According to IWSR data, in 2019, still wine volumes in the US declined -1.0% for the first time in twenty-five years. Wine consumption growth in the US has gradually been slowing over the years as consumers increasingly favour spirits and, more recently, hard seltzers. Despite these volume declines, values have continued to increase due to premiumisation.
Still wine’s two decades of growth faced multiple threats in 2019
Still wine’s successful growth period over the past two decades in the US was largely built on fostering relationships that often started at the winery’s tasting room. Developing a personal relationship with consumers has been instrumental in helping many wineries to drive business success, particularly through wine memberships, subscriptions, and similar direct-to-consumer (DtC) services. Still wine has held an advantage in shipping, with all but four US states now allowing some form of DtC alcohol shipping.
Still wine’s volume gains in the US were erased in 2019 due to multiple threats facing the US wine industry, including:
- Revamped competition, primarily from spirits and hard seltzers
- The wine tasting room experience increasingly being exchanged for the growing number of on-site craft beer or spirits experiences
- Spirits inclusion in DtC legislation
- Overall moderation
- Lack of marketing to younger LDA consumers
Covid-19 prompts wineries to diversify sales channels
As the Covid-19 pandemic unfolded, on-premise closures forced wineries in the US to re-assess their business models. The current environment may provide opportunity for the wine industry to recapture lost consumer attention. At this time, data suggests that total wine volumes are up year-over-year as more people purchase wine to enjoy with meals at home. However, there is uncertainty if the current boost in the off-premise will continue after pantry loading depletes, the on-premise slowly reopens and consumption behaviour returns to pre-Covid-19 levels.
Wineries with a heavy skew of on-premise and tasting room sales have suffered the most during the pandemic. Well-known retail brands with wider grocery distribution, large format, and bag-in-box brands are seeing strong growth to-date. Stay-at-home measures have prompted wineries to invest more resources into diversifying sales channels.
Smaller brands have less retail distribution, especially among chain stores, creating an increased need for these brands to implement online strategies to offset on-premise closures. It is likely that when the on-premise re-opens, there will be a reduced SKU count offered, making it even more important for smaller, niche restaurant-focused wineries to diversify and drive awareness with consumers who may be less able or willing to engage with sommeliers or bartenders.
Covid-19 offers wineries the chance to appeal to and engage with new consumers
Changes in consumer behaviour driven by Covid-19 has meant that wineries now have an opportunity to reach new audiences. A renewed interest in cooking and experimenting with new recipes has led to increased wine consumption and food pairing during mealtimes at home. Many consumers are reallocating their discretionary income to premium wine in the off-premise, often at $20+ per bottle. This replaces pre-Covid-19 tendencies to spend $8-12 per glass in the on-premise.
Marketing campaigns that would have typically been spent on on-premise activations during social summer hangouts have transformed into online marketing campaigns, including partnership opportunities with meal kits, online wine tastings, and social media activities. Wineries succeeding under the current environment are also focusing on partnerships with third-party delivery platforms and DtC shipping.
The pandemic has prompted many consumers to leverage ecommerce for daily activities. Most ecommerce sites report triple-digit increases in sales year-over-year, as well as a surge in customers that might never have tried to previously order wine online. If prices and low or no-cost shipping remain after the pandemic, many consumers may continue to order online for convenience. Successful wine brands are recognising digital channels as an effective platform to not only engage with consumers, but to learn more about their buying habits and preferences as well.
As states slowly reopen, the wine industry needs to focus on the foundations that drove twenty-five years of growth – providing memorable experiences and forging relationships with consumers, especially millennials and Gen Z consumers. The pandemic also provides an opportunity for the wine industry to connect with a demographic that has been lacking in wine participation. On-site restrictions may offer a chance to provide a more intimate and personal tasting experience. At the same time, social media and digital experiences may be the new normal and should be considered an integral part of connecting with consumers.
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