Wine Sales Gain 2% on Slow and Steady Growth
Dollars outpace case sales, reflecting consumer willingness to spend more
San Rafael, Calif.—U.S. wine sales posted slower growth in 2017 than in 2016, but the steady pace of gains is helping wine edge out other forms of alcohol with consumers.
Sales of U.S. wine increased 2% to $42 billion in the 12 months through December 2017, market-research firm bw166 reported, while off-premise sales as tracked by IRI also gained 2% to hit $8.8 billion in the firm’s multiple outlet and convenience store channel. A year ago, both categories posted 5% growth versus the previous year.
“Overall, 2017 was slightly softer than 2016 in terms of growth,” bw166 managing partner Jon Moramarco said last week in a review of preliminary 2017 alcohol sales data organized by Gomberg, Fredrikson & Associates.
Case volumes have been increasing more slowly than sales, however, reflecting the long-term trend toward premium purchasing engaged in by consumers. Suppliers have been hard-pressed since before the Great Recession to boost shelf prices, but a more confident consumer is taking advantage of the situation to explore higher priced offerings.
“Volumes are growing at about a 2.9% compound annual growth rate; value growing at about 3.9%, and this is just indicative of the trading-up that consumers have been doing,” Moramarco said, referencing 25 years of sales figures.
But modeling bw166 has undertaken on alcohol servings indicates that steady growth in wine sales, while lacking luster on the surface, is shining. Acknowledging that the facts indicate a nominal decline in case sales of alcohol, bw166’s model of servings consumed over the past year is exciting for the wine industry.
“Even though total volumes were down on a case basis, consumers continue to drink more, and it was up about 0.9% across beer, wine and spirits,” he said.
Wine servings were up 1.3% over the past year, and over the past 25 years (since 1992), wine has led the pack. “Wine has actually been growing at the fastest rate across all three with 3.1% growth,” Moramarco said, or nearly triple the 1.1% growth rate for the industry as a whole.
Moreover, the past 25 years have seen wine increase its share of overall alcohol servings by 6.6%. It now accounts for 17.7% of all alcohol servings poured in the United States.
This isn’t to say the industry can be complacent about slower growth.
While the industry has benefitted as Millennials have come of age, a generational shift is taking place as children of the smaller Gen X cohort attain legal drinking age. This is happening as the affluent and health-conscious baby boomer generation ages out of the market, and the so-called Amazon effect brings changes in buying and distribution patterns—manifest most clearly for the wine industry in the rise of direct-to-consumer (DtC) shipments, which Ship Compliant/Wines Vines Analytics data indicate rose 16% to $2.7 billion in 2017.
The industry needs to prepare for these changes.
“There’s been lots of opportunities over the last 25 years for the wine industry to grow. I still see large opportunities over the next 25 years,” Moramarco said. “Everybody is just going to have to look at the market and say, ‘Are there things that we need to do slightly differently given the growth that’s coming from different places?’”
Speaking of different places, packaged imports have also been a significant force in the U.S. wine market during the past year. Sales of these increased 5%, bw166 reported, with an additional $913 million in sales for the 12 months through December. This exceeded the $691 million domestic wines (including bulk imports) added over the same period. Rosé from France and sparkling wine from Italy were key contributors to the surge in packaged imports, with the latter led by brands including La Marca, Cupcake and Ruffino.
With employment cresting record levels, workers have reason to break out the bubbly. Wineries were poised to continue looking for help as 2017 came to a close.
Winejobs.com’s Winery Jobs Index reported that winery hiring rose 10% in December 2017 to end the year at 168. The growth was in line with an 8% increase in hiring activity for the year. December saw strong growth in all categories except direct-to-consumer positions including tasting room and retail, which fell 20%, the fifth straight month of weaker demand, and general administration positions, down 22%. Vineyard positions led hiring activity, rising 67% versus a year earlier.
