This issue reflects long-term trends seen through the prism of the pandemic. And while the report is aimed at the wine industry and its potential investors, each year it sheds light on what we consumers are voting for with our palates and our wallets.
Last year’s report was released just as coronavirus vaccines were becoming available. There was hope for a big reopening party as we all came out of lockdown and started going out to restaurants and hosting parties again.
“A celebration took place, but…the wine…was not invited to the party,” this year’s report said. Turns out we celebrated with the spirits.
Rather than reverting to the status quo of 2019, the pandemic has accelerated trends already underway as the main market for wine – the baby boomer generation – ages and younger consumers turn to spirits, craft beer and hard seltzer. This is especially true for restaurants, as we realized during the pandemic that we could enjoy restaurant-quality wine at retail prices while dining at home with takeout.
As we returned to restaurants in spurts as variants increased and restrictions were lifted and then reimposed, many of us balked at the high markups on wine. In fact, overall wine sales may have fallen by up to 2% last year, while spirits sales increased, according to the report.
Restaurants that sold their wine collections to get through the early stages of the pandemic are not fully replenishing them. Wine costs more than spirits per serving and it spoils. Diners not only pair food with wine, but also cocktails, spirits, beers, and even hard sodas.
This is especially true for young drinkers, the millennial unicorns the wine industry hopes to replace aging baby boomers. The oldest millennials turn 40 this year, entering their primary spending window but spreading their consumption dollars across a broader market. More ethnically diverse and less luxury-focused than their baby-boomer parents, they display consumer habits that are shaped more by the Great Recession.
This means spending less on alcoholic beverages. The Dry January, Sober October and Conscious Drinking trends emphasized moderation. Public health messages are moving away from the “French paradox” of the 1990s, which celebrated the health benefits of moderate alcohol consumption, even offering new warnings about the risks of alcohol consumption.
Rob McMillan, chief wine analyst at Silicon Valley Bank who has authored the report for the past 21 years, has consistently sounded the alarm about the generational shift among consumers. It is not so much a prediction as an acknowledgment of the inevitable. This year, in particular, McMillan warns that the industry will eventually eat each other up as they battle each other for dwindling market share. He castigates proponents of “natural” and “clean” wine for creating the impression that most wines are “unnatural” or “unclean” as an example of self-promotion by damaging the overall perception of the product.
The image of wine is still geared towards baby boomers: cult châteaux, villas and trophy wines that reek of privilege, rights and wealth. According to McMillan, young consumers value experience over status and want to support companies that reflect their own values of environmental protection and social responsibility.
When releasing this year’s report in January, McMillan announced that it had joined three other wine industry leaders to form WineRAMP (for Wine Research and Marketing Project). The goal is to garner federal government support for an industry publicity board to promote wine, similar to the “Got Milk?” campaign. and the old “Incredible Edible Egg” campaigns. Of the four organizers, including McMillan, three are male, all are white and — well, let’s just say they have many years of experience marketing wine to baby boomers.
For such top-down marketing to succeed, I hope these industry leaders turn to small-scale efforts that are already appealing to younger, more diverse audiences. I’ve written about some of them and will feature more in the coming weeks. Change is coming. We can deplore it, fight it or welcome it. Only one of them is a winning strategy.