Key trends for the US wine market in 2024

The US wine market is facing up to continued challenges in 2024 and beyond, due to a shrinking consumer base, volume declines at lower price points and the levelling off of sparkling wine gains.

IWSR forecasts that US wine market volumes will decline at a CAGR of -2% between 2022 and 2027, compounded by currently inflated inventory levels in distribution and retail. This represents an acceleration of recent declines (2017-22 volume CAGR of -1%), with volumes in 2022 falling by -3%.

The expected falls will be driven by the dominant still wine segment (85% of market volumes), which IWSR forecasts will decline at a CAGR of -3% to 2027. Other segments – sparkling, fortified, other wines and light aperitifs – are expected to grow from much smaller bases.

The continued declines come despite an improvement in consumer sentiment in 2023, with rising levels of positivity about incomes and future prospects. “This picture remains mixed though, as economic pressure is pushing many US consumers to re-evaluate their spending by prioritising essentials, so the positive shift has not resulted in higher spending on wine,” says Marten Lodewijks, Director of Consulting – Americas, IWSR.

“Stable growth in the number of regular consumers – the number of weekly wine drinkers has moved up in line with overall US population growth – when combined with the ongoing moderation trend, contributed to making 2023 a challenging year for the US wine industry.”

The US is also heavily skewed towards domestic consumption – 88% of wine produced in the US is consumed domestically, compared to 57% for Italy, 56% for France and 38% for Spain. As such, these other countries are able to move volume to export markets if domestic consumption slows, but the US is much more constrained by not having developed these markets.

Premiumisation continues – but can’t halt declines

In the recent past, premiumisation has managed to offset volume declines, growing the overall value of the US wine market, but this is no longer the case. Following a -1% value decline in 2022, IWSR forecasts shows category value to remain relatively flat through to 2027.

This reflects the long-term decline of standard-and-below priced wine in the US (less than US$9.49 per bottle), which accounts for 62% of total market volumes. IWSR predicts strong volume declines for the low-price, value and standard price tiers between 2022 and 2027, contrasting with expected gains for premium-and-above products (US$15-49.99).

“As baby boomers enter retirement with secure income levels, trading up is still prevalent within core wine consumers,” explains Adam Rogers, Research Director – North America, IWSR. “However, growth in premium-and-above segments will not be able to offset losses in standard-and-below due to the latter’s larger scale.”

Lower involvement and drinking frequency levels

Although the expansion of the regular wine-drinking consumer base is in line with general population growth, the overall wine drinking population is ageing, with LDA Gen Z accounting for only 7% of regular wine drinkers (RWDs), compared to a share figure of 36% for Boomers.

In 2019, 29% of RWDs were in the LDA-34 age group, but by 2023 this had fallen to 23%. Over the same timescale, the percentage of RWDs aged 55-plus rose from 38% to 43%.

“This means that the demographic make-up of regular wine drinkers is ageing,” says Lodewijks. “Older drinkers tend to be less involved in the wine category. Meanwhile, the LDA-34 group has a keener interest in the moderation trend and also a much wider repertoire than those aged 55+, leading to lower drinking frequency levels and volumes across the board.”

An engaged and adventurous Millennial cohort

“Millennials are the most involved age group in the wine category, with an improving financial outlook and a continued willingness to spend more on wine,” says Richard Halstead, COO Consumer Insights, IWSR. “Despite this, their wine consumption has also moderated, and their category loyalty has been insufficient to offset overall decline.”

Some 44% of Millennial RWDs have a high involvement in the wine category, compared to 30% for RWDs as a whole, according to IWSR consumer data. They are strongly positive in terms of sentiment, and are more likely to consume wine in on-trade settings.

Millennial RWDs are also more likely to buy more wine, and to spend more on it when they do so. They are more frequent wine consumers – 57% drink wine on two or more days a week, versus 46% of RWDs – and they are more adventurous: 73% say they enjoy trying new or different styles of wine on a regular basis, compared to 58% of all RWDs.

Younger LDA consumers are also leading trial of alternative packaging, with nearly a third of Millennials having purchased wine in small bottles, and 17% in a can.

For producers keen to reach the Millennial consumer, providing products with bold flavours, adhering to socially conscious business practices, presenting convenient packaging choices, and targeting the health-conscious consumer, could help to resonate with this market segment.

“It’s interesting to note that our data shows an intriguing disconnect between the overall rate of volume change (downwards) and the claimed behaviour of Millennials (higher frequency, higher spend),” comments Richard Halstead, COO Consumer Research, IWSR. “It could be that this Millennial behaviour is showing up in the marginal premiumisation trend, while the big volume decline in the standard-and-below price segments is largely a function of consumers moderating (including Boomers), and younger and/or lower income consumers exiting or downgrading their frequency in the category in favour of cheaper or smaller format beverages, such as RTDS.”

Sparkling wine growth falls flat, although consumers are more engaged

Although the volume growth momentum is slowing, with IWSR forecasts showing +1% volume CAGR, 2022-2027 (vs +6% CAGR 2017-2022), the prospects for the US sparkling wine market are largely positive, thanks to an expanding base of increasingly engaged consumers making more frequent purchases in the category.

“Sparkling wines from Italy, the US and elsewhere are increasingly migrating into a new positioning in the US – and, indeed in other major markets around the world,” notes Halstead. “Beyond the traditional celebratory occasions, the category is becoming more legitimised as an alternative to still wine at meals.

“Furthermore, its presence as an aperitif cocktail ingredient is broadening its base in the many markets where aperitif cocktails are in strong growth, including the US.”

Post-Covid on-trade recovery stalls

Regular wine drinkers have returned to the US on-trade at a greater frequency than before the Covid-19 pandemic, but a lower typical spend on casual occasions in particular reflects the current trend of financial restraint. IWSR data shows a decrease in on-premise spend (versus 2022) on a “relaxing drink at the end of the day” and “with an informal meal in a pub/bar/restaurant”.

“Following the pandemic, regular wine drinkers returned to the on-premise – though insufficiently to allow for a full recovery of the sector,” explains Rogers. “Last year, however, even that stalled as consumers dialled back on casual drinking occasions and showed an increased preference for at-home consumption. The shift to remote or hybrid working is also impacting channel recovery.”

Planning ahead

In the face of a tough trading environment and declining volume consumption, there are, however, still growth opportunities for brand owners who target engaged and adventurous Millennial wine drinkers. Although the LDA Gen Z cohort is still underrepresented in the beverage alcohol market, keeping sight of how their attitudes are evolving can help plan for the future as well. Premium-and-above price tiers are continuing to expand, and building out export markets could help to offset losses domestically.

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