Total sales of wine in the U.S. topped $73 billion in the latest 12 months, and the country remains the world’s single biggest market for wine. But growth has been flattening, a phenomenon not unusual as the base for change increases. While this should be the sign of a stable market, it’s been a cause of angst after years of strong growth following the Great Recession.
Glass remained the top packaging choice for wineries over the past year, but a desire for convenience and smaller formats underpinned sales growth. At the top of the bottle, cork also remains dominate but is facing stiffer competition from screwcaps and technical closures.
Global wine production stabilized in 2018 after Spain, Italy and France recorded normal harvests following the challenging 2017 vintage. The three European nations are the world’s leading wine exporters and account for the most imports, by value and volume, to the U.S., which remains the world’s largest wine market. Ongoing trade disputes have undermined the growth of U.S. exports in both established and new foreign markets.
A record 2018 wine grape harvest of 4.28 million tons has changed the landscape of the U.S. wine industry. Concerns over flagging wine sales at lower price points have been exacerbated by what many describe as a glut in the grape and wine market. As supply and demand come to balance on a new pivot point, there will be plentiful supply to innovate with new brands or private labels. And despite concerns about wine sales, the latest Wine Industry Metrics show steady, positive growth.
Since voters in Washington and Colorado approved legalizing the recreational use of cannabis in 2012, a growing number of states have followed suit. There is a sense that the U.S. is approaching a tipping point and it may see national legalization, following the example of Canada, as soon as 2020. Growing market share, and legal and societal acceptance of cannabis means wine may have a new competitor.
The wine regions of the Northwest have enjoyed a tremendous boom over the past decade. Dominated by small, family-run wineries whose proprietors have often entered the wine industry after successful careers outside the sector, many thrived as direct-to-consumer (DtC) sales surged and buying local gained traction.
The past year witnessed multiple deals at all levels of the U.S. wine industry. Premium wine brands and wineries, national wholesale brands and boutique producers received interest from buyers. Mergers and acquisitions are expected to stay strong in 2019 despite wider, potentially troublesome changes in the overall U.S. wine market.
The total U.S. wine market grew to more than $70 billion in total value and 408 million cases in total volume in 2018. While sales growth, particularly in volume, has slowed as the total market has doubled since 2003, consumers are buying wine at higher price points. Suppliers have not been able to rise prices, however, and are also having to react to changes in how consumers buy wine. (Metrics above reflect trends from the past 12 months.)
Cabernet Sauvignon continues to fetch the highest prices in the grape market, and the varietal is a strong performer in off-premise and direct-to-consumer wine sales. Expectations of many more years of strong sales led to a surge in new vineyard acreage in California, and the red grape is soon expected to overtake Chardonnay as California’s most planted variety. Yet the 2018 harvest brought changes to the wine and grape market that could mean even Cabernet may face challenges in the near term.