The good news in SVB wine report 2021: This year should be an improvement over 2020. But don’t get your hopes up for 2022
How about some good news in the SVB wine report 2021, Silicon Valley Bank’s annual state of the wine industry effort? It would be a welcome change from the gloom and doom of the past 10 months, as well as the past couple of years of SVB reports.
“I think the news will be measured and good,” says Rob McMillan, the report’s author. We exchanged emails in the run-up to the report’s official release and webcast yesterday.
“I think we have a bounce ahead of us,” he says. “And going back to history, I remember having data that showed a massive growth in wine consumption in 1945, then a drop in 1946. I do expect a bounce in 2021 – maybe not like 1945. Call it a rolling celebration that will span 2021 and into 2022 as occasions and delayed celebrations come back.”
The report reinforced that good news – assuming the pandemic gets under control and the wine business doesn’t do anything stupid:
• Expect a bounce in demand if tourism and restaurants come back. The report sees an increase in wine sales gaining momentum in 2021, but it may not be sustainable next year.
• Wine demand this year did not increase, no matter what others are saying. Instead, says McMillan, what happened is what’s called a channel shift — we bought less wine at restaurants and more wine at supermarkets and on-line, but the overall total didn’t change. In this, restaurant wine sales have not recovered and may still be down as much as two-thirds over the same time last year.
• Premiumization is nearing its peak, but will continue this year thanks to that pent up demand and the industry’s efforts to reduce the wine supply. The 2020 California harvest may be the smallest in a decade.
• Retailers who understand on-line sales and e-commerce – even without more loosening of three-tier laws — “will have a strong 2021.” The report says on-line sales could represent 20 percent of an average winery’s sales within five years – an impressive figure, given those are in the mid-single digits now. And e-commerce sales during a three-month period in 2020 increased as much as the previous 10 years.
Not all was good news, of course. What else would we expect after 2020? Wine’s growth rate, even with premiumization, has declined across all price segments for years, and there is no reason to expect a long term change unless the wine business changes tactics in how it sells wine. In addition, as Baby Boomers continue to drink less wine, the industry must find a way to reach under-40 consumers. Which, as we know, it has failed miserably at.