15/02/2023

The paradox of the US wine industry: falling volumes, yet more regular drinkers

IWSR analyses the demographic and lifestyle trends driving the US wine industry, investigating why wine consumption dipped in 2022, even though the wine drinking population grew.

New data from IWSR shows a bounce-back in wine participation rates in the US following a low point in 2021. Long run drinking population tracking shows there were 4 million more wine drinkers consuming wine on a weekly basis in 2022 than in 2018, a strong rebound from the Covid-era low point in 2021. Yet despite this boost to the drinking population, overall wine consumption volumes still dipped 2% in 2022 and IWSR forecasts the trend of gentle decline continuing.

This paradox in falling volumes yet an increase in the wine drinking population can be explained by looking at demographic and lifestyle trends in more detail.

A long-term decline exacerbated by Covid-19

The size of the monthly+ US wine drinking population has been in decline since 2015. Within this overall trend, participation rates among the LDA-34 age cohort, which in this period would cover Millennials and latterly Gen Z when they have reached legal drinking age (LDA), have declined at a faster rate than the overall population.

In 2015, around 4 in 10 US residents between 21 and 34 said they drank wine once a month. In 2021, for the same cohort, that proportion had fallen to just over a quarter. Other markets have also seen similar tumbles, while generally the participation rates of the 55+ age cohort have been more resilient.

Covid-19 intensified this trend. The impact of pandemic lockdowns and closures of the on-premise led to fewer opportunities for new recruits – particularly younger LDA consumers – to be introduced to wine, resulting in a strong decline in the size of the wine drinking population.

Post-Covid recovery and shifts in consumer behaviour

Since the pandemic, however, there’s been a bounce-back in overall wine participation rates in the US: the number of regular wine drinkers (RWD) grew by 14 million between 2021 and 2022. This momentum is mainly coming from those under the age of 40, and the wine industry is seeing a growing influence not just of the most engaged consumers (aged 25-54), but also of LDA Gen Z to an extent.

31% of monthly wine drinkers are now aged under 40, compared to 28% in 2021. This suggests a younger LDA population that might not be engaging with wine as regularly as older drinkers, but that is nonetheless discovering the category in greater numbers than it did pre-pandemic. The key difference is this: younger LDA+ wine drinkers now are drinking wine on a much more occasional basis, and tending to spend more money when they do buy wine.

The role of the on-trade

The on-trade has been key to the revival of wine participation in 2022. The number of RWDs buying wine in bars and restaurants increased from 2021 to 2022. Indeed, in the case of bars, 2022’s numbers are higher than they were in 2019.

Unsurprisingly, Millennials (25-39) and Gen X (40-54) are driving the rise in on-trade consumption. Boomers (55+) typically drink less out of home, and a hesitancy on the part of older, more vulnerable consumers to return to busy venues post-pandemic may also have been a contributing factor.

The return of RWDs to hospitality venues helps to explain the apparent paradox of more regular wine drinkers yet declining volume consumption: a larger number of people are drinking out, rather than at home, which is more expensive and, therefore, occurs more infrequently.

Underlying these changes are two fundamental trends:

1) Moderation:

There is a big, growing, and mostly global movement towards drinking less alcohol. It has fuelled the rise in no- and low-alcohol drinks, but it also ties in with the broader picture of alcohol consumption data in the US. The country’s wine drinkers are drinking more regularly, but in smaller volumes when they do.

2) Up trading:

Alongside a trend of drinking less, when wine drinkers do choose to enjoy wine, they tend to opt for more premium offerings. This is reflected in the marked difference in wine’s performance above and below $10. In 2022, volume consumption of low-price, value and standard segments all declined; premium, super-premium, ultra-premium and prestige all increased. Both these trends are expected to continue for the next five years.

The consumers driving the spend in more premium wine are the younger LDA demographics: in 2021, the youngest, most engaged, and highest spending social groups (Social Newbies, Engaged Explorers and Generation Treaters) made up 39% of the US wine market. In 2022, this had grown to 45%. By contrast, the slice of the pie taken by older, more price-sensitive groups had shrunk.

The impact of the paradox

It is uncertain whether the current bounce-back in the wine drinking population is a temporary post-Covid blip, after which longer term trends will reassert themselves, or a pandemic-inspired attitude reset.

However, for an industry that’s facing a loyal but ageing consumer base that isn’t yet being replaced with enough new entrants, now is the time to harness the positive momentum in wine participation. And for wine producers, it’s the differences in how these new recruits interact with wine – and beverage alcohol in general – that will be most relevant to capturing their spend.

IWSR data highlights several ways in which the relationships younger LDA drinkers hold with alcohol differs from previous generations:

1)  Consumers are less aware of familiar names (whether regions like Napa, varieties like Cabernet Sauvignon or specific brand names) and more inclined to explore. Wineries looking to talk to the new arrivals to the category have room to be more creative in their brand and messaging, particularly to communicate the value of their more premium products.

2)  Interest in no/low-alcohol wines, and moderation in general, has prompted some low-alcohol brands to highlight ABV rather than hide it. Kim Crawford Wines’ Illuminate range, for example, uses lower ABV as a differentiating factor in its branding. Body vodka markets itself as containing 25% less alcohol than regular 40% ABV vodka. Meanwhile, Craft brewer Jack’s Abby is making lower-alcohol versions of classic styles under the umbrella name of the 2% Beer Initiative.

3)  Drinkers under 40 in the US are significantly more open to alternative formats – particularly cans and pouches which suit small-consumption or on-the-go drinking occasions.

4)  As inflation and costs of living increase, the on-premise will need to provide experience-led drinking occasions to provide differentiation from the at-home occasion. Offering more creative tasting experiences and/or a wider range of wine varietals, can help drive excitement amongst younger LDA wine drinkers.

Covid-19 might not have derailed established long-term trends for wine consumption in the US, but short-term behavioural shifts could still create opportunities for brands who pivot quickly and act decisively.

You may also be interested in reading:

https://www.theiwsr.com/key-drivers-for-the-us-no-low-alcohol-market/
US alcohol sales in 2022 led by premium spending across all categories
The 8 drivers of change for beverage alcohol in 2023 and beyond