Steady Growth Expected for Already Huge U.S. Market, Leads L.E.K. Consulting's Top 10 Wine Industry Trends
BOSTON (July 31, 2018) – As the wine industry has been experiencing its fair share of twists and turns in recent years, L.E.K. Consulting has released a list of the 10 biggest trends currently affecting the wine sector.
Topping the list, L.E.K. notes the already huge wine market is still growing steadily. Last year alone, U.S. consumers uncorked $32 billion worth of wine – a number that’s expected to reach $43 billion by 2022, for an annual growth rate over 6%. L.E.K. research shows that even an economic downturn would not adversely affect growth, as the trajectory stayed positive during the 2007-08 recession. In addition, “fine and premium” wine (over $10 a bottle) sales have grown around 8% a year since 2012 and are on pace to hit around $25 billion by 2022.
Among the other trends facing the wine sector:
- Labor shortages are beginning to take a toll. Already a primary concern for the U.S. wine industry, labor shortages have been heightened by recent immigration policy reforms. Further exacerbating the issue is increased competition from alternative crops – newly legalized marijuana crops offer workers better pay and less physically taxing work.
- Direct-to-consumer (DTC) sales are on the rise. Shipments to consumers from wineries approached $3.1 billion in 2017 and are expected to grow around 11% a year to reach $5.2 billion in 2022. Smaller wineries are leading the DTC trend.
- Millennials are driving overall wine market growth. Between 2012 and 2016, millennials and Gen Xers upped their share of consumption by 8% – and edged out baby boomers as the biggest consumer segment in the wine market. In fact, millennials’ current affinity for rosé wines saw consumption rise by 53% in one year.
- “Drinking in” is the new thing. Driven by millennials who are unwilling to pay high restaurant wine markups, off-premises consumption now represents more than 80% of overall wine consumption – more than off-premises consumption of beer or distilled spirits.
“One of the top trends we noticed was the continuing consolidation of the wine industry,” says Rob Wilson, Managing Director at L.E.K. and author of “Top 10 Trends Affecting the Wine Industry.” “Last year, the top 14 suppliers controlled about 80% of the U.S. wine market by volume. Buying and M&A opportunities remain, however, as some 9,000 suppliers produced the remaining 20%.”
Finishing the top 10 trends: New forms of packaging – boxed wine, single-serve, canned wine – are gaining steam as “drinking in” becomes the norm; distributor consolidation is limiting market access for all but the biggest wholesalers; and wine shipping laws are slowly, but surely, evolving, making it easier for smaller wineries without distributors to reach consumers.
About L.E.K. Consulting
L.E.K. Consulting is a global management consulting firm that uses deep industry expertise and rigorous analysis to help business leaders achieve practical results with real impact. We are uncompromising in our approach to helping clients consistently make better decisions, deliver improved business performance, and create greater shareholder returns. The firm advises and supports global companies that are leaders in their industries — including the largest private and public-sector organizations, private equity firms and emerging entrepreneurial businesses. Founded in 1983, L.E.K. employs more than 1,200 professionals across the Americas, Asia-Pacific and Europe. For more information, go to www.lek.com.