10 Industry Influencing Factoids

By: Giovanni Sicilia

1. The Market is HUGE (and growing steadily)

U.S. consumers guzzled $32 billion worth of wine in 2017, and that sum is expected to reach $43 billion by 2022!

(annual growth rate of more than 6%)


Even more mind boggling, evidence shows that even if there was some sort of extreme economic downfall, the impact on wine sales would be virtually meaningless.


During the last recession of 2007, the growth rate for volume consumption slowed down, the actual growth trajectory was still positive, which acted as a depiction of the future of the industry. 

Some theorized that the legalization of marijuana would adversely affect wine sales. However, this theory was soon proven to be an extreme exaggeration. Those who drink wine don’t necessarily use marijuana recreationally and vice versa.


Early data from Colorado indicates legalization has not had an impact on wine consumption, which has remained constant at historical levels.

2. Over $10 a bottle is Where It’s At


The “fine and premium” category category (over $10 a bottle) has been the bread and butter (or wine and cheese, whichever) of the industry.

This segment ended 2017 at $17 BILLION DOLLARS – which is over ½ of the total $32 BILLION of 2017. This trajectory is expected to continue, with the segment reaching around $25 billion by 2022.

3. Millennials Are Holding All The Cards (or at least many of them)

Millennials are a HUGE subsect of Wine Consumers! Between 2012 and 2016, Gen Xers and millennials drove overall wine market growth, increasing their share of consumption by about 8% and edging out baby boomers as the biggest consumer segment. One estimate is that millennials will hold the largest share of U.S. wine consumption by 2026.

Millennials differ from older consumers in a number of interesting ways. They have limited category loyalty, consuming beverages across categories (even during a single occasion).

Millennials also demonstrate a high propensity to explore, favoring “new experiences” and varietals when making wine purchase decisions.

At the same time, they are clearly value-focused consumers: They are looking for high quality at an acceptable price.


 This need to constantly discover something new has led to a continual rotation of “hot” varietals, which vary year by year.

Rosé wines currently hold pride of place as the latest “it” wines: U.S. consumption of Rosé grew by around 53% in the 52 weeks prior to June 2017, a significant rise from its 0.3% annual volume growth between 2011 and 2016.


Millennial preferences offer both a warning and an opportunity. While it may be tempting to chase “hot varietals,” this could be a losing approach: It is difficult for growers to deliver a quality product based on a new varietal before the trend ends.


But the cohort’s clear penchant for experiential engagement with brands and wineries (often digitally) suggests that producers should be thinking about more innovative marketing strategies than those they have employed in the past.

4. Wining and Dining? Not so much…


Millennials are also having an impact on another trend: Unwilling to pay restaurant wine markups, consumers in general, led by millennials, are increasingly drinking their wine at home.


Off premise consumption now represents more than 80% of overall wine consumption — higher than off-premises consumption of beer or distilled spirits.

5. We’re judging a book by its' cover

As more and more consumers bring their wine home or to private social settings, they are increasingly embracing new forms of packaging that offer convenience and portability.

Canned wine sales more than tripled between 2015 and 2017, albeit from a very small base (they represented less than 1% of overall wine sales in 2017).

For example, “bag-in-box” wine is expected to see particularly high growth, given the low cost of production for suppliers. In fact, this trend is so strong that it has begun to move upmarket, with premium brands now using the format for 1.5-liter and 3-liter quantities.

At the other end of the spectrum are smaller and single-serve packages. Splits and other small format varieties are far more readily available in the marketplace now as well.

Despite the buzz, wide scale adoption of alternative packaging formats is likely to remain limited by consumer perceptions, shorter product shelf life and the difficulty of finding canning partners that focus primarily on beer. Additionally, many wine consumers play into the stigma that wine out of a can is nothing short of sacrilegious.


6 & 7. Industry Giants Are Making All The Moves… 

Regarding Suppliers, The industry may be consolidating, but buying opportunities still remain for a variety of different reasons.

In 2017 the top 14 suppliers made up approximately 79% of the U.S. wine market by volume; however, a very long list of 9,000 suppliers produced the remaining 21%. Acquisitions were made by producers of all sizes.

Medium-to-large producers have been focused in the premium segment (Think Duckhorn’s purchase of Kosta Browne)


While smaller wineries were more concerned with securing supply, permits or capacity (Such as Vasse Felix’s purchase of Watershed Vineyards).

After all, it takes a village…of Distributors!

The top 10 U.S. wine wholesalers now hold a full 80% of the market. The largest distributors are reportedly streamlining supplier relationships and seeking partnerships with strong, well-known brands with consistent and predictable sales.

In 2016, 95% of sales for wineries producing more than 250,000 cases went through distributors, an increase of 6% since 2014.

For those producing fewer than 10,000 cases, distributors were only responsible for only 33% of sales in 2016, a 6% decrease over the same period.

8. Will [not] work for wine

Labor is a primary concern for the U.S. wine industry, and right now there is not enough of it.


Producers rely heavily on migrant labor, and recent immigration policy reforms appear to be exacerbating the shortage. In addition, producers are facing increased competition from alternative crops, including newly legalized marijuana, where the pay is better and the work less physically taxing.

Seasonal workers, many of whom come from Mexico, are finding that crossing the border has become too expensive and too dangerous.

A shortage of available temporary housing in areas affected by recent fires may further reduce the labor supply. The Northern California fires in late 2017 displaced nearly 100,000 people, including both documented and undocumented migrant farm workers.

The resulting rise in the cost of accommodation may force workers to leave the area, especially undocumented farm workers who have no access to federal assistance. With no one to harvest their grapes, wineries may need to scale back production.

9. “Ship It!” “Not so fast!”

Ever since the 1933 repeal of Prohibition, the regulatory environment for alcohol has been slow to change. While wine shipping laws are starting to evolve, a big challenge for producers is navigating a confusing labyrinth of state regulations.

For example, some states allow retail intrastate shipping while others do not. Some allow winery interstate and intrastate shipping while others do not.

That being said…

In 2005, the Granholm v. Heald Supreme Court decision ruled that laws permitting in-state wineries to ship to consumers but prohibiting out-of-state wineries from doing so are unconstitutional. As a result, wine shipping regulations have relaxed: Forty-four states now allow out-of-state direct-to-consumer (DTC) shipments from wineries and 14 allow out-of-state DTC shipments from retailers.


Today only three states — Alabama, Oklahoma and Utah — directly prohibit DTC wine shipments. This less restrictive environment could provide an important opportunity for smaller wineries that are not represented by distributors and are struggling to reach consumers.

10. Sure, you can buy from our vineyard…and we’ll send it directly to you!

Can’t make it all the way to ‘Wine Country’ for that rare and hard to find bottle? No problem.

Not surprisingly, the growth in the DTC market is driven by smaller wineries. Wineries taking shipping into their own hands solves an issue: lack of national distribution.

The DTC channel hit nearly $3.1 billion in 2017 and is forecast to grow around 11% a year, reaching $5.2 billion by 2022.