Wine Trends Archives

Silicon Valley Bank: The US wine industry will bound back in 2021

The US wine industry is poised to bounce back in 2021, according to a report by Rob McMillan, Founder, Silicon Valley Bank, with a consumer desire to celebrate set to help drive wine sales this year.

Silicon Valley Bank’s 20th annual review of wine industry prospects predicts that temporary gains will yield to long-term declines. The report raises doubts that this year’s expected sales momentum will carry very far into 2022.

Wineries that have established strong direct-to-consumer sales during the Covid-19 pandemic, as well as online retailers, can expect more gains in 2021, the report says, while bricks-and-mortar retailers, urban-based grocers and restaurants will take years to recover.

Restaurants will drastically need new investment to survive or to re-appear. Yet, the report predicts a quick recovery for the industry as a whole, although the relative importance of individual sales channels will shift dramatically.

Online wine retailers had major growth in sales during 2020, and that is expected to continue into 2021. This channel, and wineries’ own online efforts, “will represent 20% of an average winery’s sales within five years,” the report predicts.

McMillan stressed that wineries, in spite of the loss of tasting room sales, are not in the same financial straits as restaurants. “Wineries seldom go bankrupt,” he said, “even if they are over-leveraged. If they have financial problems, there’s always a willing buyer.”

One problem that was lurking in the US at this time last year, according to the report, was an over-supply of wine. But damage to crops from last year’s fires and smoke, as well as diminished tasting room sales, resulted in supply now being back in balance with demand.

However, one problem that has not gone away is the changing ages of wine drinkers. As Baby Boomers continue to retire, they are being replaced by younger drinkers with different agendas.

While the decrease in demand by Boomers for wine purchases at all price levels has not been as precipitous as once predicted, the decline is not being offset by younger drinkers, who often see better value in craft beers and in spirits.

“The digital world parallels the real world,” McMillan said, “and the new consumer is not one who wants to rely on advice from most current sommeliers. We need to consider the values of younger drinkers, and they value things in the wine world differently.”

Download the full report

https://www.svb.com/trends-insights/reports/wine-report

Wine in a can is a robust trend and not a short-term fad

With the traditional wine market in the US growing at an increasingly slow pace, successful wineries 10 years from now will be those that have adapted to a different consumer with different values. Wine in a can is no new thing; it was first seen in World War 1 when the French army had their wine rations delivered this way.

WICresearch.com has done an in-depth study of the drivers that are affecting the boom in the wine-in-can market and it is predicted that the trend will continue to grow as it has done exponentially in its infancy. The most important factors to consumers when it comes to wine-in-can are taste, quality and value, followed by convenience, portability and fun. From 2017-2108 the wine-in-can market grew by 43%. It is a market that cannot be ignored as the industry needs new growth places.

There are 6 main drivers that are promoting the expansion of wine-in-can, as follows:

Convenience

This is the most obvious benefit and relates to the carrying, opening and finishing of the product. One is able take a can where it is illegal or inconvenient to bring a bottle or any glass. The single-serve size also allows for zero waste of the contents, and it removes the need for traditional wine paraphernalia: foil cutters, corks screws. Under the convenience banner, the wine vending machine is also a trend that is starting to gain traction, certainly opening new markets in terms of novelty and availability.

Occasion expansion

This is based on both location and event. Location involves places where taking a bottle of wine is not suitable nor practical: boats, beach, swimming pools. Event expansion is where offering a single-serve beverage is desirable e.g.BBQ, picnic.

It is interesting that wine-in-can drivers such as these are not cannibalizing the existing market with its meagre growth of 1-4% but it is rather creating an extension of markets or even new markets and thus creating strong double-digit growth.

Sustainability and cost savings

Aluminum is 100% recyclable and so the environmental footprint is greatly reduced, and the product attracts an eco-friendly consumer who values sustainability. Research has shown that 51% of Millennials check the packaging before purchase for sustainability claims.

Facts:

Sustainable products grew 4x the rate of non-sustainable products (Nielsen)
Consumers are willing to pay 15% more for sustainable packaging (McKinsey)
66% of consumers will pay more for sustainable brands (Nielsen)

Packaging in aluminum cans also produces a saving of 15-20% with some manufacturers suggesting 40% due to efficiency of packing and transport, lack of breakage, and lighter weight. Therefore, carbon emissions for transportation are also lower. Also, savings occur in establishments serving wine by the glass, as there is total accuracy over the serving size with no shrinkage.

Portion control and variety

Apart from the benefit of not having to open a whole bottle when you would like to enjoy a glass, there is also no issue of dealing with unfinished wine. The wine-in-can movement is very popular with restaurants that have less waste and leftover wine, or the problem of customers wanting to cork their bottle to take it home which is illegal in many parts of the world.

Due to the small serving, wine drinkers can enjoy different varieties of wine with different courses, instead of a full bottle of the same wine.

Visual image and branding

An aluminum can has a 360-degree label rather than just a front and a back. It gives the product a cooler, more photographable, Instagrammable look.

“With 64% of consumers trying a new [wine] product simply because the package catches their eye, packaging design is one of the most underappreciated marketing levers” (Freeman, 2016).

Designers can go so far as to make the packaging glow in the dark.

Quality

“You actually have a really stable environment in a can…There’s no UV penetration or oxygen exchange like there would be through a cork and glass bottle” (Drinks News, 2018).

For still and sparkling wine, the integrity of the product can easily be preserved. The dark, oxygen-free environment for still wine is ideal while for sparkling, the effervescence is contained in a small space.

There is ongoing research for different types of cans, linings and filling systems to ensure further integrity of the product as well as preserving its future life which is, as yet, unproven.

It is interesting to note that the wine-in-can purchase is not affected by gender, education nor generational group. There is also no difference in self-reported wine knowledge i.e. consumers with a high level of wine knowledge are just as likely to buy wine in cans.

In a 2019 a blind taste test of wine-in-can versus wine-in-bottle was conducted. The identical wine from the same winery in both packaging formats was poured. There were 4 different varietals and the experiment was done in 2 different locations. 51.1% said they either preferred the wine-in-can or that they could tell no difference between the two.

Wine-in-can is a growing market and innovation and interesting marketing tools are emerging every day. It will be a very interesting space to watch over the next decade.

WICresearch.com

Jenny Ratcliffe-Wright
Cape Wine Master

Wine Trends: What to watch for in 2020

Wine Intelligence has announced its annual Wine Trends Report for 2020, which will reflect global challenges in the industry.

Richard Halstead, COO of Wine Intelligence, states “wine is a risky business,” specifying challenges around climate change, discretionary consumer spending influences in different countries, and global trade policy changes.

Here are their five predictions for the next 12 months, assuming global consumer spending does not fall off a cliff, and the weather does not cause any more mayhem.

Wine volume consumption will globally decline.

Wine Intelligence sees the developed world drinking less wine in 2020, but overall, the value of wine consumed won’t be heavily impacted.

“Those drinking less wine have compensated by spending more on the wine they do buy, with the characteristic result that prices per bottle have been rising considerably for several years now in major consumption markets,” said Halstead.

There’s a prediction that this trend could mean trouble for the producers and brands with business models dependent on selling more for smaller margins.

However, this trend also noted that consumers are looking for brands that are thoughtful, have provenance or are culturally interesting. In this way, premiumization is about not only the price and quality of the liquid but also of the brand’s story and actions.

2. Sustainability claims will be scrutinized.

Environmentally friendly buzzwords are thrown around commonly on wine packaging and marketing, and it’s predicted that 2020 will see consumers investigating these claims.

While Wine Intelligence research suggests that many consumers read the word “sustainable” and believe it, Halstead said: “we also notice a smaller but growing minority of purchasers are more fundamentally committed, typically for a combination of environmental, ethical, social or lifestyle reasons.

“Next year I expect this latter group to be more zealous in their scrutiny of winemaking or viticultural claims, and more willing to call out what they see as transgressions or unacceptable standards,” states Halstead.

3. CBD wine will be explored further.

Cannabis-based drinks have been on the radar of predictions for a while now, however, considering an array of different international laws, they have yet to take off.

“As with many things in our industry, cannabis drinks products remain at the mercy of regulators in most jurisdictions, not to mention some serious product development and taste optimization challenges,” said Halstead.

While Wine Intelligence is not anticipating mainstream acceptance or popularity of cannabis wine drinks in 2020, they do predict more companies will start to explore it.

4. Products from less high-profile wine countries will become more popular.

Wine Intelligence predicts countries like Germany, South Africa, Portugal, and Greece, will see great growth in the popularity of their wine products.

“We believe 2020 will be a year where some old styles become new again to the next generation of consumers,” said Halstead.

Halstead points to specific examples including German Riesling, refreshing whites and red blends from South Africa and Portugal, and lighter white styles coming from Greece.

Halstead also describes the common thread of these products and states: “All will be meeting the growing consumer needs for more aromatic, fresh, lower alcohol whites, and lower tannin but interesting reds.”

5. Greater investment into creative packaging and serve formats.

“Our prediction is that we will see far more innovation in packaging coming to market next year than we have in the past few years, driven by the needs of business to reduce carbon footprint, to offer more recyclable containers, and to offer serve sizes that fit an age devoted to lowering volumes but increasing values,” Halstead said.

Brands will be focused on labeling and designs that stand out to busy and more visually oriented consumers, while also being classic enough to reassure shoppers of their quality. Look out for different bottle shapes, icons and coloring that go against the grain of what else is on the shelf.

Wine Intelligence’s 2019 trends and predictions were over 80% accurate.