Lovers of fine wine in the U.S. are buying more of it, but there are fewer such drinkers to go around.
And producers of the higher-end beverage should be paying closer attention to the changing consumer demographics.
That was the sobering message beverage alcohol business analyst Danny Brager delivered this week to wine industry professionals gathered in the heart of the country’s top-end region for a two-day conference.
“The core and marginal wine consumer base is shrinking. There’s not as many now as there were,” said Brager, citing Wine Market Council research during his keynote talk Wednesday at the Wine Industry Financial Symposium, put on by WBM Events at the CIA at Copia in Napa.
But the good news, Brager said, for the “premiumization” movement of the wine business — toward higher prices and margins — is the core and marginal groups are drinking higher-priced selections.
“Core” wine consumers are those who drink at least a glass of wine a week. They are deemed such because they buy much of the wine.
But of the roughly 240 million legal-drinking-age adults in the U.S., they are estimated to account for only 18% of them, or about 44 million, according to the Wine Market Council’s survey from fall last year through this spring. That’s up from 14% share in the organization’s 2018–2019 survey.
“Marginal” wine drinkers raise a glass at least once a quarter, and they make up 15% of adults in the country 21 or older, or 35 million. That’s down from 25% pre-pandemic.
Problem is, the share these core and marginal wine drinkers have of consumption of all adult beverages is highest for the oldest segments (19% for ages 60–69 and 23% for age 70-plus) then mostly tapers off in younger generations (to 16% core and 13% marginal for ages 20–29).
At the same time, “non-adopters” — those who drink only beer, spirits or other alcohol — make up the largest proportion of legal-age U.S. adults: 29%, or 70 million. That’s up from 26% in Wine Market Council’s 2018–2019 survey.
And these anything-but-wine imbibers make up increasingly bigger shares of overall beverage alcohol consumption among younger generations (from 14% of age 70-plus to 35%–36% of ages 21–49).
“Infrequent” consumers — fewer than one adult beverage per quarter — continue to make up 10% of the legal-age population, or 25 million, and their share of total alcohol consumption is around 10% across the age groups.
A growing challenge for vintners, brewers and distillers is the rise of the teetotaler. These “abstainers” have grown to become the second-largest group of legal-age adults in the country, overtaking marginal consumers, the council data showed. This year, they account for an estimated 28%, or 66 million. That’s up from 25% — tied with marginals — in the council’s 2018–2019 data.
And this no-booze demographic is gaining a bigger slice of each older age group, from 25% of ages 21–29 up to 37% of age 70-plus.
“A lot of that’s at the older end, but there’s also an increasing amount of evidence around younger consumers not drinking at all — in that 21 to 24 age,” Brager said.
While the wine business has been looking toward growing its consumer base in younger generations, it should also be looking to expanding its reach culturally, Brager said.
“The high-end consumer, the high-frequency wine consumer is decidedly non-multicultural,” he said.
Beer and spirits are beating wine in reaching younger, Black and Hispanic consumers, according to data Brager cited from NielsenIQ , which tracks sales in stores and establishments such as bars and restaurants.
The wine industry for years has been looking to millennials (born in 1981–1996, now ages 27–41) as a key to growth because of its comparable size to the baby boomer generation (1946–1964, ages 58–78).
The 21–34 age demographic — including millennials and older Gen Z (1997–2012, ages 10–25) — makes up a quarter of the legal-age U.S. population. Wine’s share of all alcohol sales to that age group accounted for 19.2%, while spirits commanded 28.7% and beer 29.4%, according to NielsenIQ.
Wine and beer underperformed with Blacks, according to NielsenIQ. Although they account for 11.5% of U.S. residents age 21 and older, that ethnic group accounted for only 9.7% of the amount of wine sold domestically, and 10.7% for beer. Spirits are overperforming with this group, commanding 16.4% of those sales.
For Hispanics, they make up 16.7% of the legal-age population but only 14.4% of wine sales. They were more likely to buy beer (21.7% share) and spirits (18.5%).
Those statistics should be a wake-up call for the wine business, Brager said.
“We need to do a better job of competing in a society that is becoming increasingly larger in terms of its diversity,” he said.
Survey: Napa Valley is getting too expensive
Also presented at the symposium were recently compiled results from an annual survey of industry executives by Sonoma State University’s Wine Business Institute.
The top cited challenges to profitability reflect those facing the global economy — cost is going up, if you can find what you want to buy. One-third of the 292 respondents said supply chain was hitting the bottom lines hardest, followed by cost and availability (29%).
“We heard this several times: ‘Cost of visitation to the Napa area is becoming prohibitive for a lot of visitors who then go elsewhere,’” said Emily Porter, who leads admissions for the executive and graduate programs at the university.
Other top perceived hindrances to profitability: regulations (14%), brand proliferation (9%) and wholesale consolidation (9%).
Most of the survey respondents were small-scale vintners, producing 1,000–5,000 cases annually and taking in revenues of $1 million–$5 million annually.
The majority (52%) didn’t have a strong focus in direct-to-consumer sales on younger consumers, with less than one-quarter of such sales going to drinkers ages 21–40. While most (61%) in last year’s survey said they weren’t pursuing this age group last year, the majority (52%) this year are.
“That says a lot about our aging population of wine consumers and how we’re slowly courting that younger consumer,” Porter said. “But we have a long, long way to go.”
Jeff Quackenbush covers wine, construction and real estate. Before coming to the Business Journal in 1999, he wrote for Bay City News Service in San Francisco. Reach him at firstname.lastname@example.org or 707-521-4256.