Let them eat cake…
I am reminded of the infamous quote by Marie Antoinette decrying her poor constituents prior to the French Revolution. Today the phrase is more associated in marketing circles for the ultralux spending habits of the wealthiest 1-5% that seems disassociated from the mainstream economy. Jewelry, travel, ultralux cars and experiences continue to be in demand by top segment consumers in North America and abroad, unfazed by the price of eggs at the grocery store or farmers market.
As 2024 draws to a close and people take stock of the year past and make predictions of the year to come, the wine industry is at a crossroads of generational change, shifting beverage preferences and economic challenges depending who you speak to.
Just like cars, the wine industry is broken into segments. Based on the October 2024 WSWA SipSource wine sales are trending off -8% YoY with the lower commercial tier of wine off double digits by -12.7%. Direct to consumer (DTC) sales were likewise off by more than -10% YoY through October. Yet the average price per bottle sold is up +5% indicating in elasticity in upper label boutique and top-end segments.
This does not mean that the upper luxury segment is immune to change. During the holiday season, private equity food and beverage firm Butterfly completed its acquisition of the Duckhorn portfolio. Closer to home in Southern California a number of Temecula Valley wineries are joining the likes of Hart Family and Weins looking for new pathways forward as the founding generation seeks to retire without the benefit of the next generation willing to pick up the mantle and carry the family brand name forward.
Key to this is generational tastes and preferences. For some time palates have shifted in the wine world from traditional new world style red wines in particular – alcoholic, robust, tannic and expensive – to a bifurcation of stylish cocktails with fancy names to lower alcohol wines. This low alcohol trend has birthed a resurgence in ancient natural wine making with its lower expense and less intrusive wine technique, to no alcohol wines popular with chefs and other hospitality industry workers who prefer taste that fermentation provides without the inebriation. While it may be safer to filet that branzino while enjoying a “no no,” de-alcoholized wines undergo a rigorous and expensive process (at least with today’s available chemistry).
2025 will offer continued change. Once can imagine the rise in rectifiers (raising my own hand here as one who blends finished product alcohol to invent new creations), as well as continued diversity in beverage portfolios. The old expression “it takes a lot of cold beer to make good wine” comes to mind and many wineries have added and will add suds to their beverage mix. Not only is this a self serving and opportunistic play but it further taps into the slice of consumers that have sulfite allergies. And as CBD beverages become more mainstream we can also appreciate the continued rise in that segment as well for individuals who prefer another “drug of choice” over alcohol.
For me – you will find me on the farm or in the kitchen, blending away or mixing the next spritzer sensation for your evening sunset. Bring in the new year and the changes it offers, while enjoying the breadth and creativity of the beverage industry.
Cheers.
StonewoodWine 