Silicon Valley Bank’s annual State of the U.S. Wine Industry Report offers an in-depth look at
the current struggles shaping today’s wine markets.
By Jeff Siegel
Perhaps the best news in Silicon Valley Bank’s 2025 State of the US Wine Industry Report? The U.S. wine market, given declining sales and inventory logjams at the retailer and wholesaler level, should yield what the report’s author, Rob McMillan, called “some of the most accessible bottle pricing of the last 30 years, a golden era for wine consumers in search of value.”
If that doesn’t kickstart demand, what will?
“Price is the tonic for oversupply,” said McMillan, who noted that it will take at least a year to clear the current inventory backlog. “We’re going to see discount pricing, but it might also be in other promotions or other ways than cutting pricing. We’re going to have to learn how to market and promote that way.”
So there was a smidgen of other good news in the bank’s 24th annual survey of wine industry conditions, released at a webinar today that included viewers from some two dozen countries. The webinar’s panelists included Kaleigh Theriault, Beverage Alcohol Thought Leader at NielsenIQ; Alison Smith Story, co-founder of Smith Story Wine Cellars; and wine industry consultant Peter Yeung.
Bright spots included the top quartile of wineries responding to the survey reporting average sales growth of 22% over the last year, as well as only one-third or so of the surveyed wineries saying their financial strength was slightly weak or very weak. And more than half said business was average or better.
Nothing but the truth
But the rest? More bad news as the wine business continues to suffer through its worst slump in some three decades. The survey expects overall U.S. wine sales to decline by 1% to 3% by volume for 2024, while this year’s business sentiment index is at a 10-year low. The biggest change in the index? Consumer demand, with about half of responding wineries citing declining demand as a key problem. That’s twice as many as in 2023 and almost a complete turnaround from 2022, when 19% saw demand as a positive.
“These are facts and data points, and the industry has to accept them to move forward,” said McMillan, noting that he had received many requests in the run-up to the webinar to downplay the ”doom and gloom” and “not to kill hope.” His point: The industry can’t devise solutions to fix the problems unless it acknowledges the current reality.
Critical factors creating challenges
Among the other report highlights:
- This downturn is similar to that in the early 1990s, before the Baby Boomers powered wine’s growth, and when there were organized anti-alcohol groups such as Mothers Against Driving that depressed demand.
- Wine remains just one choice of many for younger consumers, and it remains the third or fourth choice among those younger than 60 compared to beer, spirits, and what the report calls “other.” McMillan made the point that to expect younger consumers to drink wine “just because they should” is foolish.
- Theriault said on-premise has struggled since the pandemic, and the current numbers reflect that — down 7% in both volume and revenue through the end of 2024. Pricing is important here; it can’t go up anymore in the on-premise, she said.
- In the off-premise, she continued, despite declines in the second half of 2024, the $15 to $20 price range remains the sweet spot. But, she added, there is a difference between the wine shopper and the wine consumer. The former may not be buying wine to drink themselves, but to give as a gift.
- The growth of non-alcoholic products, said Yeung, includes a larger number of people who drink alcohol and not necessarily people who fully abstain. Drinkers may want a change — the term is “zebra striping” — while they’re out with friends or if they want to abstain for a certain period.
- Tasting room visitation is predicted to be slightly lower in 2025 compared to 2024.
- Almost half of winery survey respondents said they will take a small price increase in 2025, which may prove difficult in an over-supplied market with prevalent discounting.
- The bulk market remains oversupplied, though it is returning to 2020 levels. McMillan expects prices in grape contracts to drop, though later rather sooner. And it will be painful for many growers.
____________________________________________________________________
Jeff Siegel
Jeff Siegel is an award-winning wine writer, as well as the co-founder and former president of Drink Local Wine, the first locavore wine movement. He has taught wine, beer, spirits, and beverage management at El Centro College and the Cordon Bleu in Dallas. He has written seven books, including “The Wine Curmudgeon’s Guide to Cheap Wine.”
