No football notes this time around. It’s the time of year when I don’t pay as much attention to the NFL & pay a lot of attention to the Tour de France. I haven’t posted in months but have been thinking about the wine industry a great deal.

There are multiple challenges facing the U.S. wine industry.  There are obvious signs like the decrease in wines sales from 2021-2024 alongside less obvious signs like the number of younger adults who believe that wine is less healthy than other options including cannabis. Here are a few of the key issues facing the U.S. wine industry & some possible actions that can be taken to respond to the challenges.

Wine is moving from a beverage associated with a healthy lifestyle to one considered detrimental to health.

In the 1990’s widespread reporting on the role that moderate wine consumption played in a healthy diet, particularly the Mediterranean diet helped to make Americans more comfortable with wine drinking.  There were many articles written and books published.  A 1991 episode of “60 Minutes” that talked about the French Paradox, that the French ate cheese and drank red wine and lived longer healthy lives than Americans.  The San Francisco Chronicle recently wrote that “This effectively gave America, a nation that’s always had a strong Puritanical streak, permission to develop a wine culture. Enjoying a glass of wine with dinner became normal, even sophisticated, rather than a sign of overindulgence or vice.” Red wine sales climbed 40% year-over-year in 1992.

The World Health Organization (WHO) published a report in Lancet in 2023 that concluded that no amount of alcohol consumption was safe.  One WHO official, Dr Carina Ferreira-Borges, wrote “We cannot talk about a so-called safe level of alcohol use. It doesn’t matter how much you drink – the risk to the drinker’s health starts from the first drop of any alcoholic beverage.”

There is controversy surrounding work on a new U.S. Dietary Guidelines for Americans (DGA) review.  The Department of Health & Human Services (HHS) gave responsibility for the study of alcohol to the Interagency Coordinating Committee for the Prevention of Underage Drinking (ICCPUD).  The committee is dedicated to preventing underage drinking, which is a laudable goal.  However, it is not an unbiased skilled scientific organization.  This has led to 110 members of Congress calling on the program to be shut down.

Similar efforts in Canada and from neo-prohibitionist groups around the world are presenting alcohol in general and wine in particular as something that is only negative & never positive.  This is a contributing factor to a second issue facing the wine industry.

Younger Americans are less likely to drink wine and those who do, drink less frequently.

The most consistent wine drinkers are those 65+ (Baby Boomers).  As the Baby Boom generations passes away, the only way for the industry to maintain sales is for the upcoming generations to drink wine.  Unfortunately, that hasn’t happened yet. Silicon Valley Bank shared statistics for wine consumption in their 2024 wine industry report.  Core consumers were defined as those drinking wine at least once a week.  Marginal consumers were those that drink wine at least every 2-3 months. 29% of those 21-29 (mostly Gen Z) fit into those 2 categories. 33% of those 30-39 (Millennials) were in those 2 categories.  For those over 70, that climbs to 39%.  That 6-10% difference has a huge impact on the future of the wine industry.  According to 2023 Nielsen data, 45% of Gen Z consumers (21 and up) say they’ve never consumed alcohol.  A Gallup poll revealed that as of 2023, 52% of people between the ages of 21 and 34 believed moderate drinking is bad for your health.  That’s a huge increase from 34% in 2013.

Warner Boin, a sommelier and influencer, posted a video to her TikTok page asking her followers, primarily Millennials (57%) and Generation Z (33%), why they aren’t drinking wine. She expected about 200 responses, but as of March 24^th, 2024, she has received almost 35,000 comments on 1.6 million views.  20% of those who replied cited health impacts with many references to alcohol as “poison.”  There were also a high number of respondents who mentioned that they took anti-depressants or used weight loss medication such as Ozempic and believed that drinking wine with them would have a negative impact.  There is no actual issue with weight loss medications.  Ozempic users are advised to limit alcohol to no more than 1-2 standard units per day, but prohibition is not recommended.

Rather than hearing a message that moderate alcohol consumption is part of a healthy lifestyle they are being told that wine is poison.

Other issues cited by Millennials & Gen Z include the high cost of wine and a preference for alternatives, particularly the next factor.

Cannabis legalization has created a significant competitor to wine consumption.

Marijuana has long been used for recreational purposes, sometimes with alcohol and sometimes as an alternative.  However, it has never been as easily and legally available.

Recreational marijuana is now legal in 24 states with 39 states now allowing medical marijuana (which often has a lower barrier for prescription).

This comes as daily marijuana users now outnumber daily drinkers for the first time ever, according to a new report from researchers at Carnegie Mellon University.

Researchers at Carnegie Mellon University recently stated that daily marijuana users now outnumber daily drinkers (all alcohol) for the first time ever.  It appears that the younger generation leads this trend. New Frontier Data, a cannabis research firm released a study in 2022 that concluded that of people aged 18 to 24, 69% prefer marijuana to alcohol.  A study posted in the medical journal Addiction said that since 1992 “The number of self-reported daily and yearly marijuana users has gone up twentyfold.”

One reason cited multiple times is that cannabis is perceived to be safer than alcohol including wine. Despite growing concern from doctors about a lack of long-term research on its effects on the developing brain.

There are other current issues facing the industry.

Down stocking is an industry problem at multiple levels.

During the pandemic, wine sales soared.  A Columbia University Mailman School of Public Health report said that wine sales increased by 17% in 2020.  There were shortages on many items during the pandemic and Americans reacted by hoarding items like toilet paper and wine.  As they realized that the supply issues were temporary, most people stopped buying more than they needed of items like wine and began to work through their oversupply.  This has had a negative ongoing impact on sales.

When overstocked consumers sat down to drink their wine instead of ordering more, retailers and restaurants got overstocked.  That meant that they ordered less from distributors.  Distributors noticed, and ordered less from wineries, but they were already overstocked by then.  The wine industry has long tried to run on a just-in-time inventory system, but the surge in wine buying in the pandemic combined with concerns about shipping meant that everyone was overstocked.

Now, many retailers and restaurants are still selling down their overstocked wine.  Distributors are still working through overstock on some brands.  The increase in interest rates to slow inflation combined with the downturn in wine sales has made distributors wary of carrying too much inventory.  This means that when the distributor runs out of a non-core wine, they might not get it back in stock for a few weeks, which makes it even harder for wineries to increase their sales.

This down stocking issue is one that should run its course, but it is painful in the short term and some wineries won’t survive it.

The current supply of grapes is too high for the demand.

According to Wine Business, bulk wine listings are already up 33% year over year. Some growers in California and Washington State were forced to choose between leaving grapes on the vine or getting pennies on the dollar to sell them for distillation.

Jeff Bitter, president of Allied Grape Growers, continues to encourage the wine grape industry to reduce its acreage across the board. Since 2018 he’s called for 50,000 acres of vineyard removals statewide.

This oversupply of grapes hurts producers across the board as it lowers the grape price, decreasing margins.

There will need to be a reduction in vineyards.  That will unfortunately be a supply & demand issue.  The US doesn’t have the same kind of programs that exist in the EU to compensate growers for pulling up vines.

While the situation the U.S. wine industry is worse than it has been in years, the situation isn’t irreversible. There are some concrete steps the industry can take to respond.

The industry should coordinate to fight negative perceptions of wine health risks and to make sure that cannabis risks are promoted.

The wine industry has fragmented trade organizations with different goals.  This is a goal that they should all agree upon and one where they can work together.  There is common cause to promote moderate consumption of wine as part of a healthy lifestyle.  While there are restrictions on health claims made by wineries, it is possible for the wine industry or key players in the industry to sponsor political action committees with these goals.  Efforts like getting 110 members of Congress to stop a flawed program that attempts to demonize wine are essential. It would also make sense to pressure the government to allow the same kind of health claims for wine as for other food products.

Highlight and finance positive studies of wine The Harvard T.H. Chan School of Public Health released a study in September 2024 that concluded “Drinking wine or drinking wine with meals was associated with lower overall death rates, and with lower death rates specifically from cancer and cardiovascular disease.” I read about it in Decanter, but most people don’t read Decanter.  The industry should be able to publicize these findings.

It is important to put health risks in perspective.  Life is full of choices made to accept small risks.  Sometimes we go outside without sunscreen, jaywalk, or eat that extra slice of cake.  McDonalds sells over $25 billion worth of fast food each year despite it not being healthy.  Most frozen French fries have more sulfites than a glass of wine. It’s impossible to live a happy & completely risk-free life. 

The former chairman of France’s National Cancer Institute, David Khayat gave an excellent example of how risks can be overblown. WHO claimed that 50 grams of processed meat a day raised the risk of colorectal cancer by 18%.  What was missing from that report is that the baseline risk is 2%.  So, if your risk is increased by 18% from 2%, it is still only 2.36%.   Context is important and the wine industry needs to be aggressive about responding to neo-prohibitionists who don’t tell the full story, or who skew the results of a study.

In tandem with a focus on why wine isn’t “poison” it would be helpful to publicize the issues associated with cannabis.  The National Institute of Health (NIH) reports that “There is now reasonable evidence from longitudinal studies that regular cannabis use predicts an increased risk of schizophrenia and of reporting psychotic symptoms.” This is the sort of campaign that should be handled through a PAC rather than at the winery level.  It doesn’t mean trying to ban cannabis.  It just means that the industry needs to get the message out that wine might be the safer alternative rather than the current passive stance.

The industry could promote alternatives to Dry January & Sober October.  Laura Catena & Karen McNeil’s “Come Over October” program might be a starting point.  Their mission statement is “to encourage people to invite family and friends, new and old, to come together during the month of October to share some wine and friendship.” That branding can appeal to younger buyers who want more of a wine experience.

Tailor campaigns to attract younger buyers

Data shows that Millennials and Gen Z want more of an experience than just drinking wine.  Wineries can provide those experiences either at the winery or with pop up events.  That might mean fewer advertisements in Wine Spectator or Wine Enthusiast, but traditional media doesn’t move the needle with younger buyers in the way it has for decades.

One key to these experiences/events is that they should be affordable.  Many people, not just younger buyers are priced out of the winery experience.  SVB’s 2023 report said that the average tasting room tasting fee in Napa is $128 for a “reserve tasting” and $81 for a “standard tasting”.  That isn’t enticing for the average person in their 20’s.  Perhaps off-season or slow day deals could bring in more buyers.  The San Diego Wine & Food Festival had a significant number of Millennial attendees this year.  The cost of trying wines from over 100 wineries started at $106.50.  That gave attendees an experience & much more value for their money than a seated tasting of 4 wines at a winery.

While younger buyers might not drink as much wine as Baby Boomers, they are more likely to drink better/high priced wine.  A Numerator survey of 90,000 wine shoppers for the year ending December 31, 2023, found that Gen X, millennials, and Gen Z account for 59% of sales at $20+ price points. 

Promote wine to all ethnic groups.

In terms of ethnicity, wine consumers are 70% White, 11% African American, 13% Hispanic, and 5% Asian.  White Americans currently drink more wine than the other three ethnic segments combined. This is according to a study published in Science Direct.  America is getting less white. By 2045, according to census projections, non-Hispanic white people will fall below 50 percent as a share of the American population.  It is crucial to market wine to Hispanics, African Americans, & Asians. More importantly, it is time to consider what type of wine they might want to drink.  A Wine Market Council study from 2022 detailed some of the things that should be considered in the marketing room.  Some key considerations include “Hispanic and African American consumers seek more youthful, energetic, bright, and vibrant packaging, promotions, and experiences that reflect diversity. There is a need for more people of color in ads, social media, and marketing communications.”  The study also points out that there is a desire to see more people who look like them working in the wine industry. Companies as different as Hennessey Cognac and McDonalds have made huge gains over the years with continued inclusive marketing to the African American community.  While there have been some initiatives, the wine industry has never tried to engage African American, Hispanic, or Asian communities in the same way.

It is also important to think of these potential consumers at the wine cellar level as well.  Newer wine drinkers generally prefer sweeter wine.  Sweet wine is often given low priority in US marketing & production, primarily targeting the lower end.  Properly marketed, a slightly sweeter than usual wine can have great success.  This can be seen in the supposedly dry red blends that have sold well with 10-20 grams per liter of residual sugar.  Some ethnic groups don’t tend to like very sweet flavors.  While Asian food often pairs well with sweeter wines, Asian desserts tend to be less overtly sweet.  This should be considered in marketing.

If we want wine to sell to everyone, we need to make wine for everyone, promote it to everyone, and bring people from all ethnicities into the business.