Both the Silicon Valley Bank (SVB) and SOVOS/ShipCompliant Direct to Consumer Wine Shipping (DtC) reports have come out, and both noticed the same thing: Overall wine consumption is showing negative growth, with a loss of both volume sold and value.
While this might sound like disappointing news, there’s something important tucked away in these reports, too: A way forward for the wine industry, and a recipe for getting there.
That recipe can be a little hard to find. Here’s our summary of what it looks like.
The Industry Can Weather the Economy
The SVB and SOVOS/ShipCompliant reports both explicitly mention recession fears and inflation woes. But the SVB one goes further and notes that the wine industry is in a good place to weather a potential economic downturn: “If you run a winery, the worst place to find yourself entering a recession is with bloated inventory levels…with three years in a row of short harvests and good-quality vintages, we have balanced cellar stocks.”
In other words, wineries will probably not need to do serious discounting if the economy slows. The focus, then, should be on how to continue growing brands to ensure future growth.
Premium Brands Are Best Positioned to Expand (and Ship)
Both reports note how well premium brands have done, one of the bright spots of continued growth. It also appears that premium brands tend to be more resistant to inflation (especially as wealthier individuals tend to buy based on their net worth, and not their income). This would suggest that marketing to more affluent clients would be worthwhile. There is also evidence in the SOVOS/ShipCompliant report that premium brands are still being bought and shipped, making this a robust channel for sales.
But We Need to Appeal to the Next Generation, Too
The SVB report makes it very clear that the industry needs to find a way to appeal to the next generation of customers. (We’ve said this before. And even before that.) There are various reasons why younger generations are not consuming wine the same way that previous generations have:
- Economic reasons. Inflation tends to disproportionately hurt younger people who are still early in their careers. They are now pulling back on wine orders, even for value brands.
- Sobriety trends. Younger people are more likely to join sobriety movements or participate in things like Dry January.
- Experience and experiment. Younger people are eager for new experiences and are willing to experiment with many kinds of alcoholic beverages. Novelty trumps brand loyalty.
Knowing these reasons can actually inspire a plan for action for those willing to think through them. For example, wineries can diversify their offerings and experiment with:
- Sell the story behind the wines and not just the brand
- More ways to sample and try wines at little-to-no cost
- Better “on-ramp” products for newer generations
- Novel flavor combinations
- Non or Low-alcoholic equivalents of existing brands
- Labels and marketing that incorporate more humor
- Partnerships with other products—even other alcoholic beverages
Lean on Well-Regarded Partners
Appealing to younger generations (Millennials, Gen Z, and even “Gen Alpha”) will take a lot of thought and investment. This is a marathon, not a sprint. The good news is that the industry is, again, in a good place to do just this. Per the SVB, “The quality of solid technology partners and service providers supporting the wine industry with great solutions has never been better.”
The technology part is good news, because it means that wine producers can meet these generations where they are when it comes to technology. The service providers part is also good news, because it means that the industry can continue to provide experiences that surprise and delight consumers, especially when it comes to wine shipped directly to the consumer.
If there is one “Big Takeaway” from both reports, it’s that these past few years have been totally unlike the past decade or two. Technology is changing, consumers are changing, and the way wineries do business is changing—and all three changes have happened faster and faster.
But the wine industry is ready to change, too. There are an unprecedented number of good tools, premium service partners, and good data with which to make important decisions. The industry might not look the same at all in another decade…and that will be a good thing.
If you are curious about how your logistics partner can play a role in preparing your DtC channel for this new future, please come to us with your questions.