month period ending in June of this year. When was the last time that happened?

Wine Supply is Entering Unknown Territory

Grape Supply Cycles

The wine business runs in cycles when it comes to planting. Trying to guess which grapes are needed and just when they are needed is a trick, especially when it takes 5 years to get a fully mature yield. And it's impossible to predict planting decisions effectively without making some guess on demand.

We have been through excess before, but the cycles aren't always created by the same circumstance and this one is unique.

I Can't Take the Lunacy!

This might be the shortest blog I've ever penned, but I've got to get this off my chest.

In the 2019 SVB State of the Industry Report I pointed out some changes we as a wine industry are facing, including the lack of engagement by our younger consumers which I attribute in part to the cumulative negative health messaging coming from neo-prohibitionists.