A slumping economy. Sales declining. Restaurants suffering. Consumer confidence at an all-time low. Despite a troubling recession, a report issued this week by the industry promotional group the Wine Market Council identifies positive and promising trends for the wine business in the year ahead.
The good news, says John Gillespie, president of the industry-sponsored group, is that consumption has increased for the 15th consecutive year. While the figures for 2008 are not complete, Gillespie estimates the market at 300 million cases, moving the United States past Italy and into second rank behind France in total wine consumption. "Even with modest growth in 2008," he says, "we calculate consumption at three gallons per capita."
Wine sales showed only a 1.5-percent gain in the past year against an earlier projection of 2.1 percent, but Gillespie stressed that the increase was still higher than during the last recession year, 2001, when sales increased by only 1.3 percent. In 1993, the most recent year for a declining market, sales fell nearly 3 percent.
The study by Wine Market Council found consumers cutting their spending, dining out less frequently and drinking less--all of this contributing to the declining rate of wine consumption. In surveys taken in the closing months of 2008, nearly three out of five respondents said their personal financial situation was worse off than the previous year.
On the positive side, two-thirds of those surveyed reporting spending the same amount per bottle for wine, against 15 percent who said they were spending less. In restaurants during the final months of 2008, 7 percent said they ordered fewer bottles of wine, 23 percent ordered fewer glasses of wine and 43 percent said their orders had remained the same.
Core wine drinkers (people who drink wine at least once a week) made up 16 percent of survey respondents, but accounted for 91 percent of wine consumption. Marginals (those consuming a minimum of one glass of wine per month) comprised 15 percent of those surveyed, and added 9 percent of total volume. Nearly 44 percent of the population does not drink, and about one out of four people enjoys beer and spirits, but not wine.
Since 2000, the report shows that the number of core wine drinkers has appreciated by 60 percent, while the marginal drinking group has plateaued, and consumption among those who drink only beer or spirits but not wine, is now 21 percent less than it was eight years ago.
Men outnumber women, 52 percent against 48 percent, in the core wine group. Almost 20 percent of male wine drinkers reported drinking more wine in 2008, against a net gain of 14 percent among females.
The most positive trend, Gillespie reported, was among the younger generational segments: generation-Xers and millennials. The greatest growth and the most optimistic conclusions from the survey come from millenials, ages 15 to 32. They and the generation-Xers accounted for what Gillespie described as "stunning growth in the core wine-drinking population." In 2008, nearly half of the millennial segment reported a net 23 percent increase in wine consumption--double that of generation-Xers against minimal or declining figures for the aging baby boomers. Gillespie described this trend as a "trade-off" phenomenon, where better than 10 percent of wine drinkers, primarily generation-Xers, are increasing total wine consumption at the expense of beer and spirits.
The bad news is that some wine drinkers are now shopping less frequently for wine and trading down in stores and on-premise. Fewer expensive bottles are being sold in restaurants, and many patrons have shifted from buying a bottle to buying smaller amounts by the glass.
The millennials, Gillespie suggested, are the future of the wine industry, and their numbers are increasing as younger members reach drinking age. They are the most optimistic about the economy and their wine consumption continues to rise. Millennials take nearly three glasses per occasion, compared to 2.41 for generation-Xers and 2.13 for baby boomers. The report shows that millennials overwhelmingly associate wine with fun times. Millennials are also significantly more likely than older generations to purchase wines costing $20 or more, and they visit wine bars more frequently than those in older age groups.
The Wine Market Council public relations program is now completely focused on this consumer segment. One tactic has been to employ a battery of sommeliers, largely in the millennial age bracket, as spokespersons in the media. It also claims a successful introduction last year for an online widget advising on wine pairings.
Core wine drinkers, the study shows, make most of their purchases in the levels between $6 and $20 and purchase product in the lowest and highest price ranges more often than marginals. Red wine now accounts for nearly half of purchases by core wine drinkers. Core wine drinkers consume domestic wine two-to-one over imports and marginals favor domestic wines on a three-to-one basis.
Core wine drinkers identified their most recent wine occasion as taking place at home. Marginal wine drinkers showed more frequent participation at the homes of friends or in restaurants. While home drinking most often occurs with guests or family among both groups, core members are more likely to partake at home with informal meals, take-out food or when dining alone. Both groups are highly likely to order wine in expensive restaurants and core drinkers frequently drink wine in neighborhood or causal chain restaurants. One out of four core drinkers visited a wine bar in the final three months of the survey, almost double the frequency for marginals. Most core drinkers who went to wine bars reported more than one visit.
Surveys showed California ranked high for flavor, value and overall enjoyment, and Oregon wines were rated most unique. Consumers reported a liking for the overall quality of imports, but there was bad news for French producers in figures showing French wines considerably lower on value assessments, though strong on flavor and quality. Core wine drinkers buying imports are skewed toward wines from Spain, Chile, South Africa and Portugal.
Gillespie predicted a "soft landing" in 2009, and was optimistic that the very strong fundamentals of the wine industry will carry it through a troublesome year ahead.
The Wine Market Council originated in 1994 as a non-profit trade association to foster the wine trade and to supply its members with proprietary market information. It also conducts a national public relations campaign for the industry.