Read the report

svb.com/wine-report/

Watch a discussion on the report here.

Sales growth for wine remains positive for 2018 but is ebbing to single-digit levels, even at the higher end, according to a closely watched report released Thursday, as the emergence of younger consumers and retirement of baby boomers impacts buying behaviors and preferences.

Wineries will have to account for these shifts in their marketing efforts, especially in sales channels directly to consumers, said Rob McMillan, founder of Silicon Valley Bank’s Wine Division and author of the “State of the Wine Industry” report. It provides more detail and color on trends he began previewing last month.

“2018 will be a good year for the wine industry, and while there will still be sales growth, the rate of growth is slowing,” McMillan said in the report announcement. “The successful wineries 10 years from now will be those that adapt to a different consumer with different values — a customer who uses the internet in new and interactive ways, is frugal and has less discretionary income than their generational predecessors.”

The 17th annual report assesses current conditions in the wine industry and forecasts the direction of the business for the new year, based on economic and behavioral trends. Here are highlights and predictions from the 2018 report:

  • Millennials are migrating away from red blends and “introductory wines.” They are starting to have a positive impact on other lower-priced still-wine categories, both domestic and foreign.
  • While boomers are still the leading consumers of fine wine, they are consuming less as they age, are changing their spending patterns in dollars spent and are moving away from the high price points as they adjust to living on a fixed income.
  • Consumers continue to leave lower-price segments in favor of better-quality offerings, but total sales growth is leveling off. For the industry as whole, dollar value of sales will rise by 2 percent to 4 percent, but sales volume will increase by up to 1 percent. The premium wine segment — defined in the report as bottles retailing for above $10 — will grow in sales volume by 4 percent to 8 percent, down from the estimate of 10 percent to 14 percent in 2017.
  • Overall pricing will remain flat. Vintners will find it difficult to pass on price increases to consumers.
  • Increasing imports will continue in the lower premium price points.
  • Overall supply of wine in production and in demand from consumers is “balanced.” Cabernet sauvignon is balanced, with flat to downward pressure at the high end of the market. But demand for chardonnay wines is “particularly strong.”
  • Acquisitions will cool somewhat from the torrid pace of the past three years. “We still will see foreign purchases of U.S. wineries and significant transactions for vineyard properties,” McMillan said.
  • The growth rate for North Coast grape prices, which have seen rapid growth in the past five years, should slow.

McMillan discussed the annual report and the state of the wine industry at a Sonoma County Winegrowers seminar on Jan. 11 and in a live videocast on Jan. 17 with Gretchen Boock, chief executive officer of Dobbes Family Estate; Mary Jo Dale, marketing director of the Americas for Vinventions and Nomacorc; and Paul Mabray, director of Getemetry.com.

Read the report

svb.com/wine-report/

Watch a discussion on the report here.