U.S. Wineries Still Not Doing Enough To Attract Younger Multi-Cultural Consumers, SVB 2022 Report Says

Though more than 50% of the premium wineries surveyed in Silicon Valley Bank’s 2022 State of the Wine Industry Report, stated they had a very good financial year in 2021, report author, Rob McMillan, warns that the industry is still not doing enough to engage with new consumer segments.

“The US wine industry isn’t doing a good enough job of marketing and selling its product,” reports McMillan, EVP & Founder of the Silicon Valley Bank Wine Division,….”often remaining wedded to successful strategies from the past while the culture, country, business environment and consumer have radically evolved.”

The 66-page report, which includes survey data from around 150 wineries, analyses of winery financial statements, and compilation of 2021 wine industry sales data, outlines successes and headwinds faced by the industry. McMillan presented the results in a webinar today, accompanied by a panel of wine industry experts to weigh in on the issues.

Harris Poll Highlights Need for Wine Industry to Focus On Consumers Under Age 65

To emphasize his point that consumers under the age of 65 are not engaging as much with wine, McMillan pointed to a November 2021 Harris Poll of 1,949 US adults age 21 or over. In the poll, consumers were asked the question: “What would you bring to share at a party?” The results show that 49% of age 65+ consumers would bring wine, whereas only 15% of ages 21 – 34 would bring wine. With other age groups, it was only 29% – 30% bringing wine. (See Figure 1).

The expert panel discussed the reasons for this, along with some solutions:

Too Many Other Beverage Choices: Part of the issue, according to Paul Mabrey, CEO of Pix, is too much competition. “There is now a cornucopia of alcohol choices, compared to the past,” he said, citing such unique options as hard kombucha. This suggests that wine needs to up its game in coming up with more innovative options, such as more ready-to-drink wine cocktails or unique additions and partnerships.

Pricing & Promotion Issues: Panel members, Danny Brager with Azur Consulting and Dale Stratton, Owner of Five Points Consulting, discussed pricing issues, and lack of promotion. Brager showed a pricing chart illustrating that wine priced under $11 per bottle is not performing as well as higher-priced wine. However, “the issue is without wines priced under $11, we don’t have an onramp for younger consumers.”

Wine is also more expensive in restaurants, compared to beer or a cocktail. Stratton shared a chart showing how in 2021 many restaurants restocked their spirits inventory, but did not order much wine. The panel discussed that part of the reason is because the spirits industry does a great job of promoting and advertising their products, and wine needs to come together as an industry to do more of this.

Health and Wellness: With the health and wellness trend sweeping the nation, many consumers are choosing to drink less alcohol, and are often interested in knowing more about ingredients, calories, and carbs. “Part of it is the health issue,” explained McMillan. “We (wine) don’t put calories on our bottles, and I think we should. It is good for our industry to be more transparent.” Though lower and no alcoholic wine options are starting to appear in the market, there may not be enough clear choices that are well marketed.

The report concludes that: “Unless the industry does more to attract consumers younger than 65, wine consumption might drop by 20 percent when boomer’s sunset.” 

In an effort to help identify solutions for some of these issues, Silicon Valley Bank announced the formation of a new industry group called WineRAMP. RAMP stands for Wine Research and Marketing Project. The purpose is ‘to build and enhance the image of wine in the US marketplace and promote the positive attributes of wine to current and new legal-age consumers.’ It is open to wineries, importers, distributors and retailers who are interested in supporting research and joint marketing campaigns. They are hoping to secure a National Research & Promotions Order from the USDA.

2021 Still A Great Sales Year for Many US Wineries

Despite the lack of engagement with new consumer segments, McMillan admitted that many wineries had better financial performance in 2021 than in 2020. “In our sample, nearly 30% of premium wineries said it was their best year ever. That is remarkable to me giving the challenges we’ve had to deal with – supply chain issues, labor challenges, etc. Last year only 13% of wineries said it was the best year ever, and 32% said it was the most challenging year.”

2021 successes centered around improved digital marketing and e-commerce strategies in the direct-to-consumer channel, as well as more tourists visiting winery tasting rooms during the year. The fact that the 2021 harvest was not threatened by fires or smoke taint was also a boon. However, total wine sold through the 3-tier system declined a bit, losing market share to spirits. This suggests that wineries need to focus more on long-term strategic goals to gain new consumers and grow market share – while still taking time to celebrate the successes of 2021.

WineRAMPWineRAMP – Wine, National Research and Promotion Program