SVB Report Sees Continuing Headwinds, But Better Premium Wine Sales For 2024
January 19, 2024Silicon Valley Bank’s Wine Division has issued its State of the U.S. Wine Industry 2024 report, predicting that the wine market will continue to face headwinds this year, with volume projected to decline once again. However, the state of affairs is not entirely bleak with SVB predicting that, overall, value growth could be as high as 1.5% and that premium wineries will see stronger value gains this year, with premium brands able to take small price increases. The report also predicts that tasting room visits, which have slumped the past two summers, will rebound in summer 2024. DTC sales are also forecasted to see moderate growth this year.
Amid the uncertain conditions facing the U.S. wine market—which eked out a small value increase in 2023, according to Impact Databank, despite declining 2% to 322 million cases—SVB cautions that the industry continues to produce more wine than consumers will purchase, writing: “Total wine consumption is decreasing by volume. Retail inventories are backing up into wholesale. Wholesale inventories are bulging, and wineries are being more cautious about carrying inventory in a reduced-demand environment.” California and Washington have over-planted with vineyard acreage exceeding consumer demand, SVB added, while Oregon acreage and demand are more balanced.
For premium wineries, many of the challenges faced in 2023 should begin to ease, according to the report. While still a threat, inflation is falling, and SVB notes that 70% of premium wineries managed to partially cover higher costs driven by inflation and 15% managed to fully recover those added costs. As travel continues to return to normal, the report predicts that winery visits will rise, pointing to TSA data that shows that, as of June 2023, travel is exceeding its pre-pandemic high. —Shane English
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