According to the latest report from the Wine and Spirits Wholesalers of America (WSWA), sales from wholesalers to over 450,000 retailers in the U.S. have dropped by 6% in the 12 months leading up to August 2024. This decline marks a significant shift from earlier optimism observed in May, when a BMO Financial survey indicated rising demand for wine among more than 600 wineries.
The current data suggests that the wholesaler perspective is less rosy, with wine stock levels declining by 8% and spirits by 3.9%. These figures raise concerns about potential challenges for the industry in the remainder of the year and into 2025. WSWA analysts noted that earlier optimism stemmed from seasonal shipping patterns and destocking but now caution that broader consumption trends are worrisome.
Particularly concerning is the significant decline in the sales of table wine priced between $8 and $10.99, which has experienced a double-digit drop of 12.7% across both on- and off-trade channels. Dale Stratton, a SipSource analyst, highlighted that “wine is hurting,” attributing this decline to shifting consumer behavior, economic pressures, inflation, and reduced shelf space.
Shifting Consumer Preferences
The changing landscape also reflects a growing consumer appetite for alternative beverages. THC-infused drinks saw a revenue increase to $2.04 billion last year and are projected to exceed $3.09 billion this year. By 2032, this market could expand to as much as $117.05 billion, nearly double Silicon Valley Bank’s estimated size of the U.S. wine sector, which is expected to generate $61.2 billion in revenue this year.
Moreover, while the growth of hard seltzers has slowed, the overall ready-to-drink (RTD) beverage market is anticipated to grow by 12% from 2022 to 2027, reaching $40 billion across ten key markets. These pressures are creating a challenging environment for the wine industry.
Positive Trends Amid Challenges
Despite the overall decline, some categories within the wine market are performing better. SipSource analyst Danny Brager noted that Prosecco continues to thrive, showing over a 2% year-on-year increase on top of impressive post-pandemic figures. Additionally, the fine wine segment, specifically bottles priced at $50 and above, recorded a modest growth of 1% in the past six months, with a 3% increase in the domestic market. Brager described this as a “promising sign” heading into the festive season, indicating that consumers in higher price tiers are still willing to spend.
However, he also pointed out that declines in distribution points across most product categories in both on- and off-trade channels suggest reduced assortments of wine and spirits in retail spaces, bars, and restaurants.
Pressure on Premiumization
The report indicates that even the premiumization strategy, once considered a significant growth driver by wine producers, is now facing pressure in a tightening market. Spirits are also experiencing struggles; the highest decline segment is not in cheaper wines but in spirits priced at $100 and above, which saw a drop of 12.5%. Additionally, mid-range spirits priced between $50 and $99.99 also fell by 3.9% in the on-trade segment.
In the off-trade market, which accounts for 80% of U.S. consumer sales, the $100 tier decreased by 8.5%, while the $50 to $99.99 segment fell by 4.3%.
The current landscape paints a complex picture for the wine and spirits industry as it navigates shifting consumer preferences and economic pressures.
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