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Wine Spectator: Where The Wine Market Is Headed In 2023

January 25, 2023

U.S. wine consumption declined an estimated 1% in 2022, according to Impact Databank. California wineries report that tasting room visits are down. Even rare wine sales are slowing—the Liv-Ex 100, a London-based index of the top collectible wines, declined for the first time in 18 months in July, then again in October and November.

Analysts are trying to gauge the impact an economic slowdown could have on the industry in the coming year. “The divergence between lower price and higher price has never been wider,” Rob McMillan, executive vice president for Silicon Valley Bank (SVB) and head of its wine division, told Wine Spectator. “We really have two different wine industries now.”

“The positive growth in premium wine sales is expected to continue into 2023, tempered by the shadow of demand concerns due to the lack of adoption by consumers younger than 60,” McMillan added in a statement released in conjunction with SVB’s annual State of the U.S. Wine Industry Report. “Concerns about alcohol on health, difficult global economic conditions, and the growing influence of climate change is impacting consumer behavior.”

The SVB report added that overall U.S. wine volume is expected to stabilize this year, but that “rising demand for spirits, alternative beverages, and better-for-you offerings” is continuing to pressure the wine category on- and off-premise, and that bringing younger generations of consumers into the category remains the main challenge.

Regarding the larger economic picture, Stephen Rannekleiv, Rabobank’s global strategist for the beverages sector, told Wine Spectator, “This shows some signs of being a Patagonia vest recession. Tech workers are getting laid off right now. At the same time, sales of Busch Light are growing as blue collar workers earn higher pay but are also paying more for everything due to inflation.” Lower income households are grappling more with inflation, as prices have outpaced rising wages.

But the premium wine sector—wines priced at $15 a bottle and up—depends on higher income consumers. While there have been layoffs in tech and a few other sectors, employment is still pretty strong overall and wages are solid.

A year ago, many importers and retailers were warning that wine prices would rise dramatically in 2022, just like most other consumer goods. But, for the most part, that hasn’t happened. That isn’t because winemakers are enjoying lower costs. Just about everything in wine production has gotten more expensive, thanks to supply chain issues. Paper for labels has gotten pricier. A fire at a glass factory in Argentina left many producers scrambling for bottles. Fuel costs have been higher, particularly diesel, which is crucial for transporting wine around the country and the globe.

But most premium wine producers haven’t raised prices by much, if at all. The reason? Wine sales were sluggish for much of last year, especially compared to spirits sales, and wineries didn’t want to risk raising prices and turning off consumers. “There have been price increases, but not enough to cover inflation,” says McMillan. Keeping prices steady while costs are rising is not a recipe for profits, but wineries seem willing to swallow some short-term pain rather than risk losing customers. Wine Spectator has the full story.

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