A Bad Hangover

It seems Americans are starting to skip out on wine o’clock.

After 25 consecutive years of growth, wine consumption in the United States declined by 1.5% in 2019, according to the industry research group ISWR. It’s a decline that has caught growers, vintners, and many others associated with wine by surprise. At the same time, there’s a wine glut, with the prices of California wine falling to their lowest level in two decades, according to one industry watcher.

Now industry leaders have two major questions on their minds: Is this the start of a trend? And if it is, what can they do about it? “This is an indicator. You should never ignore an indicator,” says Lisa Curtin, a Korn Ferry area practice leader who works with consumer and agricultural firms.

To some degree, such shifts are indicative of how one once-stable industry after another is facing disruptions. But wine trade has its own particular issues that make things even harder for its leaders. The very nature of the business itself, including production, marketing, and shipping, causes challenges for leaders. Then, of course, there’s the weather, where not enough rain—or too much rain—can ruin a season’s worth of product.

More pressing are the demographic shifts and changing habits that may push down wine demand. Research shows that more and more consumers, particularly millennials, are opting for healthier products that are both socially good and environmentally sustainable. “Younger generations are selecting away from wine and into other beverages that better fit that profile,” says Pablo Golfari, market leader of the Industrial practice for Korn Ferry’s Professional Search team in North America. Indeed, data shows that distilled spirits and ready-to-drink products like spiked seltzer have seen significant gains in 2019, with the latter growing by nearly 50% last year.

But this doesn’t mean that wine companies can’t compete with other businesses and trends. In times of slumps, even small ones, leaders would do well to focus on increasing sales among their current client base, Golfari says. “You don’t want to revolutionize your business model, but you want to double down on your business model,” he says. “You have to get your customers to buy more of your product.”

This starts by knowing your customer. Experts say leaders can get ahead of trends and make more informed decisions about their product and strategy by gathering robust information on consumer preferences. “When you have the data, you’re going to see these changes in behavior coming,” Curtin says. With more data, leaders will be better able to target customers through marketing and influence their buying habits, she adds.

To be sure, this dip in wine consumption may be temporary. And although Americans are drinking less wine, it doesn’t mean they’ve stopped drinking each variety of wine equally. Consumption of sparkling wine, for instance, increased 4% last year, according to the ISWR. So, even if the decline isn’t a cause for alarm, Curtain says leaders should dig into the data to understand not only what it represents for their business, but what it is indicating about their particular customer group.