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US: Premium wine sales strong but challenges remain

Sales of higher-priced bottles have been boosted as restaurants and tasting rooms reopened, according to a new report, but it also reiterated concerns that younger consumers aren’t embracing wine like the older generation did.

Premium wine sales enjoyed a spike in the US last year, continuing a general trend towards higher-priced bottles, suggests data in the latest state of the industry report from Silicon Valley Bank’s (SVB) wine division.

It reported a sales growth rate of 21% in 2021, based on figures from premium wineries in its database. That’s the biggest rise since 2007, it said, adding that the average case price among this group was $271 in 2021, up from $241 in 2020 and $262 in 2019.

The increase was propelled by a reopening of restaurants and tasting rooms – closed due to Covid-19 – and ongoing strong online sales, SVB said in its report.

In a survey by the bank, nearly 30% of premium wineries described 2021 as their best year on record. SVB said it expected another good year for premium wine in 2022, albeit with slower growth.

Yet the wider wine market hasn’t been so rosy. In 2021, ‘total wine sold through wholesale declined through most of the year, despite tasting rooms, restaurants, hotels and travel resuming business’, SVB said.

Looking longer-term, it returned to a key theme of its reports in recent years by highlighting concerns that younger consumers are not showing the same preference for wine as older generations.

Baby boomers have driven significant growth for wine in the US in the past few decades, but more of this group are reaching retirement age and wine overall is losing market share to spirits, SVB said.

It also highlighted the challenges posed by climate change.

‘The wine industry overcame numerous hurdles to achieve a hard-earned, solid year of sales,’ said Rob McMillan, founder of Silicon Valley Bank’s wine division and author of the report.

‘That said, looking at the long-term trends, this year reveals issues with both consumer demand and the ongoing climate crisis that may impact business conditions for the industry in the years to come,’ he said.

‘The lesser interest in wine among younger consumers, coupled with the encroaching retirement and decreasing wine consumption of wine-loving baby boomers, poses a primary threat to the business.’

On climate, McMilland added: ‘More frequent drought, fires and hurricanes – triggered by climate change – will have a trickle-down affect across the industry, impacting everything from harvest to insurance.

‘The wine industry has to consider these issues seriously, as the negative consequences are increasingly evident.’

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