Decline in U.S. Wine Consumption Predicted By Silicon Valley Bank Report

Millennial drinkers are the main reason why U.S. wine consumption will trend downwards in 2016. So says the Silicon Valley Bank in their 2016 report released last week.

“Per capita consumption of wine in the U.S. will temporarily reverse trend as Millennials, who are consuming more craft spirits and beer, begin to replace retiring baby boomers, and as a larger consumer focus is placed on premium versus generic sales overall,” the report claims.

Moreover, Millenials are more willing to buy foreign wines than other American generations, the report says. This will also cut into U.S. wine sales.

The SVP bases their yearly report on an annual survey of 650 wineries, along with being “one of the largest bankers to the West Coast wine industry.

The trends of 2016 are no one-time fluke. Younger generations will continue to expand into the wine-buying populace. Consumers from Generation X will overtake Baby Boomers around the year 2021 to become the largest fine-wine consumer demographic in the US, the report states, while Millennials will similarly surpass Generation X around the year 2026.

The 2016 report expects to see “bottle prices rise by 4–8 percent above the $10 price point, and we will see both volume and price drop below $8 bottle price.” The bank also believes that fine wine sales will end 2016 with growth of between 9% and 13%, a slight decline from the roughly 14% sales growth of 2015.

“While demand for premium wine will increase this year, there are clouds on the horizon that should be considered,” said Rob McMillan, founder of Silicon Valley Bank’s Wine Division and author of the report, in a press release. “We believe total and per capita wine consumption in the US will drop for the first time in more than 20 years due to emerging generational shifts in consumption patterns that we see accelerating in the near term.”

The growth of foreign bulk wine negatively affected vineyards producing similar bottles in California’s Central Valley. Accordingly, 100,000 acres of vines in that area were removed.

Not all is ominous news. Impressive crops from past years should help make up for the 2015 California drought that affected so many vineyards.

“While retail bottle prices will modestly increase this year, the consumer will still benefit from three consecutive large and excellent harvests in 2012, 2013 and 2014,” McMillan said. “Not all of that wine will make it into branded premium labels and that will leave plenty of great juice available for domestic négociants who will repurpose it into imaginative labels.”

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