Foodie Pundit

Global Wine Market Faces Deep Volume Downturn as Consumer Drinking Habits Shift

Demographic shifts, rising costs, and competition from alternative drinks are forcing a global realignment of wine production and restaurant beverage menus.

By Foodie Pundit Newsroom - Published - Section: Wine Spirits

Global Wine Market Faces Deep Volume Downturn as Consumer Drinking Habits Shift

Key points

  • Global wine demand is dropping due to aging consumer demographics and wellness trends among younger drinkers.
  • Inflationary pressures and rising production costs have driven wine prices up, causing consumer demand to soften.
  • Ready-to-drink cocktails and non-alcoholic alternatives are actively taking market share away from traditional wine programs.
  • Restaurant operators are adapting by trimming large bottle lists and expanding their by-the-glass options.

GLOBAL WINE CONSUMPTION IS FACING AN UNPRECEDENTED DOWNTURN AS DEMOGRAPHIC SHIFTS AND ECONOMIC PRESSURES RESHAPE CONSUMER DRINKING HABITS AROUND THE WORLD. RECENT MARKET INTELLIGENCE FROM REPORTLINKER.COM SHOWS A SYSTEMIC DROP IN VOLUME PURCHASES ACROSS MAJOR WESTERN MARKETS. DISTRIBUTORS AND CELLARS ARE CURRENTLY STRUGGLING TO MOVE EXISTING INVENTORY, FORCING PRODUCERS TO RETHINK THEIR LONG-TERM PRODUCTION STRATEGIES AND PRICING MODELS.

THE DECLINE IS NOT MERELY A TEMPORARY POST-PANDEMIC CORRECTION BUT A STRUCTURAL REALIGNMENT OF DRINKER PREFERENCES. YOUNGER GENERATIONS ARE DRINKING LESS ALCOHOL OVERALL AND OPTING FOR ALTERNATIVES LIKE READY-TO-DRINK COCKTAILS, CRAFT BEERS, AND NON-ALCOHOLIC SPIRITS. FOR RESTAURANT OPERATORS, THIS TREND PRESENTS AN IMMEDIATE CHALLENGE TO HIGH-MARGIN WINE PROGRAMS THAT HAVE HISTORICALLY BOLSTERED NIGHTLY GROSS PROFITABILITY.

FOR DECADES, WINE PRODUCERS RELIED ON THE BABY BOOMER GENERATION TO DRIVE STEADY GROWTH IN VOLUME AND VALUE. BOOMERS PROVED PARTICULARLY VALUABLE BECAUSE THEY TENDED TO DRINK WINE REGULARLY AT HOME AND WERE WILLING TO SPEND PREMIER PRICES AT RESTAURANTS. AS THIS DEMOGRAPHIC RETIRES AND CUTS BACK ON ALCOHOL INTAKE, PRODUCERS FIND THEMSELVES WITHOUT AN EQUIVALENT REPLACEMENT DEMOGRAPHIC TO FILL THE VACUUM.

MILLENNIALS AND GENERATION Z ARE APPROACHING ALCOHOL WITH A DISTINCTLY DIFFERENT MINDSET THAN THEIR PREDECESSORS. DATA COLLECTED BY INDUSTRY ANALYSTS INDICATES THAT THESE YOUNGER DRINKERS CATEGORIZE WINE AS A SPECIAL-OCCASION BEVERAGE RATHER THAN A DAILY STAPLE. ADDITIONALLY, WELLNESS TRENDS AND DRY-JANUARY CAMPAIGN MOVEMENTS HAVE NORMALIZED SOBER-CURIOUS LIFESTYLES, REDUCING OVERALL DRINKING FREQUENCY AMONG ADULTS UNDER FORTY.

INFLATIONARY PRESSURES HAVE COMPOUNDED THE VOLUME DROP BY ALTERING RESTAURANT DINING HABITS AND RETAIL SPENDING. WINE HAS BECOME SIGNIFICANTLY MORE EXPENSIVE TO PRODUCE DUE TO RISING COSTS FOR GLASS BOTTLES, CORKS, SHIPPING CONTAINERS, AND LABOR. PRODUCERS PASSED THESE INCREASES DOWN TO WHOLESALERS, WHO IN TURN RAISED PRICES FOR ON-PREMISE VENUES AND CONSUMERS.

CONSUMERS HAVE SENSITIVELY REACTED TO THESE HIGHER SHELF AND MENU PRICES BY CUTTING BACK ON UNNECESSARY EXPENSES. DINERS WHO PREVIOUSLY ORDERED A FULL BOTTLE OF WINE FOR THE TABLE NOW OPT FOR A SINGLE GLASS OR A CHEAPER DRINK ALTERNATIVE. IN THE RETAIL SECTOR, SHOPPERS ARE DOWN TRADING TO LOWER-PRICED BRANDS OR EXITING THE WINE AISLE ENTIRELY FOR ALTERNATIVE BEVERAGE CATEGORIES THAT OFFER MORE UNIQUE FLAVOR PROFILES.

THE RISE OF COMPETITIVE BEVERAGE CATEGORIES

THE WINE CATEGORY IS ALSO LOSING SHELF SPACE AND CONSUMER MINDSHARE TO EXPANDING ALTERNATIVE DRINK MARKET SEGMENTS. READY-TO-DRINK CANNED COCKTAILS AND HARD SELTZERS HAVE SEEN RAPID INNOVATION, OFFERING CONVENIENCE, CLEAR INGREDIENT LABELS, AND PREDICTABLE FLAVOR PROFILES. THESE ALTERNATIVES APPEAL DIRECTLY TO BUSY CONSUMERS WHO FIND WINE TERMINOLOGY CONFUSING OR INTIMIDATING.

NON-ALCOHOLIC AND LOW-ALCOHOL BEVERAGES ARE ALSO TAKING MARKET SHARE FROM TRADITIONAL WINE PRODUCERS. SO-CALLED PROOF-ADJACENT CONSUMERS DAILY CHOOSE PREMIUM ZERO-PROOF SPIRITS, CRAFT BOTANICAL DRINKS, AND DE-ALCOHOLIZED WINES. VENUES ARE CRAFTING EXCELLENT ZERO-PROOF DRINK MENUS TO CAPTURE THESE DOLLARS, WHICH DIVERTS SPENDING AWAY FROM THE CELLAR.

PRODUCTION OVERCUP AND INVENTORY BOTTLENECKS

THE DROPPING DEMAND HAS CREATED A DANGEROUS INVENTORY GLUT THROUGHOUT THE ENTIRE WINE SUPPLY CHAIN. VINEYARDS PRODUCED MASSIVE VINTAGES BASED ON OLDER DEMAND FORECASTS, AND BULK WINE STOCKS ARE NOW SITTING UNUSED IN STORAGE TANKS ACROSS MAJOR GROWING REGIONS. PRODUCERS IN CALIFORNIA, FRANCE, AND AUSTRALIA ARE WAITING OUT OVERCROWDED CELLARS WHILE SPENDING EXTRA MONEY TO MAINTAIN THEIR SURPLUS INVENTORY.

IN SOME TRADITIONAL EUROPEAN REGIONS, GOVERNMENTS HAVE HAD TO INTERVENE WITH FUNDING TO SUBSIDIZE THE DISTILLATION OF SURPLUS WINE INTO INDUSTRIAL ALCOHOL. VINEYARD UPROOTING PROGRAMS ARE ALSO GAINING TRACTION AS GROWERS AGREE TO REMOVE SURPLUS VINES TO REDUCE HARVEST VOLUMES. WITHOUT THESE DRAPE REDUCTIONS, BULK PRICES WILL CONTINUE TO DROP AND FURTHER WEAKEN FINANCIAL HEALTH ACROSS THE GLOBAL INDUSTRY.

RESTAURANT OPERATORS ARE BEING FORCED TO COMPLETELY RE-ENGINEER THEIR WINE LISTS TO PROTECT PROFIT MARGINS IN THIS NEW ENVIRONMENT. EXPENSIVE BOTTLE LISTS ARE BEING TRIMMED IN FAVOR OF CURATED BY-THE-GLASS SELECTIONS THAT LOWER THE FINANCIAL ENTRY BARRIER FOR DINERS. DYNAMIC PRICING AND SMALLER POUR OPTIONS ARE ALSO BECOMING POPULAR WAYS TO KEEP CONSUMERS ENGAGED WITHOUT FORCING HIGH MENU SPEND.

MANY HOSPITALITY OPERATORS ARE ALSO DIVERSIFYING THEIR DRINK SELECTIONS TO OFFSET SLUGGISH WINE SALES. INCREASED SHELF AND MENU SPACE IS BEING ALLOCATED TO HIGH-MARGIN CRAFT COCKTAILS, LOCAL BEERS, AND SOPHISTICATED ZERO-PROOF DRINK PROGRAMS. ESTABLISHMENTS THAT REMAIN FLEXIBLE AND OPEN TO CONSUMER PREFERENCE CHANGES ARE FINDING WAYS TO MAINTAIN BEVERAGE PROFITABILITY DESPITE DROPPING VOLUME.

FOR DINERS AND EVERYDAY CONSUMERS, THE CURRENT WINE MARKET SURPLUS COULD SOON LEAD TO BETTER VALUE OPTIONS AT RETAIL STORES AND NEIGHBORHOOD RESTAURANTS. WHOLESALERS AND PRODUCERS SEEKING TO CLEAR OUT EXCESS INVENTORY MAY OFFER PROMOTIONAL DISCOUNTS AND BETTER WHOLESALE PRICING TO VENUES, WHICH CAN SECONDARILY TRANSLATE TO LOWER GLASS PRICES FOR PATRONS. CONSUMERS CAN ALSO EXPECT TO SEE MORE ACCESSIBLE, UNPRETENTIOUS PACKAGING FORMATS SUCH AS CANS AND BOXED VINTAGES IN THE COMING MONTHS.

FOR RESTAURANTS, SURVIVING THIS SHIFT REQUIRES A BALANCED BEVERAGE MENU THAT DOES NOT RELY SOLELY ON TRADITIONAL BOTTLE SALES FOR PROFITABILITY. EXPANDING GLASS PROGRAMS, INTRODUCING CREATIVE NON-ALCOHOLIC FLIGHTS, AND REMOVING OVERLY EXPENSIVE WINES FROM INVENTORY WILL HELP PROTECT MARGINS. BY MEETING CONSUMERS WHERE THEY ARE AND EMBRACING MODERATION TRENDS, OPERATORS CAN SUCCESSFULLY NAVIGATE THIS SHIFTING DRINK LANDSCAPE.

Sources and methodology

Reported from the public datasets below.

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