Thursday, May 1, 2014

20 good years for wine. What's next?

Twenty years is a generation. We have experienced an entire generation of growth in the U.S. wine market, and we've begun to take it for granted.

It's barely news anymore, the annual data that Americans spent 5% more on wine than the year before. The rise seems as inexorable and inevitable as increases in housing prices and cable TV penetration and literacy.

How could Americans ever drink less wine than today?

You could have said the same thing about French and Italians and Spanish a generation ago, especially as their wines experienced spectacular rises in consistency. But Europeans are drinking less wine, and it's worth looking at the cultural differences.

People from France and Italy and Spain grew up in a culture where wine was a staple, as much a part of the meal as bread. Their per capita rates of consumption are still higher than in the U.S.

Ironically, the worldwide rise of wine connoisseurship has something to do with lower overall consumption in these countries.

People in the European countryside once have a pitcher or bottle of the local red; it was just what one did. Now they have to think about their choice, and there are other choices. Spain is in love with gin and tonics. France has discovered beer and cocktails.

And those countries are all consuming less alcohol overall, in part because of stricter drunk-driving laws.

The U.S. is just the opposite. A generation ago, wine was the third choice, after beer and spirits, for the 2/3 of adults who drink alcohol. According to the Gallup poll, that percentage hasn't changed: more than 1/3 of U.S. adults still tell pollsters they don't drink at all.

Americans lie on polls. Bourbon Street and the Vegas Strip are filled nightly with born-again Christians singing off-key while showing us their tits (especially the men). But I guess most people who fib on these polls aren't hiding a cellar full of fine wine.

So the growth in American wine consumption comes from three areas. One is population growth. Another is poaching consumers from beer and spirits.

The Wine Market Council recently did a report on craft beer drinkers in which it learned most of them are also wine drinkers. This isn't surprising. But 20 years ago, they might have been exclusively beer drinkers.

But the third, most important area in wine market growth is that people who do drink wine are drinking more of it. Instead of a bottle on Saturday night and Christmas, they're enjoying Chardonnay on Tuesday.

"Sideways" remains an excellent mirror of how our national view of wine has changed. The protagonist is a miserable fool who steals from his mother, dumps a bucket of spit on his own head and doesn't get the girl. In 1994, at the start of wine's rise in America, he would have been the butt of the joke. Instead, in 2004, people all over the U.S. looked at Miles and said, "I'll have what he's having."

France elected a sanctimonious teetotaller in Nicolas Sarkozy, and wine consumption dropped. The U.S. elected a sanctimonious teetotaller in George W. Bush, and wine consumption continued to rise. Oddly, there are more Prohibitionist-type groups operating in France now than in the U.S., and some of their laws seem unthinkable here.

Did you know you can't show people enjoying alcohol in an advertisement in France? Meanwhile, on this side of the Atlantic, as the beer conglomerate ads say, "Here we go!"

Forget the low prices your grandparents brag about having paid for a case of first-growth Bordeaux. To live in New York or San Francisco today is to be in the best time and place in the history of the world to drink wine. We have unprecedented variety, and flaws have been practically eliminated. Purely for quality reasons, it's easy to see why wine consumption keeps rising.

We shouldn't take it for granted. History is rarely a straight line moving upward, and the size of the American teetotalling population means you can never turn your back on them.

The 20th consecutive year of rising wine sales is great news. More wine being drunk means there will be more great wines made. Wineries can prosper, and that's good for everyone. We should enjoy this ride as long as it lasts. Once again, here we go!

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Goma SF said...

Cheers for American wine market!
More people prefer drinking wine, better choice we ca have. :-)

Mark Andrew Sinnott said...

"France elected a sanctimonious teetotaller in Nicolas Sarkozy, and wine consumption dropped. The U.S. elected a sanctimonious teetotaller in George W. Bush"

Blake, I don't ever recall W being sanctimonious about alcohol, or much of anything else for that matter. You may disagree with his politics, but that's a different issue.

And Sarkozy sanctimonious? I don't think so. Arrogant for sure, but he was the French President, what do you expect?

Bob Henry said...


A better metric for assessing whether the domestic wine market is growing is unit volume, not dollar volume.

Likewise the percentage of the drinking age population that consumes wine.

It has been suggested that 80-plus percent of all wine consumed in the United States is by roughly 10 percent of all the domestic wine drinkers.

And that 80:10 ratio hasn't significantly changed over time.

A 5 percent increase in domestic wine consumption could be due to rising retail selling prices as the economy recovers from the Great Recession, and producers feel more confident that they can impose price increases to cover rising production costs.

(Aside: Recall that Trader Joe's famous "2 Buck Chuck" now sells for $2.50 in California; closer to $4 outside our home state. TJ collecting an extra 50 cents represents a +25% price increase. But has the total number of bottles purchased stayed the same or increased with the price hike - or are price-sensitive consumers cutting back on their purchases?)

(Here's another analogy.

The sales revenue generated at the box office by first-run theatrical release movies is at or near an all-time high, measured in inflation-adjusted dollars.

But has the number of movie tickets sold likewise reached an all-time high?

No -- that high water mark was set in the years following World War II.

Annual movie ticket sales have been falling for decades.)

So what is the more accurate measure of a "growing" retail market: dollar volume or unit volume?

(I vote for the latter metric.)

~~ Bob