1、State of the US Wine Industry 2023Written by Rob McMillan,EVP and Founder,Silicon Valley Bank Wine DivisionTable of ContentsSTATE OF THE US WINE INDUSTRY 202301 Introduction 0302 2022 predictions in review 0803 2023 US wine business predictions and observations 1104 The consumer and demand 1405 Adve

2、rtising and promotion 3006 The Winery Sentiment Index 4207 Sales trends 4508 Cumulative negative health messaging 7209 Have we ever raised bottle prices?7710 Premium winery financial performance 8211 Grape and wine supply 8812 Final thoughts 9413 Endnotes 973SVB ESG REPORT01STATE OF THE US WINE INDU

3、STRY 2023IntroductionWe are an industry made up of people who inhale good news.Our penchant for the positive is rooted in our typically pragmatic farming community and propagated by winemakers who see every vintage as the best of the decade and each glass a gift from the gods.DEI AT SVBABOUT SVBESG

4、GOALSTALENTECONOMIC IMPACTCITIZENSHIPCLIMATE AND ENVIRONMENTGOVERNANCEINTRODUCTION020509030610120408071113STATE OF THE US WINE INDUSTRY 20234INTRODUCTION020509030610120408071113Its why bringing forth critical findings in this report can be challenging for me at times.Who in this cheery business want

5、s to read about industry problems?On the other hand,who would read a report that said,“Everything is fine.Nothing to see here.”?You can just imagine the feedback I received in 2018 when I opened that report with these thoughts:Today,consumers are leaving the lower price segments in favor of better-q

6、uality offerings,but after more than 20 years of straight-line upward growth trends,total volume growth is leveling out.Premiumization is still the dominant trend,so volume drops in lower-priced generics are part of the explanation for flattening volume;but in a more recent development,even premium

7、wine growth is slowing.Im sure many stopped reading the 2018 report right there.But the perspective was supported with data and is now widely accepted as fact(see figure 13).At the time,however,the conclusion was called out as doom and gloom an overreaction.The point of looking at industry issues is

8、 to start a conversation or shine a spotlight on an issue that should be examined.Hopefully,we are looking around corners and calling out issues before they happen.How can we solve problems without identifying them?Prepare yourself and take a deep breath.There are plenty of critical issues to discus

9、s in this report,and we will.But for all of you joyously going about your day and living in the moment,there are pockets of good news for you too,so please keep reading!STATE OF THE US WINE INDUSTRY 20235INTRODUCTION020509030610120408071113One piece of good news that should be underlined and shouted

10、 from the rooftops is that the premium segment of the wine business has been performing quite well after the difficult year in 2020.In 2022,the premium side of the industry experienced another good year in an increasingly challenging marketplace,with revenue up 9.7 percent,on average,through Septemb

11、er,according to the Silicon Valley Bank Peer Group Analysis Database.That is solid growth.The more difficult news is that for the industry as a whole,we arent measuring up.Wine sold below$15 continues to slide,and we will have a second year of negative volume growth in the industry as a consequence.

12、From our survey data,we know that the question of greatest concern to business insiders is the direction of the economy.As of this writing in December 2022,we are not in a recession,though many are predicting one.1 While there is nothing you can do to avoid a recession,you can plan and prepare for o

13、ne just in case.Believe it or not,I have good news on that front as well.If you run a winery,the worst place to find yourself entering a recession is with bloated inventory levels.That leads to rapid discounting.In a weak vintage year,wholesalers may even try to skip over that vintage in favor of th

14、e better vintage,as was the case with the 2000 and 2001 vintages that collided with the dot-com bubble.2,3While every recession since the late 80s has started with too much wine in the tanks,the good news,even with flagging overall demand for wine today,is that with three years in a row of short har

15、vests and good-quality vintages,we have balanced cellar stocks of well-regarded vintages across the industry,so we are the best positioned weve ever been to successfully negotiate a recession,should that actually emerge.Those are the facts as they stand heading into 2023.But in a more intermediate-t

16、erm view,there has never been a wider gulf between the success of the production side of the wine business and that of the premium side.The downward trend has been discussed in this report for many years.And while trading up is still a part of the premium space vernacular that favors the premium bus

17、iness today,those issues impacting lower-priced wine will eventually impact premium producers too if nothing alters the current consumer trajectory of the entire category.This is a situation our industry has to fully embrace and solve as a whole.We are the best positioned than weve ever been to succ

18、essfully negotiate a recession,should that actually emerge.STATE OF THE US WINE INDUSTRY 20236INTRODUCTION020509030610120408071113In this report,we pulls apart many critical issues impacting the business,giving you,the winery owner,directional guidance to consider in your own strategic planning.We h

19、ope the critical comments will start discussions toward collective problem-solving.Based on our extensive expertise and deep relationships in the wine industry,we will assess where the industry finds itself today and offer our view on where its headed in 2023 and beyond.Seven tailwinds 1.The premium

20、 side of the business continues to deliver excellent growth and returns.Premiumization is still alive as a tailwind.2.With low inventory levels in the business after a third consecutive small vintage,the industry has never been better prepared for a recession,should one arrive in 2023,as many predic

21、t.3.Its difficult to see this as a tailwind,but we are fortunate to have consecutive small vintages in California.The harvest quality has been good,particularly over the past two years.The alternative of normal-size yields would have proven problematic.4.The quality of solid technology partners and

22、service providers supporting the wine industry with great solutions has never been better.5.Even with the economy softer as of this writing in December 2022,the typical consumers of premium wine are sitting on more than a trillion dollars in COVID savings.Our customers have the capacity to use their

23、 savings and discretionary income to buy wine even in a soft economy.6.The growth in the non-California wine community across North America continues.Good,approachable and continuously improving wines are being grown and made throughout the country in each state,as well as in Canada and even norther

24、n Mexico.With dedicated colleges and capital available to fund more growth,these nontraditional regions are making hand-crafted wines at affordable prices and bringing in younger new consumers to the category.7.The IPO window is closed on Wall Street,and the M&A market has a door barely ajar given t

25、he increase in financing costs due to Federal Reserve Bank actions.But in the wine community,there are still buyers and sellers in what is a surprisingly strong M&A market for both vineyards and wineries.STATE OF THE US WINE INDUSTRY 20237INTRODUCTION020509030610120408071113Seven headwinds 1.The con

26、sensus of analysts is that the wine industry will have negative volume growth in 2023.Thats a trend that needs to change.2.Boomers still lead all cohorts in share of consumption.That would be easier to tolerate if the industry were growing.The opportunity to gain additional sales growth from a cohor

27、t with a median age of 66 will prove difficult.3.Consumers younger than 50 drink wine but more often drink across categories.But a sizable number of alcohol consumers under 50 fall into the category of consumers who imbibe but have chosen not to drink wine.4.Wellness has merged with the sober-curiou

28、s movement,and a growing number of dry events are being popularized,such as Dry January and Sober September.4 Neo-prohibitionism is very much alive and well.5.Costs(particularly inflation costs in bottles,materials,shipping and staffing)continue to be an issue.Finding labor at any price is sometimes

29、 more of a problem than it once was.6.The impact from climate change comes in many different forms,forcing the industry to remain agile and factor in new risks in planning.7.The wine industry isnt working together to solve the obvious demand problem for the wine category.8SVB ESG REPORT2022 predicti

30、ons in reviewWe have been researching the wine business since 1991 and making predictions for more than 20 years.Some years,we properly characterize a market change.In other years,our findings might be off in timing or even wrong,but we always review the forecasts made the prior year to be fully tra

31、nsparent.02STATE OF THE US WINE INDUSTRY 2023DEI AT SVBABOUT SVBESG GOALSTALENTECONOMIC IMPACTCITIZENSHIPCLIMATE AND ENVIRONMENTGOVERNANCE2022 PREDICTIONS IN REVIEW0105090306101204080711139STATE OF THE US WINE INDUSTRY 20232022 PREDICTIONS IN REVIEW010509030610120408071113What we got rightWe said 20

32、22 would be another good year for premium winebut at lower growth rates than we experienced in 2021.Silicon Valley Banks Peer Group Analysis(PGA)Database5shows a 2022 nine-month year-to-date sales growth rate of 9.6 percent,which is down from growth of 18.2 percent in 2021.While analysts disagreed o

33、n full industry sales growth,we predictedthat,within three years,declining sales by volume would be acceptedas reality by all analysts.We believed that last years volume sales were already negative,but the view was in the minority.As of this writing in December 2022,all of the analysts making predic

34、tions are forecastingnegative industry volume growth in 2022.We expected that the 2021 California wine grape harvest would comein at 3.6 million tons,making it a second consecutive small harvest.The final crush,announced in February 2022,was 3.61 milliontons.Our prediction of 3.6 million tons was sp

35、ot-on.We said that grape and bulk prices had stabilized at lower levelsthan wed seen in the past five years for California and that buyerswould likely remain cautious on price this year.Brokers tell us that 2022 featured the most stable grape marketCalifornia has seen since 2000,and buyers are indee

36、d cautiousgiven the unknowns of the economy and the existing softdemand in the category.We wrote that supply in the West was largely balanced heading into2022,but low levels of demand suggested that some acres of vineswould still need to be removed in California and Washington tosustain the balance,

37、particularly if volume sold continued to dip.About 20,000 vine acres were removed in California in 2022,and Washington also saw some removals,although we donthave confirmed data on acreage.We predicted that demand for wine would be slack as the medianboomer hit normal retirement age in 2022 and as y

38、ounger consumerscontinued to prefer alcoholic beverages other than wine.This is true and discussed in detail in this years report.Its increasingly obvious that wine as a product has lost the luster it once had with the consumer 20 years ago and is probably entering a phase of negative volume growth.

39、For 2022,we should still see positive sales on a value(dollar)basis.”Last year we noted at the start:That was an accurate statement and one Ill reiterate and expand on this year.10STATE OF THE US WINE INDUSTRY 20232022 PREDICTIONS IN REVIEW010509030610120408071113We said that supply chain issues wou

40、ld gradually ease through the year butwould likely have an impact on individual wineries production capacities.Supply chain problems are much better,but they still exist,particularly on the East Coast.Bottle price and availability did impact productionschedules.The effect of the situation continues

41、to be felt inincreasing costs.We wrote that inflation would impact product delivery,transportation costs,labor and supplies well into 2022 and put pressure on wine sellers to increasebottle prices.Given the higher costs of production in a modest inflationary environment,we expected to see wide insta

42、nces of small price increases.Indeed,increases in price were common across the full industry but easier to take in higher-priced wine.The increased cost of goods from inflationisnt being covered fully by price increases in any segment.What we got partially rightWe thought that the impact of drought

43、would become a focal point of industry discussions and planning in 2022,particularly if the drought continued.The drought did continue in the West,and while the conversation onwater availability has grown,we are surprised that the discussionshavent taken on a more dire tone.We predicted that online

44、sales would continue to grow as an important partof direct-to-consumer(DTC)efforts and expand past its current share of 9percent of an average winerys total sales.While the technology used by the industry continues to improve,it appearsthat the pandemic-induced increase in internet sales flattened o

45、ut after reopening.Online sales havent grown.What we got wrongWe expected that the pandemic experience would make obvious the risksof focusing too high of a percentage of sales through the tasting room andthat it would push winery owners to find other means to build clubs withoutinsisting someone fi

46、rst come to their winery.Owners emphasized recovery through the period,and largely that meantreturning to the pre-pandemic way of developing sales instead of evolvingtheir direct-to-consumer strategies.11SVB ESG REPORT2023 US wine business predictions and observations03STATE OF THE US WINE INDUSTRY

47、2023DEI AT SVBABOUT SVBESG GOALSTALENTECONOMIC IMPACTCITIZENSHIPCLIMATE AND ENVIRONMENTGOVERNANCE020105092023 US WINE BUSINESS PREDICTIONS AND OBSERVATIONS061012040807111312STATE OF THE US WINE INDUSTRY 2023020105092023 US WINE BUSINESS PREDICTIONS AND OBSERVATIONS0610120408071113We arent making any

48、 predictions about the national and world economies.While most economists are forecasting a recession at some point in 2023,our predictions are made with the assumption that the economy continues as it is at the end of 2022.We estimate sales growth of 4 percent to 6 percent for thepremium wine segme

49、nt in 2023,down slightly from 2022 sales growth.For the industry as a whole,we will see volume stabilize in 2023 atnegative growth levels but slightly positive value measures.A stableyear is more than likely a temporary state absent action on thedemand issues the industry is facing.Winery margins wi

50、ll be reduced in 2023,as higher costs of goodsburied within inventory are passed through the income statement.SupplyWhen results of the 2022 harvest size are announced in March 2023,we will have a third consecutive light crop year in California,with thecrush coming in at 3.7 million tons,which will

51、be slightly larger thanthe 2022 harvest.Overall supply is balanced in California at the end of 2022.Absentimpacts from climate change,grape and bulk prices will remain stableat present levels.A normal or large 2023 harvest isnt desirable andwill change the balance.New plantings should continue but a

52、t a slower pace in Oregon,butfor California and Washington,new plantings will be few and none willbe speculative.DemandRetiring baby boomers seem to have a long tail and fortunately arentquick to run to pasture.Longer-lived wine consumers are having apositive impact on wine sales today,with share gr

53、owth in even the70-to 80-year-old age band continuing.The demarcation pointbetween growing consumption share of wine and shrinking share isat age 60,with the above-60 segment growing and the below-60segment shrinking their relative share of consumption.We believethat trend will continue.(See figures

54、 2 and 4.)13STATE OF THE US WINE INDUSTRY 2023020105092023 US WINE BUSINESS PREDICTIONS AND OBSERVATIONS0610120408071113The trend of volume declines in lower-priced wines will continue below$15through wholesale channels.(See figure 14.)Its becoming increasingly apparent that wines demand problem ext

55、endsbeyond the millennial generation.Consumers are drinking across beveragechannels,and those under 60 dont have the same appreciation for wine asthose over 60.The trend of wide beverage menus in restaurants vs.the prior practice of dedicated wine lists will continue to expand,reflecting a rising de

56、mand for spirits,alternative beverages and lower-alcohol offerings from restaurateurs.The industry has a long way to go to return wine to the preferred space itonce occupied in the late 90s and early 2000s,when consumers who choseto consume alcohol believed wine was better for you.That is another ba

57、ttlewe are losing to other categories.Price2022 bottle pricing dynamics should continue into 2023.Those makinglower-price wine will have difficulty passing through the cost of inflation,butthere will be less resistance to passing on some small price increases inhigher-priced wine.14SVB ESG REPORTThe

58、 consumer and demand04STATE OF THE US WINE INDUSTRY 2023DEI AT SVBABOUT SVBESG GOALSTALENTECONOMIC IMPACTCITIZENSHIPCLIMATE AND ENVIRONMENTGOVERNANCE0201050903061012THE CONSUMER AND DEMAND0807111315STATE OF THE US WINE INDUSTRY 20230201050903061012THE CONSUMER AND DEMAND08071113Consumer evolutionIts

59、 a little embarrassing in hindsight,but I can remember sitting in business school while professors were teaching about management miscues in companies or about products that are no longer with us.The case studies were always presented in such a way as to lead the reader to a textbook conclusion.So I

60、 always came away from the case study thinking with youthful hubris,“Those people must be idiots!I could do better than that!The train was on the tracks,the lights were on,the horn was blaring,but the company never evolved or changed!”The list of examples is long names like General Electric,Kodak,Bl

61、ockbuster,Bear Sterns,P.It was a while ago,but IBMs belief that there was no viable market for the personal computer is a good one to put on the list.Then there is Steve Ballmer of Microsoft,who famously said,“Theres no chance the iPhone is going to get any significant market share.”Some current exa

62、mples of miscues include Disney,FTX(and maybe crypto as an asset)and Facebook(Meta),which is now rethinking the cloudy metaverse.The examples are manifold.There are a lot of smart people within that list of companies.No question that in many or most cases,the writing on the wall wasnt very legible.B

63、ut there are plenty of examples of companies whose leaders saw the writing but kept doing what they were doing because“thats what we do,and its always worked!”Im sure you see where this is going.While there are segments and companies that will always have a measure of success,as a whole the wine ind

64、ustry in the US is at a pivotal point of change.The writing on the wall is legible now.If we cant work together and alter the trajectory of consumer adoption,then we should prepare ourselves for less-than-hoped-for industry results.The question is,will the wine industry become a business case study

65、someday?The question is,will the wine industry become a business case study someday?16STATE OF THE US WINE INDUSTRY 20230201050903061012THE CONSUMER AND DEMAND08071113Losing the marketing battle for consumersWe know the US consumer is evolving.Figure 1 shows the US population by age,split between ma

66、le and female,and delineates the current cohorts in play.It seems obvious that the main spending years should take place between the ages of 35 and 55,if for no other reason than there are more living adults in that age range.Its also obvious that the boomer,who is still the top consumer in wine,is

67、trending off in numbers,along with the mature generation.With all the discussion on cohort sizes over the years,its interesting to note that the four main legal-drinking-age cohorts are getting very close to equal in size(see figure 3).The age bands over 60 are responsible for most of the growth in

68、still wine over the past 25 years,as noted in figure 2.Amazingly,their share of spend is still growing.The median boomers are now on the other side of their normal retirement age of 66,and the spend in that cohort will have to decline unless they somehow get a reprieve from death and taxes.As consum

69、ers,boomers are being replaced by younger buyers at a clip of 10,000 per day,each of those replacements possessing different tastes,values and desires than the older cohorts.One of the things that distinguishes boomers from all other cohorts is their affinity for wine.Those younger than 60 are less

70、in love with wine than those older than 60.That means that were replacing consumers who are more committed to the category Figure 1:US population by ageSource:US Census Bureau Population Estimates,20196,000,0005,000,0004,000,0003,000,0002,000,0001,000,000018 20 22 24 26 28 30 32 34 36 38 40 42 44 46

71、 48 50 52 54 56 58Age60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 100MaleFemaleGen Z76 Population17STATE OF THE US WINE INDUSTRY 20230201050903061012THE CONSUMER AND DEMAND08071113and who spend more on wine today with consumers who drink more across all the alcohol beverage categories

72、 and are less committed to wine.Add to that the growing number of wine consumers who are trying to reduce consumption for health reasons,and that doesnt spell category growth over the next decade.Those are difficult but foundational and now irrefutable truths we need to accept.Figure 2 from Customer

73、 Vineyard via Sovos ShipCompliant comes from a database of 2,200 suppliers and 80 million direct-to-consumer wine transactions beginning in 2007.There are several things to take away from this chart.While none of this should be a surprise to anyone who has followed this report,it is still important,

74、if uncomfortable,to see the information.Over the past 15 years,the proportion of wine sold directly to consumers over age 60 has continued to grow in total share over all other age bands.The over-60 cohort was responsible for 32.6 percent of total direct-to-consumer spend in 2021.Said another way,th

75、e age group above 60 is still growing in the amount they spend on wine even as their population is declining.And conversely,the population younger than 60 is ceding consumption share to the older generation.Weve seen current data on the lack of engagement by the younger consumer,but figure 2 sheds a

76、dditional light on the reality.Figure 2:Share of direct-to-consumer sales by age bandSource:Customer Vineyard,Sovos ShipCompliant100%80%60%40%20%0%20072021Share of sales200920112013Year20152017201927.8%25.9%24.4%22.9%20.8%19.8%19.7%20.4%28.1%28.5%27.9%26.9%25.0%23.3%23.2%22.6%14.2%17.0%18.1%18.6%18.

77、5%19.0%19.9%19.7%0.9%0.6%1.3%1.7%1.8%2.4%2.6%2.9%19.2%17.5%17.0%17.2%17.9%18.5%18.0%17.9%6.5%6.0%6.5%6.7%9.4%8.7%7.5%6.6%3.5%4.7%4.9%6.0%6.5%8.2%9.2%10.0%BoomerMillennial Gen XGen Z21%22%20%21%Figure 3:Current population share by cohort+80+2.04%7080+6.53%6070+5.46%5060-5.52%4050-7.36%3040-1.27%2130+

78、0.12%Change in share 20072021Source:Customer Vineyard18STATE OF THE US WINE INDUSTRY 20230201050903061012THE CONSUMER AND DEMAND08071113I had hoped to see trended information that would show that our industrys engagement with the younger consumer was at least improving over time,even if was disappoi

79、nting nominally.But this information says the opposite.This large dataset shows that consumers younger than 60 are less interested in buying wine today than they were in 2007.This is telling us that whatever weve collectively tried to do to engage with the younger consumer in the last decade hasnt b

80、een good enough.In fact,if we are doing something,the results are getting worse,so you could argue that we should immediately stop doing it.As a boomer myself,its great to hear that people are living longer and more active lives today.Longer lives partly explain the data because boomers and older pe

81、ople are growing their share of wine consumption.But thats not reassuring because its difficult to expect a population above age 60 to continue to be the source of growth for virtually any product.If the younger population were growing both in consumer numbers and share,that would be a source of hop

82、e,but its not the case.Figure 4 is from the same Customer Vineyard dataset and is a heat map that shows how the spending patterns of a given age band compare to that bands share of the legal-drinking-age population.This allows us to see how much of the changes in consumption come from shifting ages

83、in a population.This is telling us that whatever weve collectively tried to do to engage with the younger consumer in the last decade hasnt been good enough.In fact,if we are doing something,the results are getting worse,so you could argue that we should immediately stop doing it.19STATE OF THE US W

84、INE INDUSTRY 20230201050903061012THE CONSUMER AND DEMAND08071113Age groups80+-4.19%-4.10%-4.00%-3.98%-3.84%-3.76%-3.66%-3.55%-3.48%-3.39%-3.23%-3.10%-3.09%-2.69%-2.83%7080-4.45%-4.05%-3.56%-3.12%-2.25%-2.45%-2.08%-1.74%-1.55%-1.18%-0.67%-0.28%-0.25%0.17%0.42%60702.93%3.81%5.03%6.02%6.25%6.93%7.09%7.

85、54%7.41%7.55%7.82%8.29%8.66%8.22%8.77%506011.89%12.61%13.34%13.63%13.51%14.02%13.87%13.37%12.90%12.44%11.53%11.41%11.26%9.56%9.86%405010.75%9.60%8.81%8.06%7.36%6.72%6.33%5.71%5.36%4.85%4.58%4.07%4.16%4.21%4.19%3040-1.90%-2.42%-3.94%-4.71%-5.02%-5.29%-5.35%-5.26%-5.12%-4.88%-4.69%-5.01%-5.23%-4.59%-5

86、.59%2130-15.03%-15.45%-15.68%-15.91%-16.02%-16.17%-16.20%-16.06%-15.52%-15.39%-15.35%-15.37%-15.50%-14.87%-14.83%200720082009201020112012201320142015201620172018201920202021Figure 4:Customer spend weighted against population demographicsSource:Customer VineyardThe number 0 in the table indicates tha

87、t consumers are spending consistent with their population share.A negative number means they are underrepresented in their spending relative to their population size,and a positive number shows the extent to which they are outspending their population share.Here,the 21 to 40 age bands are significan

88、tly underrepresented in their spend for each year.The prime wine consumers are in the 40 to 60 age bands,as expected,and they spend significantly more relative to their population size,but their share is declining over time.The chart is telling us that over the time period covered,the 40 to 60 age b

89、ands have gone from overrepresenting their population share by double digits on the left to overrepresenting by single digits on the right.It would be a good sign if the loss of population share became an increased share for the consumers younger than 40,but instead the age groups older than 60 gain

90、ed ground.Again,thats the opposite of what we want to see.Finally,notice the worrying change in the 30 to 40 age band.In 2007,that group was underrepresented by 1.9 percent.At that point,the category was a mixture of both Gen Xers and millennials.By 2021,the age range was completely filled with mill

91、ennials and had declined in its share of spend to minus 5.59 percent.We are improving engagement with 60-to 80-year-old consumers and losing the interest of the under-50 population.20STATE OF THE US WINE INDUSTRY 20230201050903061012THE CONSUMER AND DEMAND08071113Figure 5:Consumption patterns by age

92、 bandSource:Wine Market Council,US Wine Consumer Segmentation Surveys100%80%60%40%20%0%2129Percent of sample303940495059Age bands606970+Population representationSize of populationShare of consumer legally able to drink(251M)25%20%25%30%31%37%12%35%13%16%10%36%13%20%7%36%15%17%11%28%15%16%11%24%16%19

93、%11%14%16%23%Core wine drinkerMarginal wine drinkerAlcohol,not wineInfrequent alcoholAbstainer45M37M74M25M70M18%15%29%10%28%For many years,the Wine Market Council has been doing great consumer segmentation studies that track changes in wine consumer drinking patterns.Figure 5 also shows where we are

94、 gaining or losing consumer spend.Some definitions are important in order to understand the information.Core wine drinkers drink wine at least once a week.Marginal wine drinkers prefer wine to other alcoholic beverages and consume wine at least every two to three months.Added to that are wine consum

95、ers who drink wine one to three times a month.Alcohol,not wine consumers drink other alcoholic beverages than wine at least every two to three months.Abstainers dont consume alcohol.21STATE OF THE US WINE INDUSTRY 20230201050903061012THE CONSUMER AND DEMAND08071113Of the total US population of 332 m

96、illion people,251 million are of legal drinking age.The most important wine consumers over the legal drinking age are core consumers.Those are consumers we want to keep.And while they indicate they will drink more if they can,its not sustainable.In fact,core consumers are consuming less,dropping 4 p

97、ercentage points since the 2017 survey.Marginal wine consumers likewise have fallen 4 percentage points since the 2017 survey,another difficult thing to see,as that decline is another loss of share in a cohort of current consumers.Abstainers have made up their minds about alcohol and arent going to

98、be a source of demand,and their share of the drinking-age population has increased 4 percentage points since the 2017 survey,as the sober-curious consumer and the anti-alcohol messages gain bigger footholds.The opportunity for the largest increase in consumption lies in the non-adopters of wine,or t

99、hose who drink alcohol but have made the decision not to drink wine.The“alcohol,not wine”consumers are growing:3 percent since 2017.This is a cohort the wine industry isnt connecting with and who have decided to stick with other alcoholic options or become abstainers.The simple takeaway from figure

100、5 is that the younger the age band,the higher numbers of“alcohol,not wine”consumers.On the one hand,the fact that there are more non-adopters of wine in younger age bands could suggest that as younger consumers age,they may switch to wine.Its certainly a popular theory.But the chart is really saying

101、 that as people get older,more of the“alcohol,not wine”consumers become abstainers,not wine drinkers.And once again,this data source shows that more of the core consumers are older than 70.This is a cohort the wine industry isnt connecting with and who have decided to stick with other alcoholic opti

102、ons or become abstainers.22STATE OF THE US WINE INDUSTRY 20230201050903061012THE CONSUMER AND DEMAND08071113In 2021,a few analysts got together and asked The Harris Poll to run the question in figure 6.A sample population was asked,“What would you most likely bring to share at a party?”The answer wa

103、s revealing.As alcohol beverage consumers,some days we go a little downmarket,and other times we spend a little more on something better.The analysts based this question on the theory that someone going to a party would probably bring something better,since that choice is more likely to be seen as a

104、 reflection of their taste.Peer pressure should push them in an upmarket direction.What beverage would impress their friends?Almost half of the plus-65 crowd said they would bring wine.For all the age bands under 65,though,the answer for wine fell to less than 30 percent.Thats a 20-basis-point drop

105、in mindshare for wine with all consumers younger than 60.This implies that the exchange of older consumers for younger consumers could be quite binary in purchase impact in the next decade.Thats a 20-basis-point drop in mindshare for wine with all consumers younger than 60.Source:The Harris Poll Sur

106、vey conducted online by The Harris Poll on behalf of the Wine Executive Exchange November 911,2021,among 1,949 US adults ages 21+.60%50%40%30%20%10%0%Percent of respodents213465+35444554Age range5564WineSpiritsBeerFlavored malt beveragesHard seltzersRTDs/ciderFigure 6:What would you most likely brin

107、g to share at a party?20%29%26%29%18%15%28%29%29%49%9%9%10%8%4%17%13%10%16%8%17%11%8%4%2%16%6%7%5%3%At least a 20%drop in mind share from 65+to other age bands23STATE OF THE US WINE INDUSTRY 20230201050903061012THE CONSUMER AND DEMAND08071113213435444554Age range556465+100%90%80%70%60%50%40%30%20%10

108、%0%Figure 7:Which premium beverage would you order at a fine-dining restaurant,presuming the cost and relative quality were equal between the choices?27%32%A flute of premium sparkling wine for$12A glass of premium beer for$8A premium cocktail or spirit for$12A glass of premium still wine for$1216%1

109、5%28%37%17%12%30%31%26%4%27%27%22%8%32%26%20%5%Source:The Harris Poll,2022Average28%31%19%10%The same analysts,working with the The Harris Poll,asked the question a different way this year to gain a greater understanding of consumer demand for premium wine:“Which premium beverage would you order at

110、a fine-dining restaurant,presuming the cost and relative quality were equal between the choices?”Essentially,the question assessed the consumers desire what they would want vs.what they can afford(see figure 7).Changing the occasion to a fine-dining establishment eliminated the choice of non-premium

111、 wines.The question was asked in such a way as to mute price and quality in the decision-making process.6 For the premium wine industry,there are both good and bad takeaways.The results still showed that consumers over 65 preferred premium wine more than other age bands,but the break wasnt quite as

112、stark as in figure 6.From that,we can infer that when the choice is more public(e.g.,a friends party),boomers bring what they think they should.When they are choosing for themselves at a restaurant,they drink what they desire,and their selections are spread out more across all drink categories.That

113、news is half good.But it would be better to see consumers in the younger age bands selecting wine at least as often as boomers.Again,the opposite is the case.There is opportunity available if we as an industry can tap into whats holding those consumers back from selecting wine.Percent of respondents

114、24STATE OF THE US WINE INDUSTRY 20230201050903061012THE CONSUMER AND DEMAND08071113The difference between consumers preferring a cocktail or craft spirit vs.wine for most age groups was small much more so than their current buying behavior suggests.When price is less of a factor,the younger consumer

115、 may be more wine-curious.Thats a mixed blessing.On the positive side of the ledger,this suggests that there is opportunity available if we as an industry can tap into whats holding those consumers back from selecting wine.On the other hand,wine has typically been part of a meal in fine-dining estab

116、lishments.Wine is the beverage always paired with food.With wine and spirits in nearly a statistical tie in a few age bands,this survey supports other available research telling us that the new consumer in restaurants believes that wine isnt the only beverage that can be paired with food.In this new

117、 consumers eyes,spirits can be married equally well.7 Thats the story the restaurant trade is selling today.A final view comes from the survey work Silicon Valley Bank has produced for more than 20 years.This specific information series started in the early 2010s.When we first began to track this da

118、ta,there wasnt much available information on the subject that was trustworthy.The published work showed results with a wide variation and,in a single case,was dramatically wrong(see figure 8).Figure 8:Wine club composition by age cohort50%45%40%35%30%25%20%15%10%5%0%Percent of total wine club member

119、s34%37%5%20%4%Gen Z(2124)Millennials(2540)Gen X(4156)Boomers(5775)Mature(76+)Generational Cohort201420152019201620202017202120182022Source:SVB State of the Wine Industry Reports25STATE OF THE US WINE INDUSTRY 20230201050903061012THE CONSUMER AND DEMAND08071113All data,including our survey data,has b

120、ias.Theres no such thing as perfect data.But its been rewarding to see the Silicon Valley Bank data stand the test of time and prove to be similar to the other information now available,produced by many other sources.In our survey,we ask wine producers who have wine clubs and track the data to tell

121、us how their club stacks up against standard cohorts(see figure 8).While we dont define precisely who fits into the description of premium wineries,we can put some brackets around the survey population.The population is taken from wine club data.The median case production is 5,000 cases,the median p

122、rice per bottle is$39 and the average length of time the respondent winery has been in the business is 21 years.The years prior to 2022 had slightly different but relatively similar metrics.The sample varies by number each year but hovers around 600 wineries,serving hundreds of thousands of consumer

123、s,so it represents a significant share of the commercially operating premium producers in the US and a material share of wine club consumers.Club data is only a part of the normal sales in a premium winery,but we can presume that these consumers purchase wine through other channels at times,includin

124、g through the grocery and restaurant channels and the tasting room,so we can make some broad generalizations about the wine consumers by looking at the club data.In figure 8,we see a large drop-off in wine consumption between older consumers and younger consumers each year.There has been no signific

125、ant movement by the two youngest consumer cohorts to assume the dominant position in wine consumption from the older consumers,though it should be noted that during the COVID business period,the younger age groups did step up their share of wine club consumption somewhat,perhaps as a result of being

126、 more comfortable with travel at that point during the pandemic.Though not displayed in chart form here,a final dataset comes from W research from early 2019 showing that the older boomer consumers,and everyone born before 1945,ordered the most bottles per order and had the most orders per year and

127、the highest average order value.In an interesting twist to the other data presented,those born before 1945 also had the lowest average selling price per bottle.The large group of consumers between age 21 and 41 had the highest average selling price per bottle.But the same younger cohort also had the

128、 fewest bottles per order and the fewest orders per year.What does that added piece of information tell us?26STATE OF THE US WINE INDUSTRY 20230201050903061012THE CONSUMER AND DEMAND08071113The evidence in this dataset indicates that older consumers drink more than younger consumers but spend less p

129、er bottle.Thats not newsworthy.What is newsworthy is that today younger consumers may be wine-curious.It appears the young consumers have brought back a phenomenon we saw in the 1980s opening wine only on special occasions or buying it for gifts.How do we summarize the complete set of consumer chart

130、s in this report?Together,they tell a remarkably similar story.On the one hand,at least young consumers appear wine-interested.But too many consumers under age 50 drink alcohol but not wine.Too many are buying for special occasions but not for everyday use.The consumer population for wine still skew

131、s to those over 60,and that is a segment that is growing.But we are not making any headway getting consumers younger than 50 to favor wine as their beverage of choice.For many consumers,the data shows that wine is their parents alcoholic beverage but not their own.If this preference continues for to

132、o many more years,it will only increase the number of non-adopters of wine,as the Wine Market Council data is already showing(see figure 5).Younger consumers have brought back a phenomenon we saw in the 1980s opening wine only on special occasions or buying it for gifts.27STATE OF THE US WINE INDUST

133、RY 20230201050903061012THE CONSUMER AND DEMAND08071113Luxury sales as a compWine,particularly premium wine,has been called an affordable luxury.So a natural question to ask is,if younger consumers arent buying wine,how are they impacting non-wine luxury goods sales?As the wine industry continues to

134、do things the way it always has(that is,not making significant strides to attract the young consumers interest),the world luxury market is delivering quite different results.According to the annual Bain Luxury Report,the global luxury market is projected to grow by 21 percent in 2022 and deliver add

135、itional growth of at least 3 percent to 8 percent in 2023,even factoring in a world economic slowdown.8 The report attributes the growth to Gen Y(millennial)and Gen Z and notes that spending by Gen Z and“Gen Alpha”is set to grow some three times faster than for other generations until 2030,by which

136、time it will make up a third of luxury spending.The comparison with the wine business is stark.The wine industry as a whole is still waiting for millennials to become the type of consumers boomers have been.While there are fewer expressing this view each year,many have argued that boomers only becam

137、e consumers of wine in their mid-30s,so we just need to be patient.Perhaps,but the first millennials are already 41,and all the data above tells me that waiting isnt a good strategy.In my view,this is the greatest issue of concern for the wine business today namely,the lack of engagement and partici

138、pation in the wine category by younger consumers in their prime spending years.In just 10 more years,the last boomer will pass age 66 and be eligible for full Social Security benefits.What will the average wine consumer look like then,with the under-50 preferences continuing as they are today,with f

139、ewer boomers alive and with the rest in full retirement?Now that Ive depressed everyone,let me add this:None of the preceding information means we have to live with these current industry trends.There is still some time for the wine industry to adapt.With the median age of the millennial consumer on

140、ly 32 today,the industry can find its footing and compete for millennials business with the rest of the alcohol beverage market.But for today,the wine industrys outreach and the millennials retail silence in return is deafening.The factors creating this circumstance will notevolve in the industrys f

141、avor unless the wine industry decides to takeon the challenge.The wine industrys outreach and the millennials retail silence in return is deafening.The factors creating thiscircumstance will notevolve in the industrysfavor unless the wineindustry decides to takeon the challenge.In my view,this is th

142、e greatest issue of concern for the wine business today namely,the lack of engagement and participation in the wine category by younger consumers in their prime spending years.28STATE OF THE US WINE INDUSTRY 20230201050903061012THE CONSUMER AND DEMAND08071113Consumer on-rampsMost wine consumers begi

143、n their discovery stage by sampling lower-priced wines and wine-based beverages.Because of scale and operating efficiencies,the overwhelming majority of lower-priced wines are made by the largest producers and importers.In the past,large-scale wineries brought these gateway beverages to new consumer

144、s.Wine coolers were the product entrant for the boomers.9 Ive watched as red blends started making progress with young consumers and thought that might be the on-ramp to repeat the wine cooler boom.And the short moscato boom looked like it might bring in consumers.Recently,some of the successful Rib

145、oli Stella Rosa brands have looked like another product on-ramp.Once a consumer does decide to consider giving wine a try,they run into another problem unique to this business.By some estimates,200,000 different wine brands exist in the US.Nobody knows the exact number,but can we just agree that the

146、 wine category is rather saturated and fragmented?Its confusing.How is a consumer to decide which wine to purchase?In the early 1980s,with the US industry fighting the European producers for mindshare,the Benzinger family came up with the idea of the“fighting varietal.”Thats still being used in the

147、US:the varietal,such as chardonnay or cabernet,is as prominent as(or moreso than)the producer.That makes wine a little easier to understand.Today,many companies have developed apps and online solutions to help consumers find wines they will always like.That will continue to help boost wine now and i

148、n the future.But consumer trial is the acid test,and its one place where the wine industry is lacking.Trial is a critical component of alcohol brand adoption,and the industry is spending little time looking at the problem or devising solutions.Outside of grocery stores that experiment with inexpensi

149、ve wine in tastings(the part of the industry that is shrinking),the only other significant on-ramps for consumers to discover wine are consumption at home,visiting tasting rooms,by-the-glass programs in restaurants and bars or by purchasing smaller packages.10Consumers today are increasingly less in

150、terested in low-price wines and more interested in other alcoholic beverage options or are leaving alcohol altogether.29STATE OF THE US WINE INDUSTRY 20230201050903061012THE CONSUMER AND DEMAND08071113The ready-to-drink(RTD)beverage segment is another potential on-ramp for new consumers,but apart fr

151、om wine in cans(which can be considered an RTD),the wine industry barely participates in the category despite the fact that shelter-in-place mandates helped RTD beverages explode.According to SipSource,on a trailing 12-month basis through September 2022,the spirits category has seen 27.3 percent gro

152、wth in RTD cocktails.And according to Drizly,62 percent of spending in the category comes from millennial purchasing,with the highest growth rate seen in Gen Z.While there does seem to be some effort to dust off the old wine cooler category,the overall lack of participation in the single-serving and

153、 RTD market might be a missed opportunity.But before we even get to the on-ramp discussion,consumers have to be curious about wine.That is a function of advertising and promotion,something we as an industry must improve upon(see figure 9 in the next section).The overall lack of participation in the

154、single-serving and RTD market might be a missed opportunity.30SVB ESG REPORTAdvertising and promotion05STATE OF THE US WINE INDUSTRY 2023DEI AT SVBABOUT SVBESG GOALSTALENTECONOMIC IMPACTCITIZENSHIPCLIMATE AND ENVIRONMENTGOVERNANCE0201ADVERTISING AND PROMOTION0903040610120807111331STATE OF THE US WIN

155、E INDUSTRY 20230201ADVERTISING AND PROMOTION09030406101208071113Consider the demand problems facing the industry.If an average businessperson were asked to propose a solution to the negative sales trend,some would suggest increasing the advertising budget.It seems obvious!Well,maybe someone might fi

156、rst ask the more obvious question,“Are you discounting the price?”But that person would be out of touch with the current pace of inflation and the costs to produce wine.Lowering the price,in my opinion,is a downward spiral.Some of the current industry advertising is directed at the under-50 consumer

157、,but its not moving the needle.Much of the messaging and marketing used today was useful for an older generation,now age 60 and over.When we do market today,we are still largely selling“long warm days,cool nights and special soils.”You know what I mean by that.We spend time talking about the date of

158、 harvest,the pH of the wine,acidity and pick dates.We speak of the owner,their background and their successes,if not also the familys history.Some owners put drone footage of their beautiful properties on their websites to entice visitors.What we are doing in the premium industry is selling white-li

159、nen hospitality and gracious living,with a nod to the lifestyles of the rich and famous in many cases information thats interesting to wine geeks and consumers over 60 but probably not to the vast majority of potential customers.That message is at best wasted on a younger crowd;at worst,its turning

160、them off,as the data demonstrates.$1,600$1,400$1,200$1,000$800$600$400$200$0198520211990 1995 2000 2005 2010 2015 2016 2017 2018 2019 2020BeerDistilled spiritsFlavored malt beverages WineFigure 9:Annual advertising spend for alcoholic beveragesSource:Shanken Impact DatabankMillions of dollarsMillion

161、sCategory20202021Percent of total ad spend,2021Beer$900.1$886.248.1%Distilled spirits$385.2$533.020.6%Flavored malt beverages$193.6$328.310.4%Wine$90.4$122.04.8%32STATE OF THE US WINE INDUSTRY 20230201ADVERTISING AND PROMOTION09030406101208071113Wine was last cool with young consumers 30 years ago.I

162、n the heavy-production side of the business,there is at least an attempt to use imaging and graphics that might resonate with younger consumers,but the results dont lie.Attracting younger customers,who are more diverse than older generations,requires reimagining and redefining the audience and our i

163、ndividual brands.Each point of your brand expression the website,tasting room,winemaking,growing operations,company goals,packaging,hiring practices and even the dress code has to be evaluated for how well it will resonate with a new audience.11The solution to flagging demand is to improve the value

164、 of wine peting beverages for the consumer.Reducing prices could increase value,but a better bet is to promote features about your wine that resonate with new and marginal wine consumers(see figure 10).With that information,we should start with an industry advertising campaign to boost the category,

165、measuring success along the way.What we as an industry are currently spending on advertising is embarrassingly low,at 5 percent of all alcohol beverage advertising spending.And that 5 percent is our spending in a good year!Its more often less than that.Our category isnt playing in the same league as

166、 beer,spirits or even flavored malt beverages when it comes to creating interest in the products.And its no coincidence that we are surrendering share to other beverage categories.Wine was last cool with young consumers 30 years ago.The category back then spoke of boomer values,conspicuous consumpti

167、on,outward personal success,short breaks for family gatherings and the imaginary free time that would be taken with the money earned by working.After writing about industry challenges from the sidelines for years,I decided to get off the bench.Starting in the winter of 2018,a small group of industry

168、 analysts including me tried to advance an industry-wide marketing organization.The progress was announced in the 2022 State of the US Wine Industry Report.12 In the final analysis,I can say we got close but were proven unsuccessful.(See the next page for“The Rest of the WineRAMP Story.”)Cooperative

169、 industry advertising,messaging and promotion to bring in new consumers of legal drinking age seem out of reach.33STATE OF THE US WINE INDUSTRY 20230201ADVERTISING AND PROMOTION09030406101208071113The Rest of the WineRAMP StoryIn last years State of the US Wine Industry Report,I announced the formal

170、 formation of WineRAMP,an effort to discover paths to improve consumer adoption of wine.That announcement was made after two years of gratis hard work by three other industry analysts and me.Also joining the effort were a variety of senior executives from wine companies,including most of the largest

171、 wineries,some medium and smaller wineries and industry suppliers.That group formed a steering committee.The unanimous conclusion by the group was that the industry had a demand problem and a solution needed to be devised.A feasibility study run by the Haas School of Business at UC Berkeley led to t

172、he recommendation that the best way to attack the elements hurting wine demand was to come together as an industry and promote the category through a USDA Marketing Order.We raised commitments for nearly all of the$1 million required for the two-year approval effort.But once the effort was announced

173、 in January 2022,objections were raised by a minority outside of the steering committee.The mandatory assessments required to fund the organization were the most controversial element.Those objecting voices carried weight,and the opposition grew to the point that the project was abandoned.We four an

174、alysts looked for other feasible options over the subsequent months but,finding none,stopped actively working on a cooperative industry solution.Each of the four analysts engaged in WineRAMP still retain concerns around slackening wine demand,but today WineRAMP has become a footnote.Who has the next

175、 big idea?Who will be a leader?34STATE OF THE US WINE INDUSTRY 20230201ADVERTISING AND PROMOTION09030406101208071113If you are a winery owner,you have to consider how to message to new and marginal wine consumers to attract them to your brand.It doesnt matter if you are selling$10 chardonnay or$200

176、cabernet,the wine consumer is changing,and everyone needs to develop a strategy for their brand or risk riding the shrinking industry tide.Welcoming the younger consumerTo on-ramp a new consumer of legal drinking age,we first need to consider what they have in common with the existing consumer set.W

177、hile we havent won over the young consumer,there is emerging and credible data from two separate retail sources that show younger consumers are making the largest per-bottle purchase when they do buy wine.While that doesnt mean they are spending the most per purchase(they are actually buying fewer b

178、ottles per purchase than any of the other age bands),they do appear to be buying expensive bottles for gifts and special occasions.Thats a promising start.If it can be proven with more data,it shows that the young consumers are wine-interested,and when the right marketing and quality/price are deliv

179、ered,they should be buyers.But attracting the 30-to 40-year-old consumer to the wine category has to start with changing our marketing message.Younger consumers dont put much trust in the wealthy even if they want to be rich themselves.They are skeptical about inauthentic and opaque marketing,and mo

180、st of the time they dont care about your familys name on the bottle unless it comes with a story that resonates with them.A story that starts with“I made my money doing”isnt helping your brand today.Younger consumers are more interested in whats in the bottle where it comes from,how its grown,the in

181、gredients and additives,how it can make their lives more fulfilling and how you as an organization try to the world better.Everyone needs to develop a strategy for their brand or risk riding the shrinking industry tide.Attracting the 30-to 40-year-old consumer to the wine category has to start with

182、changing our marketing message.The key to future success in marketing to younger consumers is recognizing the things that are important to them as opposed to whats worked in the past.35STATE OF THE US WINE INDUSTRY 20230201ADVERTISING AND PROMOTION09030406101208071113The key to future success in mar

183、keting to younger consumers is recognizing the things that are important to them as opposed to whats worked in the past,then leveraging those values in marketing wine(see figure 10).Its important to understand that I am not implying that we need to blow up what weve been making and put cartoon chara

184、cters on our labels.We dont need to change the core of who we are.We are producing a consumer product,but we are also being true to a tradition that has spanned 8,000 years.13 That should say something to a consumer too.We can keep traditions and traditional labels,but we have to evolve and,as marke

185、ters have done for generations with other consumer goods,find the points of agreement where changing generations have common ground,and then get better at competing for market share.We can produce wines as we always have,but we need to reflect the values of younger consumers in our branding and mess

186、aging.Figure 10:Generational differencesValuesBoomerMillennialWork lifeHard workMeaningful work and life balanceTwo-income familiesOptional but allowed for lifes luxuriesNow required for rent and homeownershipDefining success Material things and awardsFulfilling friendships and relationshipsWinningC

187、ompete to win THE trophyEveryone wins a trophyTechnologyFor improved efficiencyTo communicate,connect and be entertainedSupport groupFamilyFriendsMarriageMarry early.Divorce early.Not required but secretly desiredChildrenImportant;two or moreConflicted;at least one if the timing worksChoice in foodD

188、ont eat if its bad for youOnly eat if its good for youFaithPick one flavorOptional but accepting;prefer spirituality to religionGovernmentNot to be trustedNot to be trustedBusinessCapitalism is the path to individual wealthBusiness success comes with social responsibilitySocial justiceResponsibility

189、 of government,church and lawMy responsibilityDiversityCivil Rights Movement drove changeAction and social and ethnic diversity drive changeFinancesDebt is goodSavings are goodLandfills and wasteDisposable cultureGreen,reuse and repurpose cultureSpendingConspicuouslyOn important thingsPleasureWork b

190、efore playWork at playFunWork is funEverything should be funRetirementNot if I dont have toIll never be able to,but the sooner the betterExperiencesBucket listsUnique,adventurous and socially connectedCharityQuietly donating money to causesPublicly donating time to causesSource:Silicon Vally Bank,20

191、2236STATE OF THE US WINE INDUSTRY 20230201ADVERTISING AND PROMOTION09030406101208071113Social responsibility is important to millennial consumers.14 Thats a factor embedded in their purchase decisions.They are driving change in boardrooms,insisting that companies consider how they impact both the ea

192、rth and society as a whole.Younger consumers are effectively using activism and social pressure to initiate change and are reframing social expectations.They didnt listen to my Business 101 course,where I learned that the goal of a company is to maximize shareholder profits.And yes,price does factor

193、 into the decision,especially when your product is being compared to the spirts category,which is gaining market share(see figure 21).Millennials are frugal,delaying or skipping most of the major life events.Compared to past generations,they take longer to graduate from college,delay marriage or nev

194、er expect to marry,15 postpone having children16 and start their careers later.The homeownership rate of millennials is lower than the homeownership rate of Gen Xers and baby boomers at the same age.Their income has not kept pace with pandemic-influenced real estate price increases.17But price isnt

195、keeping the younger consumer from buying luxury goods.As noted earlier,millennials and Gen Z are responsible for all of the growth in the luxury goods category in 2022.Those in the luxury goods business market and build their brand.They know how to connect with buyers,and how to improve the value in

196、 their product,while raising prices.Why cant the wine industry do that?37STATE OF THE US WINE INDUSTRY 20230201ADVERTISING AND PROMOTION09030406101208071113Wine and healthEating healthy is a critical value for young consumers,and there is ample evidence that suggests that older consumers are taking

197、their cues in wellness practices from young people by adopting some of their health-conscious diets and consumption patterns too.So paying attention to health messaging is probably good for both current and potential consumers.Respected beverage analyst Danny Brager noted that the better-for-you win

198、e entrants such as FitVine,Bota Box Breeze,Cupcake LightHearted and Franzia Refreshers are delivering good results.NielsenIQ reported a 13 percent rise in annual sales of better-for-you brands on a year-to-date basis in September 2022.18Part of health awareness is knowing how many calories are going

199、 into your diet.Even those of us in the industry often dont know how many calories are in a 5-ounce glass of wine.We lack the transparency our consumers are demanding when we refuse to even put calories on the label,and that is a huge marketing miss.If we really want to reach the millennial,we need

200、to look at how other beverages are marketed successfully,including soda,energy drinks,hard seltzers and spirits.Then we need to repurpose those ideas for our own benefit.Have you ever looked at the back of a can of White Claw spiked seltzer?Notice the number of calories per serving.The content descr

201、iption has very few ingredients and nothing the consumer cant pronounce.19 Its also a lower-alcohol product(5 percent alcohol by volume),which appeals to both older and younger consumers.There are“no added sugars”as a point of emphasis.Each of those messages is being made to health-conscious consume

202、rs.Are the claims working?Research done by the Wine Market Council(WMC)is definitive about how the consumer views spiked seltzer vs.wine(see figure 11).While over half of respondents dont attribute any health claim to any alcohol beverage category,the chart has two interesting components.We lack the

203、 transparency our consumers are demanding when we refuse to even put calories on the label.38STATE OF THE US WINE INDUSTRY 20230201ADVERTISING AND PROMOTION09030406101208071113First,the dormant messages of the French Paradox,the Mediterranean diet and Dr.Arthur L.Klatskys work on the positive health

204、 impact of moderate alcohol consumption(see the“Cumulative Negative Health Messaging”section)still have some power with the over-55 crowd,which drives the“wine is healthier than other alcohol beverages”response in the chart according to the Wine Market Council.20 Second,while more respondents view w

205、ine as healthier than other alcohol categories,the health claims made on cans of spiked seltzer are working for consumers below age 55.21No,the wine industry cant make health claims and include an icon that implies such without label approval by the Alcohol and Tobacco Tax and Trade Bureau(TTB).22 A

206、nd before we get there,that messaging has to be right for who we are as a producer.Nonetheless,we can inform the public of the attributes within our products that others ascribe to health,and we should be incorporating those into our marketing messages as appropriate if we want to improve the value

207、of what we make in the eyes of a health-conscious population.What ingredients are in a bottle of wine?Grapes,sometimes with added yeast and minuscule amounts of added sulfites.Wine couldnt be any more natural,especially compared to other alcoholic beverages.But we arent close to being transparent wi

208、th whats inside our bottles.Not letting the consumer know just how few additives are in wine,how naturally its made,how little sugar is in dry wine and how pure the beverage is remains a lost differentiator and a mistake.Figure 11:Share of adults who associate wellness attributes with types of drink

209、sSource:Wine Market CouncilWineBeerSpiritsHard seltzerNone of theseIs low-calorie10%9%9%24%56%Is low-carb11%7%14%21%56%Contains less sugar9%13%14%21%52%Is a good option when dieting or watching what I eat18%4%9%18%59%Is healthier than other alcoholic beverages34%6%5%13%48%Is lower in alcohol14%23%1%

210、22%47%39STATE OF THE US WINE INDUSTRY 20230201ADVERTISING AND PROMOTION09030406101208071113Wine.Its what the young consumer wants.They just dont know it.I ask you to consider this question:At the core,what is the wine industry about?My answer is that its about producing a natural product that enhanc

211、es life,fun,life events and experiences.23 Wine is not a health tonic,but it is better for you than other alcoholic beverages.The wine industry is also about giving generously for causes,advancing green practices,caring about where and how we source and grow grapes,being responsible stewards of the

212、land and the limited water supply,using natural resources conservatively and being mindful about our partner farmworkers,often providing them the best benefit and compensation structure in agriculture.Many owners in the wine business use sustainable farming practices,incorporate biodynamic and organ

213、ic24 farming techniques and take great care in their winemaking by recycling water,avoiding the use of glyphosate,building and retrofitting with LEED certification in mind and developing sustainable business models.All of those qualities are important to younger consumers,but the fact that these con

214、sumers dont see the wine industry in those terms is a failure of unified industry messaging.Our industry has values that are important to younger consumers,and we are exactly the beverage they are seeking that mirrors their values.They just dont know it!As one of my friends once said with passion,“F

215、or gods sake,we are plant-based!”Natural and organic wineMany producers make wine with organic grapes,take a minimalist approach to winemaking,stay away from additives,are biodynamic farmers,use sustainable methods of farming or produce a low-alcohol wine.Thats keeping up with the populations desire

216、 for cleaner food,produced without agro-chemicals.Oddly,more times than not,the green efforts those wineries and growers make arent being used for marketing purposes,even though the winemaker and winery owner must believe that those efforts make better wine.Our industry has values that are important

217、 to younger consumers,and we are exactly the beverage they are seeking that mirrors their values.They just dont know it!“For gods sake,we are plant-based!”If health-conscious consumers are looking for wines that are better-for-you and transparent in their ingredients and winemaking,why not give them

218、 what they want?40STATE OF THE US WINE INDUSTRY 20230201ADVERTISING AND PROMOTION09030406101208071113If health-conscious consumers are looking for wines that are better for you and transparent in their ingredients and winemaking,why not give them what they want?The TTB has recently weighed in on thi

219、s question as more producers have been making health claims in social media and on their websites,trying to provide the transparency the consumer wants.25As we all know in this business,the TTB is quite clear that producers cant directly advertise or link any health benefit to alcohol.That obviously

220、 limits what can be said.But you are allowed to state anything that constitutes“the truth.”For instance,you can say your wine is low in carbs,low in calories or sugar-free under specific content labeling rules.26 Clearly,the gate is even wider than that,given the advertising that is common with spik

221、ed seltzers and spirits,and a growing number of producers are finding their own path to that consumer by using descriptions such as organic wine,minimalist intervention wine,natural wine or clean wine.The story should end there,but a lot of controversy surrounds both this topic and some wine produce

222、rs who are using many of those terms to sell what their wine isnt.Im referencing the growing number of wineries that see the need to start their consumer message by implying that all wine is made with chemicals and loaded with additives.They then go on to tell the story of how their wine isnt that.I

223、 am a fan of being transparent.Ive been encouraging owners to do that for many years.But Im not at all a fan of the marketing tactic that throws shade at other wine producers with sweeping generalizations in an attempt to lift one brand.That approach is shortsighted and not a sustainable business mo

224、del.The wine category is made of consumers who drink a variety of wines.This isnt soda and a choice between Coke and Pepsi.When producers cast doubt about the rest of the wines made in the industrythe wines their target consumers enjoythey are seeding doubt about the industry,and in the end,that can

225、 implode,particularly if that marketing technique is obfuscating any truth about their own wines.The truth will be made clear at some point.We stand a better chance being successful by working together.Im not at all a fan of the marketing tactic that starts by throwing shade at other wine producers

226、with sweeping generalizations in an attempt to lift one brand.41STATE OF THE US WINE INDUSTRY 20230201ADVERTISING AND PROMOTION09030406101208071113Heres two marketing pitches:We should be marketing what our wines are and what they stand for,not what they arent.(What its not)Our wines dont contain fu

227、ngicides,glyphosate,pesticides,velcorin,isinglass,bentonite,sulfur dioxide,copper sulfate or worm castings.(What it is)Our wine is made from organically farmed grapes and contains natural yeast,natural and added sulfites for freshness and less than 1%residual sugar from the harvested grapes.A 5-ounc

228、e serving has 140 calories.Which wine would you buy?My advice is that we should all be selling customers what they want and should become more transparent about our winemaking and grape growing,as well as what we put in our wine.We should also advocate for more disclosure in labeling guidelines and

229、market what our wines are and what they stand for,not what they arent.42SVB ESG REPORTThe Winery Sentiment Index06STATE OF THE US WINE INDUSTRY 2023DEI AT SVBABOUT SVBESG GOALSTALENTECONOMIC IMPACTCITIZENSHIPCLIMATE AND ENVIRONMENTGOVERNANCE020109030405THE WINERYSENTIMENT INDEX10120807111343STATE OF

230、 THE US WINE INDUSTRY 2023020109030405THE WINERY SENTIMENT INDEX101208071113Have we ever had a more difficult business environment to conquer?2022 marked the beginning of the move back toward normal business conditions.We arent there yet,but we are closer.Its been a wild ride over the past three yea

231、rs,with 2020 being the low point thanks to COVID and West Coast fire and smoke issues.But for some,2020 also was a bright spot.While 2020 was a clear aberration for everyone,the large producers generally did well that year,with good sales growth.Their success reversed in 2021,when they failed to get

232、 the hoped-for boost from restaurants restocking.For large producers,sales growth in 2021 was going to be hard to maintain,given inflated 2020 off-premise results.Those large wineries represent the majority of industry production by volume and own the lower-price market.For that group,2022 ended up

233、producing mixed results at best.At the other end of the volume sector,the smaller premium producers results were the mirror opposite of larger producers.2020 was the difficult year,followed by an exceptional 2021 as tasting rooms and restaurants reopened.Restaurants did restock their cellars from th

234、e premium producers.While sales growth in 2022 for this segment wasnt at the astronomical levels we saw in 2021,the growth was still quite solid in the high single digits.All that said,2022 brought its own set of challenges for everyone.The issues that winery owners needed to overcome this past year

235、 were daunting.While COVID has mostly fallen into the background now,a partial list of other headwinds includes the continuing and growing consumer disillusionment with wine under$15,a slowing economy,neo-prohibitionism and evolving anti-alcohol laws,world political unrest,an aging wine consumer and

236、 resulting changing consumer tastes,declining total volume industry sales,supply chain shortages,finding skilled labor at an affordable price(or any price),inflation and increased material and shipping costs that were hard to fully pass to consumers in price increases,higher interest rates,higher nu

237、mbers of imports and competition from other alcohol producers,and the deleterious impacts from climate change.Have we ever had a more difficult business environment to conquer?We have been tabulating the Winery Sentiment Index for nine years now through the annual Silicon Valley Bank Winery Conditio

238、ns Survey.Im sure if winery owners could have voted their sentiments during the Prohibition era,they would have rated it a more difficult time than today,but there is definitely anxiety hanging in the air.44STATE OF THE US WINE INDUSTRY 2023020109030405THE WINERY SENTIMENT INDEX101208071113The econo

239、my,labor,wine substitutes and water availability are the largest negative contributors to owners sentiment today,with consumer demand and sales channels representing the only positive inputs(see figure 12).In 2018,the overall Winery Sentiment Index dropped into negative territory for the first time

240、since the index was created.With the exception of 2021,when the index was a positive 1,the index has remained negative ever since.27This year,the overall Winery Sentiment Index came in at a record low point of minus 15.That doesnt mean that winery owners are losing money or jumping off a ledge.In fa

241、ct,in figure 34,40 percent of owners responded that 2022 was one of their better years or their best year yet.But the Sentiment Index does reflect a growing negative consensus around several of the index categories.Im viewing this in the context of the amount of current uncertainty in the world and

242、the business environment.Many larger wineries had a difficult 2022,but financial performance,as discussed elsewhere in this report,was solid for the small premium wineries that dominate the index.Feeling positive about consumer demand and sales channels goes a long way to offset the beliefs about th

243、e other index categories.Small winery performance was solid in 2022 for the small premium wineries who dominate the index.Source:SVB Winery Conditions Surveys6040200-20-40-60-80Net sentiment indexEconomy33321221-34-5-8-18-1-5519-2-30-12-17-9-32-15-24Overall20182020201920212022Figure 12:Winery Sentim

244、ent Index Consumer demandSales channelsGrape supplyLaborAlcohol lawsCapitalForeign competitionSubstitutesWater availability-12141138-31-125-14-45-5-1838125-13-95-5-32-22145439-52-213-6-291-339-2845SVB ESG REPORT07STATE OF THE US WINE INDUSTRY 2023Sales trendsOverall US wine industry top-line perform

245、ance in 2021Sales are the potential to make a profit.Having sales doesnt guarantee a profit,but without them,there is no chance to make money.Its the first data most financial analysts review when looking at a company or segment,so its a good starting point for a discussion on the financial performa

246、nce of the industry.DEI AT SVBABOUT SVBESG GOALSTALENTECONOMIC IMPACTCITIZENSHIPCLIMATE AND ENVIRONMENTGOVERNANCE02010903040506101208SALES TRENDS111346STATE OF THE US WINE INDUSTRY 202302010903040506101208SALES TRENDS1113Total consumption growth of wine in the US on a volume basis has been slowing f

247、or many years now,something that has been discussed frequently in this report in past editions.While most market watchers have acknowledged the slowing volume trend,determining real volume consumption in wine with accuracy has always been a difficult task because the multiple inputs that need tracki

248、ng cant all be measured with precision.While measurements are improving with technology as it becomes available,there is a fair bit of guesswork involved.The volume estimates of annual sales growth in the wine industry in 2022,as of this writing in December 2022,have hovered around negative 1 percen

249、t volume change,plus or minus 1 percent either way.28 But in a small anomaly today,most,and possibly all,analysts are predicting negative volume growth for year-end 2022(see figure 13).While that is a discouraging alignment of opinions,there are bright spots in the data.For instance,while 2022 indus

250、try volume will be negative,predictions are that sales dollars will be positive,perhaps as high as 1 percent to 2 percent growth by some early estimates.While 2022 industry volume will be negative,predictions are that sales dollars will be positive,perhaps as high as 1 percent to 2 percent growth by

251、 some early estimates.Figure 13:Change in US wine volume consumedSource:Shanken Impact Databank Review and Forecast,2021*Estimate25%20%15%10%5%0%-5%Percent change200020212005201020152016201720182019202020.13%-0.62%-0.90%22.28%10.24%5.19%0.91%0.39%0.64%0.00%3.31%2022*47STATE OF THE US WINE INDUSTRY 2

252、02302010903040506101208SALES TRENDS1113Understanding the nuanced view of sales trends in the wine business starts with acknowledging that there has never been a wider disparity between sales growth in the value-priced,high-volume wine segment and sales growth in the premium wine segment.While some b

253、rands and wineries defy the overall trends today,all price segments less than$15 are experiencing declining sales volume,according to SipSource information,and those above$15 are still growing in sales volume(see figure 14).Over the past eight years,the demarcation line between growing or shrinking

254、industry sales volume has marched consistently higher in Nielsen data from$8.99 per bottle as recently as 2014 to$11.99 in 2021 and,with reopening post-COVID,to$14.99 in 2022.That is a rapid shift in consumer buying behavior underway.On a value basis,the data is slightly better,with the$11 and below

255、 segment now declining while the$12 and above segment is still growing in market share(see figure 15).Its important to recognize that the$11 and below category represents roughly 73 percent of total wine volume sales in the US today and dominates the sales metrics for the category.There has never be

256、en a wider disparity between sales growth in the value-priced,high-volume wine segment and the premium wine segment.Source:SipSource15%10%5%0%-5%-10%-15%35%30%25%20%15%10%5%0%Sales growth over prior yearVolume share of table wine$4.50$50.00+ShareTrendFigure 14:Wine business bifurcation$4.50$7.99Shri

257、nkingGrowing$8.00$10.99$11.00$14.99$15.00$24.99$25.00$49.99-9.8%-8.8%-10.3%-3.5%6.4%6.4%10.0%48STATE OF THE US WINE INDUSTRY 202302010903040506101208SALES TRENDS1113While it would be easy for the owner of a growing premium winery to conclude that reversing the negative trends in the under-$15 wine c

258、ategory is the job of the large production wineries and there is a large amount of truth to that declining consumer interest in lower-priced wines should be a concern to everyone in the wine business at all price points.For these persistent trends to be reversed,we need to do something different bec

259、ause what were doing now isnt working.Today,the wine industry is failing to identify and apply effective measures to attract new people to the category,create more occasions for wine to be consumed by existing wine consumers or take market share back from the spirits category.The spirits industry is

260、 doing a much better job of selling and marketing their product.For these persistent trends to be reversed,we need to do something different,because what were doing now isnt working.Source:Nielsen35%30%25%20%15%10%5%0%Market share12/20139/202110/202212/201512/201712/201412/201612/201812/201912/2020F

261、igure 15:Annual change in share(value)by price point$0$2.99$100+$3$5.99$6$8.99$9$11.99$12$14.99$15$19.99Price point$20$29.99$30$49.99$50$99.9949STATE OF THE US WINE INDUSTRY 202302010903040506101208SALES TRENDS1113Impact of pandemic-influenced channel shiftsLarge production wineriesThe top seven win

262、eries represent about 60 percent of total wine sales.For all but two of these wineries,2020 was a very good year,with more wine sold to their retail and grocery accounts across the nation.When 2021 came and restaurants reopened,though,those gains reversed,and only one of the seven had positive year-

263、over-year depletions.2022 continued the trend,with all but three of the seven showing depletion declines,even given the weak prior-period comps.For the longer period from 2019 to 2021,total depletions for this group were just slightly negative.The sales depletion performance of those producers shown

264、 in figure 16 indicates the scale of the issue.Because of COVID,the last three years have seen the most dramatic channel shifts in history,unless you consider Prohibition a channel shift.The COVID-induced shifts caused restrictions on business conditions,creating winners and losers in each of the la

265、st three years.Even to this day,the impacts and reverberations from those shifts are still being felt.Figure 16:Sales depletions for the largest seven US wineries*Includes brands acquired from Constellation in 2020 and 2021.Excludes brands licensed from Treasury Wine Estates in 2021 and wines acquir

266、ed from Constellation Brands in 2022.Excludes brands sold to Gallo in 2020 and 2021.Includes brands acquired from Francis Ford Coppola Winery in 2021.*Includes Frank Family Vineyards and brands licensed to The Wine Group in 2021.Source:Shanken Impact DatabankRankCompany9-liter case depletions(millio

267、ns)ChangeChangeChange20182019202020212019202020202021201920211E.&J.Gallo Winery*98.594.595.393.40.9%-2.0%-1.2%2The Wine Group41.540.342.040.54.2%-3.6%0.5%3Constellation Brands 21.721.521.620.70.5%-4.0%-3.7%4Trinchero Family Estates18.518.418.017.6-2.0%-2.0%-4.1%5Delicato Family Wines11.212.015.415.7

268、28.5%2.0%23.7%6Deutsch Family Wine&Spirits11.210.912.411.813.7%-5.3%7.1%7Treasury Wine Estates Americas*11.411.610.89.9-7.0%-9.0%-18.1%Average sales growth for the largest seven wineries3.0%-2.8%-0.2%Average market share for the largest seven wineries64.8%63.3%63.1%61.8%50STATE OF THE US WINE INDUST

269、RY 202302010903040506101208SALES TRENDS1113Figure 17 is perhaps the best visual representation of the shift in off-premise wine purchase patterns in the US over the past three years and is instructive on where channel shifting stands today.This chart,which shows only grocery and drug channels,can be

270、 divided into four segments.The first segment represents the pre-COVID period in 2020(i.e.,the first two months of that year).Just prior to the pandemic,wine suffered from an acute oversupply in the US.In early 2020,“normal”meant that large production wineries had minimal growth and were discounting

271、,while smaller premium wineries were finding growth rates around 5 percent.As a category,we were moving toward negative growth.In early 2020,volume changes exceeded value changes in grocery stores,implying that the off-premise channel was discounting,which is done when there is acute oversupply.The

272、second segment in the chart begins in March 2020 with the COVID lockdowns.Alcohol sales in the grocery channel exploded as shelter-in-place orders were being issued and restaurants were shuttered along with tasting rooms.Wine sales spiked 68.6 percent in the off-premise channel as panic buying,or pa

273、ntry loading,for wine and other staples took over.29Because of the frenzied buying behavior,supply became restricted in the off-premise channel,and stock-outs of some well-known comfort brands in isolated stores became a talking point,with store employees working through the night to restock shelves

274、.Off-premise merchants quickly reduced promotional programming and raised prices.Value changes exceeded volume changes.30Figure 17:Weekly off-premise volume and value changes vs.prior yearSource:Nielsen80%60%40%20%0%-20%-40%Percent of change from prior week,prior yearCOVID-restricted reopeningCOVID

275、closuresPre-COVIDNormalizing businessValue changeVolume change01/04/202003/07/202005/09/202007/11/202009/12/202011/14/202001/16/202103/20/202105/22/202107/24/202109/25/202111/27/202101/29/202204/02/202206/04/202208/06/202251STATE OF THE US WINE INDUSTRY 202302010903040506101208SALES TRENDS1113The se

276、cond segment concludes in March 2021 with the vaccination rollout,a full year after the original shelter-in-place orders had been issued.The third segment starts in April 2021 as businesses reopened and mandates were relaxed,with wine purchases creeping back into their prior closed channels.This per

277、iod also included supply-chain issues,which impacted inventory in grocery stores,and a spike in the Omicron variant,which led to disappointing holiday sales in December 2021.31 The spike rolled back some of the restrictions that had been relaxed and slowed both on-and off-premise sales.The fourth se

278、gment of the chart starts with early 2022 and the official relaxation of mask mandates and business restrictions.As business conditions continued to normalize,wine sales continued to drift away from off-premise to the channels that emphasize premium wine.The large producers with distribution in the

279、grocery channel did well during COVID business closures,which were not kind to smaller producers that had closed their tasting rooms and laid off staff.It wasnt fatal,however,as wine club sales,online sales and other creative tactics helped sales growth in premium wineries to minus 0.6 percent for 2

280、020(see figure 18).Small premium wineriesWhile larger producers raised prices in the off-premise channel in 2020,small producers took to discounting or offering reduced-price shipping to move supply during that time.In March 2021,12 months after the shelter-at-home orders and resulting huge spike in

281、 grocery sales,total off-premise sales began to revert back to the pre-pandemic statistical mean.Consumers had more options for buying wine than just grocery stores and online.While it couldnt really be called normal business in 2021,given the masking and added COVID precautions,wine did start selli

282、ng again in tasting rooms,bars,restaurants and other service venues.Even with smiles hidden behind surgical masks,2021 was a very good year for small premium producers,with total sales growth up an average of 18.6 percent compared to a small sales decline in 2020(see figure 18).The large producers w

283、ith distribution in the grocery channel did well during the period during COVID business closures,while the second segment of the chart was not kind to smaller producers who had closed their tasting rooms and laid off staff.52STATE OF THE US WINE INDUSTRY 202302010903040506101208SALES TRENDS1113Figu

284、re 18:Sales growth rate for premium wineries28.0%24.0%5.2%17.6%25.5%21.2%18.4%22.3%2.8%-3.8%-0.6%19.8%12.2%9.6%7.7%9.2%11.9%3.1%5.3%5.6%18.6%14.5%9.7%COVIDGreat Recession Tech bubble 32%25%20%15%10%5%0%-5%-10%Growth rateFigure 19:Tasting room visits and sales in 2022180%160%140%120%100%80%60%40%20%0

285、%-20%-40%190%140%90%40%-10%-60%1/2022155.7%10/2022-13.7%Source:Community BenchmarkPercent change in visitors over prior yearPercent change in tasting room sales over prior year2/202243.6%3/20228.8%4/20220.4%5/2022-17.2%6/2022-17.4%7/2022-19.3%8/2022-16.3%9/2022-19.1%145.8%-9.7%56.8%23.6%16.1%-3.1%-7

286、.2%-9.5%-6.2%-6.3%Change in tasting room visitorsChange in tasting room sales200120002003200220052004200720062009200720112010201320122015201420172016201920182021Sep-20222020Jun-2022Source:SVB Peer Group DatabaseYears53STATE OF THE US WINE INDUSTRY 202302010903040506101208SALES TRENDS1113The strong g

287、rowth was due not only to smaller premium producers reopening their tasting rooms but also to consumers who wanted to get out of their homes but found long-distance and international travel still restricted.Close-to-home visits for outdoor wine tastings were a great solution.After the Omicron Grinch

288、 stole holiday sales beginning in November 2021,there were high hopes for a better spring,marked by the full rollback of health restrictions.Most restrictions did end in 2022,but the result didnt materialize in quite the way most envisioned(see figure 19).Information from Community Benchmark is the

289、most definitive information available on monthly visitation.2022 was light compared to 2021 in visitation,particularly after May 2022,when travel restrictions and mask mandates began to be fully relaxed.Visitation was off an average of 17 percent from May to October 2022.Indications are that trend c

290、ontinued through year-end.Tasting room sales fared better,only off an average of 7 percent during that time frame.With travel restrictions and mask mandates ended in 2022,many delayed celebrations and adventures became possible again.A portion of the normal Wine Country crowd decided to make up for

291、all the missed opportunities that COVID snatched away,and they opted to travel elsewhere in 2022.In figure 18,the anomaly in the general industry sales trend is obviously 2021,with sales growth at 18.6 percent.Thats the highest growth rate since 2010.In the same way 2021 was a rebound year from COVI

292、D,2010 was a rebound year from the impacts of the Great Recession.In all past recessions,the pattern has been to slump,recover with strong sales growth the following year,and then revert to the mean,which for premium wine is around 5 percent growth.In addition to lowering tasting room spending,reduc

293、ed visitation negatively impacted total premium sales growth,which ended nine months in September 2022 at 9.7 percent growth(see figure 18).Growth for the full year shouldnt drop below that,given the weak comps from the prior year.2022 was light compared to 2021 in visitation,particularly after May

294、2022,when travel restrictions and mask mandates began to be fully relaxed.We should end 2022 with premium wine industry sales growth somewhere around 9 percent plus or minus 1 percent.54STATE OF THE US WINE INDUSTRY 202302010903040506101208SALES TRENDS1113While great strides continue to be made toda

295、y to elevate the club and tasting room channel with metrics and training and that should continue consider this critical question:In an increasingly digital world,what industry would insist that its consumers first come to its place of business to buy its wares?Luxury wineries sell 70 percent of the

296、ir wine through direct-to-consumer channels today.Its really a shame that most consumers dont know how to get wine other than through the grocery channel.But I see that as an opportunity because it means the premium industry still has a lot of upside if it can tap into the wine-interested consumers

297、who arent buying directly from the winery.The annual State of the US Wine Industry Survey data shows that from 2010 to 2016 there was significant channel shifting away from wholesale and over to the DTC channel.This stabilized between 2017 and 2020,when DTC became virtually the only option for small

298、 wineries to move wine slated for restaurants and tasting rooms.As figure 20 indicates,wholesale on-premise sales recovered with reopening,while off-premise has remained a smaller part of an average winerys sales mix today.PhoneGrowth in direct salesDecline in three-tier salesOtherMailing list/subsc

299、riptionsOnline salesWholesale off-premiseWine clubWholesale on-premiseTasting room80%70%60%50%40%30%20%10%0%201820222020201920212018202220202019202140%35%30%25%20%15%10%5%0%Percent of sales declinePercent of sales growth63%70%34%29%Figure 20:Sales growth of premium wineriesSource:SOTI Survey,2022 No

300、te:Excludes export sales.55STATE OF THE US WINE INDUSTRY 202302010903040506101208SALES TRENDS1113It should be noted that with only three states(Delaware,Mississippi and Utah)still prohibiting direct shipment of wine to consumers,the opportunity to expand direct sales when new states open to direct s

301、hipping is now more limited than in the past decade.Growth in this segment will come from new subscription models and wineries ability to grow their sphere of influence and take their direct sales efforts and winery experience on the road to new locations and customers.32What is still working for th

302、e wine industry is the premium category.Consumers are leaving lower-priced segments and continuing to trade up to higher-price,higher-quality products.Wine and spirits have both benefited from this trend since the mid-to late 1990s.But how long can trading up continue without a consumer“trading in”t

303、o the wine category in the first place?If your winery is in the premium category and still doing well with consumers trading up,congratulations are in order.But dont get too comfortable with tomorrow just yet.While trading up might be reassuring to some of us,total industry volume growth is negative

304、 today,so it behooves all of us to ask what will change that trend.Today,any individual winerys growth means it is taking share from one of its neighbor wineries.How do we return to increasing consumer demand that floats all boats?Sales through distributionThere is one source of information today th

305、at cuts through much of the fog from channel shifting,at least between on-and off-premise.SipSource is a newer data consortium of large wine and spirits wholesalers that contribute their sales data through the Wine&Spirits Wholesalers of America to provide the most reliable depletion-level informati

306、on that I can find.33 The company doesnt produce total wine sales data because not every sale of wine goes through wholesalers.But it does track both on-and off-premise sales by volume allowing valid comparisons on a relative basis during the last few years,something no other data source can provide

307、.Figure 21 shows the growth in total volume depletion for both wines and spirits on-and off-premise from September 2020 through September 2022.I think its important to talk through what has happened with these two beverage categories over the past few years.What is still working for the wine industr

308、y is the premium category.Consumers are leaving lower-priced segments and continuing to trade up to higher-price,higher-quality products.56STATE OF THE US WINE INDUSTRY 202302010903040506101208SALES TRENDS1113While growth in spirits sales depletions was better than wine through all of 2020,those two

309、 categories were at least tracking together and both showing positive volume growth on a trailing 12-month basis.Beginning in February 2021,restaurants started restocking their depleted inventories,as hotels and tasting rooms also began reopening.Data from the spring of 2021 showed increasing hotel

310、occupancy rates,improving numbers of seated diners in restaurants and larger numbers of air travelers going through security,which should have boosted wine sales.Those trends persisted through the middle of 2022.Growth during reopening was a prediction that I made last year.But even with the tailwin

311、d of reopening,wine depletions did not continue trending higher with spirits,and instead total sales volume of wine started to turn negative.Even with the tailwind of reopening,wine depletions did not continue trending with spirits,and instead total sales volume of wine started to turn negative.Figu

312、re 21:Growth rate of alcohol depletions on-and off-premiseSpirits5.3%Restricted business conditionsStart of business reopeningWineSource:SipSource10%8%6%4%2%0%-2%-4%-6%-8%-10%09/202012/202003/202106/202109/202112/202103/202206/202209/2022Last 6 months5.3%6.2%4.8%4.9%5.7%6.4%7.4%7.8%7.9%6.8%7.5%6.3%6

313、.4%6.8%8.7%8.7%8.2%7.6%6.3%6.0%5.5%4.4%3.8%3.4%0.2%1.0%0.6%1.5%1.1%1.0%1.0%-0.5%-1.4%-2.1%-2.8%-3.5%-3.3%-4.5%-5.0%-5.2%-5.2%-5.3%-5.6%-5.9%-6.3%-5.9%-6.6%-6.9%-6.8%6.7%8.6%57STATE OF THE US WINE INDUSTRY 202302010903040506101208SALES TRENDS1113From March 2021 to the present,the volume of wine sold

314、has declined while the volume of spirits sold has increased.That is consistent with other data,suggesting that wine will have negative volume growth for 2022.Its not a positive sign that since early 2022,spirits too have demonstrated declining growth rates.From April to September 2022,growth in spir

315、its was a meager 0.2 percent and seemingly is poised to join wine with negative growth.The explanation for this situation lies in the confluence of many factors:the aging of the baby boomers,consumers increasing tendency to drink across categories(spirits,beer,RTDs and spiked seltzers),anti-alcohol

316、messaging from modern-day prohibitionists,higher prices charged for wine in restaurants,the changed values of the next generation of alcohol beverage consumers and,critically,a lack of leadership within the wine industry to work together to counter these obvious trends.The restaurant channelDuring 2

317、020,the restaurant industry experienced its worst year since the Great Depression,and perhaps the worst year ever,considering that during the Great Depression people could still go inside a restaurant.The story of wine sales in restaurants over the COVID period is the exact opposite of sales in the

318、grocery store and drugstore channel,except that the recovery in restaurant wine sales came in multiple waves,with business opportunity inversely related to the growth in new COVID cases.Figure 22:Average winerys restaurant salesSource:SVB Annual Winery Conditions Surveys35%30%25%20%15%10%5%0%Percent

319、 of total sales20142022201520162017201820192020202118%19%11%15%17%17%16%19%31%58STATE OF THE US WINE INDUSTRY 202302010903040506101208SALES TRENDS1113As premium winery direct sales have grown over the past 30 years,the amount of sales directed to restaurants by the average premium winery has decline

320、d,particularly over the past decade,from a high of 31 percent of an average winerys sales in 2014 to a low of 11 percent in 2020(see figure 22).In the fall of 2020,Silicon Valley Bank survey respondents reported that 18.4 percent of their sales came through wholesale off-premise and 10.8 percent thr

321、ough wholesale on-premise.After reopening in 2021,those figures nearly flipped,with wholesale off-premise representing 10.6 percent of an average winerys sales,and wholesale on-premise representing 19.2 percent of an average winerys sales.The numbers have stabilized for 2022,with wholesale off-premi

322、se representing 10 percent of sales,and wholesale on-premise representing 18 percent.Its further evidence that while restaurants as a whole are reducing their wine lists in favor of beer and spirits,premium wine is still doing well in restaurants looking for better wine.Furthermore,its telling that

323、of small winery sales,only 10 percent now is sold through the grocery and drugstore channels.The grocery channel isnt the place consumers buy small-production wines anymore.As the owner of a small winery,how will you connect with a consumer who buys all of their alcoholic beverages in grocery stores

324、?Source:VIP Outlet Database400,000350,000300,000250,000200,000150,000100,00050,000001/2020358,908215,386318,876318,340322,804334,829-6.7%-40%+55.4%Figure 23:Active on-premise accounts12/202012/202103/202206/202209/202259STATE OF THE US WINE INDUSTRY 202302010903040506101208SALES TRENDS1113Many resta

325、urants didnt survive 2020.Nations Restaurant News determined that more than 10 percent of restaurants permanently closed.34 SipSource also reported that 10.7 percent of on-premise accounts had shuttered.2022 saw more healing in the business,with 5 percent growth in the number of active on-premise ac

326、counts,leaving the restaurant industry 6.7 percent below the number of restaurant accounts from the pre-COVID era(see figure 23).Total restaurant sales per open location in the US recovered to pre-COVID measures by week 16 in 2021.Through week 45 in 2022,average sales for an open restaurant were ahe

327、ad of 2021 by 6.3 percent,and ahead of 2019 by 14.1 percent(see figure 24).While these improved numbers are comforting,the data is tempered by a persistent decline in traffic counts.Average checks are higher,as are industry sales in total,but the higher sales are due to increased average checks clos

328、ing in on 9 percent growth.35Future restaurant challenges and changesToday,if the food is the experience,it has to start with a sustainable,local,fresh,healthy and organic menu.But the taste has to be great,the price fair and the venue more casual and interesting for young consumers.$100,000$90,000$

329、80,000$70,000$60,000$50,000$40,000$30,000$20,000$10,000$0135751273747919293949112131411323Calendar week3343152535452020201920212022Source:Nielsen CGAFigure 24:Average sales per open restaurant$57,897$78,081 60STATE OF THE US WINE INDUSTRY 202302010903040506101208SALES TRENDS1113While the wine indust

330、ry is awakening to discover changing demographic preferences,the restaurant industry is well into its own evolution,thanks to these new trends:The evolving consumer is less formal.Thats clear from the success of polished casual restaurants and a shift away from formal business attire.Its not about a

331、 display of wealth.Todays customers value speed.Quality food is expected,but in two-income families that speak in sound bites and are never unplugged from work,there is no time.So fast casual has done well thus far,and home delivery models have taken off during COVID to capitalize on the increasing

332、premium being placed on time saving.Its not just about the food.New consumers value visual distraction a show,something that is more than the subject(food/wine).That is why they will pay for expensive cocktails but wont pay for a fancy meal in a restaurant last remodeled in 1990.Its not just about t

333、he cocktail or the glass of wine.New consumers impute value from fresh ingredients and expensive liquors offered in a cool or themed environment and served with flair to enhance the experience.Its not about generic ingredients.Unlike 20 years ago,when pairing food and wine was as common as serving fries with ketchup,consumers today are pairing spirits,cocktails,beer and non-alcoholic options with