Is the U.S. wine boom over?

U.S. wine boomThe end of the U.S. wine boom will change the wine business, and consumers almost certainly won’t be the better for it

I’ve written about this before on the blog, but usually in bits and pieces – that the 40-year U.S. wine boom may have ended. But this story, which I wrote for the trade magazine Wine Business International, goes into all the grisly details. There’s a lot of math involved, and the last quarter of the piece is business-oriented, but still worth reading for those of us who love wine.

That’s because the end of the wine boom will change the wine we are able to buy, how we are able to buy it, and who makes our wine – and not necessarily for the better. Consider:

• The growth that made the U.S. the biggest wine consuming country in the world has ended. Instead of the 5 to 10 percent annual increases that weren’t unusual during the four-decade run-up, look for wine consumption to grow only as much as the increase in the country’s drinking-age population, about one percent.

• Prices could well remain flat, since more and more wines will be chasing the same number of wine drinkers. By one analyst’s estimate, there are about 125,000 wine labels on U.S. shelves in any one year, but the high frequency wine drinker buys only about 75 bottles a year. Who is going to buy the rest?

• Flat prices are good news for the consumer, but the bad news? Consolidation among retailers, distributors and producers, which shows no sign of ending, could make it more difficult for all but the biggest producers to make an impact on wine drinkers. Who else will have the money to market wine in that glutted a market? And the wines they’ll be marketing will almost certainly be boring, focus-group driven, and all taste the same. In other words, red blends run amuck.

Those three things may also offer an explanation for premiumization. If you can’t sell more wine, and prices are flat for the wine you can’t sell anyway, then invent new, more expensive wine to sell. Which sees to be what has happened since the recession started in 2007 – the value of the wine sold in the U.S., as measured in dollars, has increased more than the amount of wine sold, 25 percent to 21 percent.

Finally, the trade magazine post has generated a fair amount of buzz on the cyber-ether, and Forbes even picked it up (though the piece misspelled my name). Which is all well and good, but why didn’t anyone notice this before? Were we too busy focusing on toasty and oaky to see what was going on?

Photo courtesy of Peachridge Glass, using a Creative Commons license