The wine industry is currently facing a significant downturn, sparking concern among experts and industry leaders worldwide. While economic fluctuations and inventory issues have historically presented challenges, the current decline – with a 2.3% drop in global wine consumption in 2023 and further decreases in 2024 – appears to stem from a confluence of more complex factors that have been developing over the past 2-3 years.
Changing generational consumption patterns have been widely discussed as a contributing factor to this decline. For instance, younger generations such as Millennials and Gen Z are generally consuming less alcohol overall, including wine, compared to previous generations like Baby Boomers, who historically have been more consistent in their wine consumption habits.
One prominent theory attributes the decline to the lingering effects of the COVID-19 pandemic. Lockdowns and restrictions on on-premises establishments led to a surge in at-home wine consumption and online sales, yet the overall industry faced challenges due to the sharp decline in restaurant and bar sales. Smaller wineries, particularly those reliant on tasting rooms and in-person events, struggled to adapt. Consumer preferences shifted towards more affordable and familiar brands amidst financial uncertainty. Furthermore, the potential impact of the illness itself on wine consumption remains an “unspoken” consideration. If a significant portion of wine consumers experienced even brief periods of illness during which they reduced or abstained from alcohol, this could account for a notable drop in overall consumption.
Another significant factor may be the rise in popularity of weight loss medications like Ozempic and Wegovy. These drugs, which have proven significant efficacy in reducing body weight, have seen rapid market growth, with millions of prescriptions issued globally. Concerns have emerged about the potential impact of these medications on alcohol consumption. Some users are cautioned about potential liver damage if alcohol is consumed while taking these drugs. Anecdotal evidence suggests that these medications may reduce the desire for alcohol in general. Given the increasing number of individuals using these drugs, this could represent a substantial threat to wine consumption. USA Today even reported these drugs are being considered for use to combat alcoholism. According to Gallup, there are 82 million active wine drinkers in the US. With 30+ million people using weight loss drugs, this could be the largest threat to wine consumption in the US.
Finally, the increasing legalization and acceptance of cannabis may be contributing to the decline in wine consumption. As cannabis becomes more widely available, some consumers are opting for it as a substitute for alcohol, particularly wine. Cannabis offers a tailored, lower-calorie experience with fewer hangover effects, appealing to health-conscious consumers. BDSA, an industry analytics company, found that consumers over 40, traditionally a core demographic for wine, are increasingly turning to cannabis for relaxation and socialization. In May 2024, it was reported that for the first time ever, Americans are consuming more cannabis than alcohol daily.
In conclusion, the wine industry is grappling with a complex set of challenges that extend beyond traditional economic factors. The lingering effects of the COVID-19 pandemic, the rise of weight loss medications, and the increasing popularity of cannabis are all contributing to a decline in wine consumption globally. While the industry is already addressing issues such as the anti-alcohol movement, it must also adapt to these new realities by understanding their impact on consumer behavior and adjusting marketing strategies, production methods, and product offerings accordingly. The future of wine consumption hinges on the industry’s ability to navigate these challenges and innovate in a rapidly changing landscape.
To address these challenges effectively, wineries can leverage the expertise offered by the 2GO Advisory Group’s Ag Practice Team, of which I am a member. The Team has a broad-based and deep understanding of the emerging business challenges facing wineries with proven access to subject matter experts, including Tary Salinger, who contributed his insights to this blog. Assistance that the Ag Team can provide includes support for Direct-to-Consumer (DTC) business enhancement, professional services such as audits and reviews, operational efficiency improvements through SKU rationalization, technology integration, strategic planning and leadership development, enhancing company cultures, and C-suite leadership to drive success. By partnering with the Ag Practice Team, wineries can improve their ability to not only survive but thrive in today’s challenging market.
I am also the lead for the Banking Practice Group and am delighted to assist companies with the best decisions and support for financing. If you would like assistance with your operational, financial, or funding challenges, please call Glen Terry at (951) 310-8480 or email me at gterry@cfos2go.com.
Glen Terry is a seasoned executive with more than four decades of extensive experience in the banking sector. He has assisted companies in resolving challenges that have arisen between borrowers and their banks. He has partnered with companies to restructure and renegotiate banking relationships, including transitioning to new providers.
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