News and Insights
This Year’s State of the Wine Industry Report Urges a Need for Change and Adaptation: Innovative Marketing Can Help
February 15, 2024
Reading through and listening to the presentation of this year’s Silicon Valley Bank State of the Wine Industry report, one word was repeated throughout: adapt. An industry that has survived for centuries and overcome the seemingly insurmountable obstacles of prohibition and phylloxera, American wineries can most certainly bounce back from the last few years of declining sales, but not without righting the ship. The heart of the industry is what’s in the bottle, but a quality (and legacy) product needs the support of refreshed thinking and promotion to regain the market share and growth it previously held.
Addressing the RTD and NA Issue – Becoming the Cool Option
Wine alternatives, such as cannabis-infused drinks, ready-to-drink (RTD) beverages and low/zero alcohol options, present a challenge to the traditional wine industry. While some producers have started adopting these trends and have incorporated low ABV options into their lines or created wine-based RTDs, there is still hope for wine to regain its place as the first choice beverage. In the promotional landscape, wineries could flip the script and position themselves as the alternative to the other beverages. Younger consumers need a new view on wine: the same tried and true promotions are no longer resonating. Looking at where these alternatives are reaching consumers through activations, creative influencer alignment and fresh partnerships brings wine back into the ‘cool’ conversation. If all your friends are drinking hard seltzer, stand out by choosing wine.
Direct-to-Consumer Engagement – Developing New Brand Fans
Reaching consumers through direct-to-consumer channels has long been a challenge for American wineries, simply given the antiquated legislation restricting shipping access, but direct-to-consumer offers an opportunity for the wine industry to regain market share and control. As SVB predicts that these sales will trend upward in 2024, how can the wine industry capitalize on this predicted upswing? While craft distilleries and breweries hinge on direct-to-consumer sales, other alternatives are almost purely wholesale and retail plays. Not only could the industry put more pressure on the legislators to remove barriers, wineries would be smart to rethink how they approach direct-to-consumer sales and promotions. Wine Clubs are too ubiquitous to be a differentiator, but strategic partnerships, increased offerings, and a larger investment in advertising and promoting wine clubs would move the needle; incentivizing direct sales by creating increased value.
Tasting Room Visitation – Reinvigorating Wine Tourism
2021 was a remarkable year for tasting room visitation, as noted in the report, mostly due to the release of the vaccine and wineries having open-air spaces; As more of the world opened up, it was not surprising that tasting room sales fell back to pre-COVID levels. However, tasting room visitation and sales are major profit centers for many of these wineries. Through much of our destination work, our team evaluates current travel trends; and the question becomes, how do we create new experiences in wine destinations? Highlighting younger wineries in Napa, building itineraries in the Willamette Valley, celebrating the beauty of the Columbia Valley, and working with less-traveled regions, including the Okanagan Valley and parts of Texas, on robust tourism campaigns will bring visitors to the regions, create new devotees who will buy local.
Premium Growth and the 2023 Vintage – Celebrating Quality
While volume sales finished lower in 2023 for the Premium category, value sales are higher than in previous year, indicating that premium wineries were able to raise prices, although not able to move inventory. Increased prices imply an elasticity for consumers, but paired with less overall consumption.
Concurrently, growers and winemakers are excited about the 2023 vintage, citing long and temperate growing seasons across major AVAs. Knowing that consumers are willing to spend a little more, the excellence of the vintage presents an opportunity to create the wine collectors of tomorrow. Indicating to consumers that, most of the time, a higher price does correlate with higher quality, educating younger drinkers about the quality of the 2023 vintage, and what even makes a vintage better than others, and celebrating the excellence of American wines using 2023 grapes all will have returns past the release of the 2023 vintage and support life-long relationships between producers and consumers.
Embracing Change
The strategies for adaptation intersect through the need to adapt; American wineries bottle some of the top wines in the world, adjusting how we engage consumers. To paraphrase the report authors: success will come when addressing the needs of new consumers and no longer focusing on the 60 year-old+ drinker who has upheld the wine industry for decades and has slowed spending. Blowing the dust off wines and refreshing our tactics is the solution for sustained economic stability and growth. Reflecting on the Consumer Lifestyle and Sports team’s work across travel and hospitality, we know that innovation is the key to reinvigorating brands and industries to create consumers for life.
TAGS: Consumer & Lifestyle
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