A tentative recovery in the US wine market

Almost all supplier countries seem to have suffered significant volume losses. Italy and France are particularly hard hit by the gloomy state of the American market, with declines of 13% and 16% respectively, though to a lesser extent than major bulk wine suppliers such as Chile and South Africa, which are sometimes losing more than half their volumes compared to 2022.

In 2023, the United States imported wine worth 6 billion euros. While this figure may seem substantial, it represents a decrease of over 800 million euros compared to 2022. Although the price per bottle exported to the USA continues to rise overall for most suppliers, the increase in price has not offset the decline in volume, leading to lower overall sales figures.

Wine consumption in 2023: sales down, but premium segment resilient

American consumers are becoming increasingly restrained in their wine consumption. According to the OIV, volumes consumed in the United States are expected to fall by 3% compared to 2022, while estimates from specialized organizations indicate a steady decline in volumes since 2021.

Despite the overall downturn, the premium segment of the market remains resilient. While overall sales are down, the continued rise in the price per bottle suggests that there is still strong demand for higher-quality wines. This trend underscores the importance of focusing on premiumization as a strategy for mitigating volume declines and sustaining value in the market.

This observation also extends to consumers' budgets over the course of a year, and has an impact on the wine industry's sales. While premium wines (>$12) are doing well overall, with even a slight increase in sales, value wines are in a tricky situation. Disrupted by very high production volumes and an increasingly pronounced consumer appetite for higher-end wines, inventories at wholesalers and retailers, as well as at producers, struggled to sell out in 2023.

There are many reasons for the stagnation of the US wine market. While some, such as high inflation, seem more cyclical, more structural reasons raise questions about the future of American wine consumption.

Covid-related wine overstocks : a brake on recovery

The large inventories built up in the post-Covid period have had a major impact on the performance of countries exporting to the USA in 2023. Indeed, when the sanitary crisis was over, export volumes soared amid fears of wine shortages, particularly as the on-trade circuit reopened.

In the wake of the 2020 economic catch-up, major American importers and distributors aggressively purchased large volumes of wine at elevated prices. This was buoyed by a well-funded American consumer base, engaging in what has been termed "revenge spending." The resultant over-accumulation of wine stocks, misaligned with a gradual decline in demand, led to significant stockpiles at both retail and wholesale levels.

The Impact of Inflation on Consumer Behavior in 2023

The decline in wine consumption can be attributed, in part, to the onset of notable inflation beginning in 2022. This inflationary pressure affected consumers in two key ways. Firstly, the surge in costs associated with wine production—including energy, raw materials, packaging, and glass—drove up the prices of wine bottles. This trend is starkly illustrated by the price trajectory of Champagne, which saw average prices increase by 23% from 2021 to 2022, and by an additional 5% from 2022 to 2023. Secondly, the overall rise in prices, particularly of food, eroded household purchasing power, further dampening wine consumption.

Early 2024: Signs of a Moderate Recovery in the Wine Market?

In response to the overstock situation, retailers and wholesalers have implemented strategic adjustments, including promotional activities, to reduce inventory levels to more acceptable standards. Although stock levels have declined from their mid-2023 peak, they remain elevated at the beginning of the year, especially for still wines. The industry is cautiously optimistic, eyeing a potential moderate recovery in the wine market as these adjustments take hold.

Despite recent robust performances by premium wines in both volume and value metrics, 2023 witnessed a cessation in their upward trajectory. Projections from IWSR suggest a stagnant sales environment for the next three years, with premium wines experiencing minimal to no growth. Conversely, the market outlook for value wines appears bleak, with anticipated declines in both volume and value.

In contrast to domestic trends, imports are showing signs of resilience as of early 2024. The first four months of the year have seen a reversal in import trends. Notably, countries such as France have seen a 7% uptick in volumes compared to 2023, while others like Italy have managed to stabilize their losses or maintain consistency. The landscape is more varied in terms of value, with ongoing substantial declines; however, prospects indicate stabilization and potential reversal in the near term. This optimistic outlook is bolstered by expectations of easing inflation and renewed purchasing power within the U.S. market.

Evolution and challenges in wine consumer behavior: navigating industry shifts

In both Europe and the United States, the aging demographic poses a persistent challenge, particularly concerning wine consumption trends across different age groups. A notable shift is underway from mass-market, affordable wines toward higher-value, lower-volume options, influenced significantly by the preferences of millennials.

To ensure the vitality of the wine market in the U.S., it is imperative for industry stakeholders to prioritize understanding and appealing to this evolving consumer base. Winning back market share hinges on comprehensive research and strategies that resonate with the preferences and behaviors of the new generation of wine consumers.

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