Silicon Valley Bank’s State of the U.S. Wine Report urges wine industry to adapt
"What (beverage) would you most likely bring to share at a party?"
That was the question posed to survey takers in advance of the Silicon Valley Bank’s 2024 State of the U.S. Wine Industry Report published earlier this month.
Designed to analyze alcoholic beverage choices among different consumer age groups, the survey question revealed what many in the wine industry already know: younger consumers are still not drinking wine.
But that was just one of the key findings in this year’s highly anticipated report by Rob McMillan, a longtime wine industry analyst and executive vice president of Silicon Valley Bank’s wine division.
Published annually for the past 23 years, the report provides key wine sales data and trends from the previous 12 months and includes predictions for the upcoming year. Its findings are considered invaluable to wine industry professionals steering the ship.
When Silicon Valley Bank, with headquarters in Santa Clara, collapsed in March 2023, McMillan and his cohorts were uncertain what would become of the State of the Wine Industry Report. Fortunately, when the Raleigh, North Carolina-based First Citizens Bank acquired SVB, it retained McMillan and the bank’s Napa-based wine division.
For this year’s report, McMillan and his team combined proprietary research with survey data from more than 500 wineries across the U.S. Here are some of the report’s key findings:
A glimmer of hope
In 2023, sales of wine by volume fell 3%, a three-year decline that is expected to continue in 2024.
But premium wines — those priced $12 and above — provided a glimmer of hope, with an anticipated sales uptick of 1% to 4%, for the year, once fourth-quarter data is tallied.
While inflation was a reality that affected much of the wine industry in 2023, nearly 70% of the premium wineries surveyed were able to partially recover the higher cost of doing business — some with nominal bottle price increases passed along to the consumer.
McMillan also reported tasting room traffic and direct sales to consumers (through wine club memberships, winery websites and tasting room purchases) were down in 2023, but he’s hopeful we’ll see growth in these areas in 2024.
That’s good news in Sonoma County, where many wineries are still navigating a post-pandemic reduction in tasting room traffic.
At Rodney Strong Vineyards in Healdsburg, John Busby, director of direct-to-consumer and hospitality, said the winery hopes to lure more on-site guests in 2024 through events that are “approachable, affordable and authentic.”
“Should industry headwinds persist in 2024, our approach to visitation is to continue to lean in on the guest experience,” said Busby. “We plan to offer ‘peek behind the curtain’ events with our winemaking and viticultural team that are smaller, more intimate, and affordable. They’ll provide guests a hands-on experience in the cellar and 1-to-1 opportunities to ask questions (to) get to know our winemaking team. Prediction is very difficult, particularly about the future, but we’re positioned to take what comes.”
Oversupply tipping the scales
As demand for wine continues to decline, California grape growers are facing a surplus of fruit and planted acres and are struggling to figure out how to manager their crops.
Jeff Bitter, president of Allied Grape Growers in Fresno, recently spoke on the subject at the Unified Wine & Grape Symposium in Sacramento. He said grape growers need to be realistic about decreased demand and recommends California reduce its bearing acreage by 30,000 acres to help balance the scales.
Enticing younger consumers
For years, the wine industry has been challenged to attract younger drinkers who often eschew wine for beer, spirits, cider and other alcoholic beverages.
This year’s report showed little has changed over the past 12 months, with consumers age 65 years and older continuing to purchase the lion’s share of wine. When questioned what beverage they would bring to a party, 58% said wine, compared to other age groups that indexed nearly 30% lower.
The youngest drinkers (age 21-34) were only 16% likely to bring wine to a party, compared to beer (21%), spirits (18%), flavored malt beverages (18), hard seltzer (17%) and cider/RTDs (ready-to-drink beverages) at 10%.
In fact, 2023 will mark the first time in 43 years that volume sales of spirits will surpass that of wine, according to Shanken News Daily.
In a marketplace flooded with alcoholic beverages touting edgy labels, convenient packaging, low-calorie/low-alcohol promises and budget-friendly pricing, it’s no wonder younger consumers are being lured away from wine.
