Demographic changes in the US have been a big factor in a slowing US wine market: ageing baby boomers with increasingly less disposable income are reducing consumption as they enter retirement with fixed incomes, while younger consumers are drinking across all categories at significantly higher rates, also resulting in reduced occasions for wine.
Growth in still wine has been slowing down over the past few years, with a volume CAGR of 1.3% from 2013 to 2017 slowing to a rate of just 0.3% last year. Shifting priorities from younger consumers are playing a large part here. Adam Rogers, IWSR’s Research Director for North America, notes, “younger legal drinking age consumers are much more conscious of health and wellbeing, so spirits that cater to low-calorie and natural ingredients tend to be more appealing than wine. Coupled with a preference for “less but better”, consumers are more discerning about how they spend their disposable income, increasingly preferring premium spirits and cocktails over red or white wine.”
Rosé has benefited from its positioning as a gender-neutral beverage
Rosé has bucked the trend, performing more strongly than red and white varietals. It has benefited from its positioning as a gender-neutral beverage, which opens the door to more occasions and consumers, such as brunch. It also works well in a culture where everyday celebrations are valued, and its traction in social media, spawning the “rosé all day” phrase, for example, has boosted its staying power, as has its ability to influence cross-category innovations, such as rosé being used as a flavour in vodka or cider.
Product innovation encourages new occasions for wine
“Wineries need to continuously innovate in order to retain market share, especially that of the younger consumer segment,” remarks Rogers. Recent wine innovation, such as red blends and bourbon-barrel aged products, have helped to retain consumer interest, as well as to bring more men into the still wine category. However, wine producers are taking things further still, using innovative branding and packaging to meet demands for convenience and portability, and to increase penetration across different occasions. They are also offering more unique experiences and collaborations for consumers to enjoy on-site.
Portability and convenience are key drivers in wine packaging innovation. Bota Box and Black Box are both examples of growth-brands that leverage alternative packaging, such as tetra packs and bag-in-box wine, as well as small-format cartons. The improving quality of US wine-in-box packaging is also increasing demand in this category.
Canned wines have been a major volume driver for the industry as well, with sales exploding over the past three years. Its share of sales continues to increase within the wine category. Rogers adds, “traditional 750ml glass wine bottles have held the category back from being taken to beaches, boats, hiking and other outdoor activities and sporting events. As a non-glass packaging option, canned wines are suited for a greater variety of drinking occasions.”
As an added bonus, these smaller formats are more likely to encourage trial among adventurous consumers who don’t want to commit to an entire bottle. This is undoubtedly pushing canned wine into the market more quickly, as its low price point (often just USD $4–$7 per can) makes it an easy sell to new consumers.
Cheeky and approachable branding appeals to younger consumers
Going beyond the physical packaging, wine producers are also evolving their branding to appeal to younger consumers. Rogers states, “Yellow Tail originally did this back in the early 2000s, but now we’re seeing more examples of branding that is fun and approachable. For example, producers like The Prisoner Wine Company and Layer Cake Wines put less focus on winery credibility by appellation or even by varietal. It’s becoming much more common to see affordable wines appeal to non-wine consumers who just want something fresh and fun to drink.”
Cheeky and entertaining names that appeal to females and occasions, such as those used by Theme Night Wines and Middle Sister Wines, are also making it simpler for consumers to make purchasing decisions.
Unique activities and partnerships improve the winery experience
Looking beyond packaging & brand innovation, wineries are tapping into younger consumers’ affinity for experiences to help retain market share as well. As Napa Valley becomes pricey for many consumers, wineries are setting up satellite urban tasting rooms, drawing in consumers who may not be able to visit vineyards that are further afield. Wineries are also leveraging technology like virtual reality to give people the experience of enjoying vineyards “in person”.
Unique partnerships, such as collaborations with local creameries, go above the traditional “wine and cheese board” activity. Events such as wine & yoga, wine & sip and hands-on-harvests offer elevated experiences that are also “Instagrammable”.
Wine producers need to keep it simple
As demographic shifts change the way wine producers respond to consumer preferences, the US wine market has an opportunity to break norms even further. Wineries that want to appeal to younger consumers need to simplify the way these consumers approach the category. This is a market segment that has typically viewed selecting a wine as a complicated process in terms of pronunciation, understanding, package size, how to open, and even the correct way to sip and describe what they are drinking. Younger consumers increasingly want something that is, quite simply, easy to drink.
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