Millennials in the US are not diving into the wine world as quickly as predicted, suggests a new report, raising concern that this generation won't compensate for retiring baby boomers.
- Millennials ‘not engaging’ with wine as anticipated but there is time for a shift, says Silicon Valley Bank report
- Premium wine sales still set to grow by between four and eight percent in the US in 2019
- California vineyard price rises set to flatten with expected fall-off in takeover deals
Wine sales momentum in the US has shown signs of slowing as more baby boomers reach retirement age and millennials are slower-than-expected to pick up the baton, according to the latest ‘state of the industry’ report from the Silicon Valley Bank (SVB) in California.
Millennials, who currently have a median age of 30, account for an estimated 17% of wine consumption in the US and are still expected to become the biggest wine-consuming group in the country by 2027. But, this generation has so far not engaged with wine as much as hoped, SVB said.
‘The unfortunate reality is that while millennials have a better appreciation of wine compared with other cohorts at a similar age, their appreciation has not been reflected in fine wine consumption,’ said Rob McMillan, founder of the SVB’s wine division, in the report.
Commenting on the reasons for this, McMillan, who is also an SVB executive vice president, said in the report, ‘[millennials] lack financial capacity, currently prefer premium spirits and craft beers, and have been slow getting into careers.
‘Cannabis demand skews to younger males today, and that is also likely playing a role in the cohort’s delayed appreciation for wine.’
However, he stressed that there was still time for a shift in momentum.
‘With the median age at 30, this generation still has time to find its footing. But for today, their retail silence, particularly for discretionary and luxury goods, is deafening,’ McMillan said.
Health concerns also played a role, the report said.
Yet, the report added that the industry could do more to engage millennials with better marketing messages.
For now, the so-called Generation X that sits between boomers and millennials, and is smaller in overall size than both of those, is set to become the biggest wine consuming group in the US by 2022, the report forecasts.
Premium wine sales in the US were still expected to grow by between four and eight percent in 2019, after growing by an estimated 5.2% in 2018, said SVB.
That still puts US wine market momentum ahead of several other markets, including the UK.
But SVB warned that ‘premiumisation is nearing its apex as a trend’ and that sales momentum in several premium price segments was slowing, based on Nielsen data.
Price increases would likely be minimal in 2019, partly due to an expected surplus of wine; a feature that may please wine lovers in the short-term.
‘As an industry, we’re transitioning to a period of flat-to-negative volume growth, low sales growth and a modest surplus of grapes, which will put pressure on prices,’ the report said.
SVB classes a premium wine as $10 or above at retail, per bottle. This category commands 54% of the US wine market by value and around 30% of market volume, it said.
SVB estimated that Nielsen figures covered around two thirds of the off-trade [retail] wine market. It acknowledged that Nielsen data did not include direct-to-consumer sales or some big players, such as Costco.
Some separate research studies have suggested that the millennial generation has shown greater interest in the so-called ‘experience economy’ rather than in simply purchasing at retail.