Silicon Valley Bank’s latest wine industry forecast says the current correction, the most significant since the late 1980s, could last for several years as the industry addresses excess cases and courts new consumers.
The wine industry is experiencing a significant recovery due to falling demand, and it may take several years to correct the overall bump in sales growth, according to an influential industry report released on Thursday.
Sales revenue for premium wineries (those that generally produce retail wine for over $20 a bottle) fell 3.4% on average through September of last year from the same period in 2023, according to a report from Silicon Valley Bank, now part of of First Citizens Bank. This analysis came from SVB’s review of Vintner’s database of financial statements collected over decades.
Last year’s sales growth for these top-tier manufacturers was below 0.6% DIP for all of 2020, the pandemic’s initial year, which had been the first such drop in sales revenue in more than a decade. .
“We are in a demand reset,” said report author Rob McMillan, founder of SVB’s Wine Division, during a webinar on the report.
However, not all wines are seeing the effects equally, the analysis found. The top quarter of wines analyzed saw an average of 22% revenue growth last year, while the bottom quarter saw a 16% revenue decline.
Overall, US wine sales are expected to be down 1% to 3% by volume, according to preliminary estimates cited in the report.
“The wine industry is undergoing significant change, marking the first demand-driven correction in three decades,” McMillan said in a statement. “We’ve been anticipating a generational shift for many years, and the data from the 2025 report reinforces the wine industry is now living that reality. Different parts of the industry will recover at different times, but we can expect a continued decline for some time before we reach flat growth.”
Long term issue
The correction is expected to be prolonged, with the industry likely to find an end and return to zero growth around 2030, McMillan wrote. The premium business is expected to return to flat growth between 2027 and 2029.
The economic impact of the correction is significant, with premium wineries experiencing a drop in revenue and an increase in operating expenses. Interest expenses have also increased due to higher balances on lines of credit and rising interest rates.
The previous demand-based correction McMillan noted was 1986—1994, which saw Boomers emerge as major wine consumers and the anti-alcohol movement gained ground.
“We’re not going to have the French paradox to take us out of this,” McMillan said in a Thursday webinar on the report.
Research on the health benefits and challenges of wine has been a hot button issue among researchers for decades. Data on the “French paradox” of the lower incidence of heart disease among the French despite higher consumption of wine, cheese and other foods came to public attention with a 1991 “60 Minutes” broadcast. is credited with establishing an increase in sales for red wines along with planting thousands of acres of red wine grapes, especially Sauvignon Cabernet.
The SVB report also noted that some white wines are enjoying positive or less negative sales growth compared to red wines, which have been the main growth drivers for decades.
Inventory issues
The wine business as a whole tends to grow, leading to an oversupply of wine, the report said. After the rapid purchase of wine and other alcohol in the first months of the pandemic, retail and wholesale inventories supported. Wines are now cautious about holding inventory in an environment of reduced demand.
California and Washington in particular have significant oversupply issues, the report said. Bulk wine is plentiful and available at low prices, but buying activity has been sporadic.
Visit to the tasting room
Tasting room visits have been lower than expected, and that trend is likely to continue this year, the report said.
The decline is attributed to changing travel patterns and preferences among consumers. The expected return of visitors after the “revenge trip” after the fundemia abroad has not yet materialized, the report noted.
Generational change
Older, high-spending wine consumers are being replaced by younger consumers who are trending toward lower wine preferences.
To mitigate the decline of older consumers, the industry needs to improve its approach to the 30-45 age group and improve its share of beer, wine and spirits in that group, McMillan wrote.
Younger consumers (21—29) are more likely to abstain or drink alternatives to wine. The industry should target the 30-45 age group to reverse the decline in demand.
Price adjustments
Discounting is expected to continue as a strategy to address oversupply, the report said. Established labels may not need to discount their top-line offerings, but may use other tactics to drive volume.
The SVB survey found that 42% of buyers plan to make a small price increase this year. McMillan wrote that such a move could be challenging in a market with abundant wine supply and increased discounting to move unsold inventory.
Jeff Quackenbush covers wine, construction and real estate. Reach him at jquackenbush@busjrnl.com or 707-521-4256.