The global pandemic continues to bring deep economic pain to wineries throughout the United States. Consumers, however, are buying record amounts of wine through off-premise channels and DtC shipments saw a 45% increase in volume in April. This month’s report also includes an in-depth examination of Chardonnay, which remains California’s top winegrape.
The crisis wrought by the COVID-19 virus brought a surge in wine sales that offered some relief to an industry facing huge challenges from the loss of tasting rooms and on-premise venues. This issue of the report also examines the winegrape market as the 2020 vintage approaches in a vastly different economy from just a few weeks prior.
California’s Central Coast is a diverse and vibrant part of the U.S. wine industry. It is home to 20% of the state’s wineries and accounts for roughly 12% of the 4 million tons of wine grapes produced each year. The region is primed for growth but also faces the same constraints to that growth confronting the industry overall. This month’s report also includes a look at plateauing rosé sales, the effects of U.S. tariffs on European imports and indications of how the global pandemic of the novel coronavirus (COVID-19) is adversely affecting the wine business.
An oversupply of grapes, moderating growth in wine sales and the threat of recession are pushing buyers to be more discriminating when it comes to evaluating potential acquisitions in the wine industry. Yet steady deal activity in 2019 means that wineries that can make a defined case for themselves have a good chance at finding a new owner.
The total U.S. wine market increased to more than $72 billion in 2019, according to market research firm bw166, up nearly 4% from the previous year, while total case volume gained 1% to 409 million. The growth is steady, but it’s also underwhelming compared to the years of recovery immediately following the Great Recession of 2007-2009.
As 2019 comes to an end, the U.S. wine industry continues to struggle to clear its inventory of 2018 wine. This challenge has grown particularly acute in a lackluster bulk market. Private label brands offer some relief, but this sector is much more competitive than in previous years. The latest Wine Industry Metrics indicate premiumization continues as sales growth remains solid for higher-priced wines.
The wine industry is adopting new technologies to marshal the vast amount of data becoming more available to it. Wineries are seeking to integrate data from the vineyard all the way through to the point of sale to make better and more informed business decisions.
While the latest Wine Industry Metrics reveal positive sales growth in September, the U.S. wine industry is riven with concerns over flattening sales volume. Direct-to-consumer and online wine sales, however, appear poised to provide a foundation for future expansion.
The largest U.S. wine distributors strengthened their control of the wholesale market during the past year. Southern Glazer’s Wine & Spirits remained No. 1, and No. 2 Republic National Distributing Co. formed a partnership with No. 4 Young’s Market Co. Despite improved technology to support the logistics of distribution, even wholesalers face a challenging wine market that likely will get tougher because of declining sales volume and a serious over supply issue in California.