Wineries are getting crushed by millennial and Gen Z drinkers.
Volume sales for wine declined by 3% in the United States last year, the third consecutive drop for the industry. Prior to the contraction, wine sales have been close to flat since as far back as 2016, only enjoying a single-year jolt in 2020 when Americans were stuck at home during the pandemic.
Silicon Valley Bank reports that 58% of consumers over the age of 65 favored wine over other alcoholic beverages. But millennials and Gen Z, the latter just beginning to age into legal alcohol purchases, each prefer wine nearly 30 percentage points lower. The bottom line: Every consumer over 60 who stops drinking wine is replaced by a younger drinker half as likely to pick wine over other beverages, including liquor, hard seltzers, and ciders.
“It’s rather dour,” said Rob McMillan, founder of the Silicon Valley Bank wine division, during a presentation of the figures earlier in January.
“We have not done a great job as an industry around making wine approachable and relevant to younger consumers,” Tom Steffanci, president of Deutsch Family Wine & Spirits, tells Fast Company. “Even as a company, I wouldn’t yet give us high marks.”
A key obstacle is simply that Americans are drinking less. Last year, consumption of beer hit a decades-low level. Beyond refraining from alcohol altogether, there’s a movement toward nonalcoholic options and cannabis. January has become either “dry” or “damp,” as many abstain from alcohol at the start of each year.
The shift is generational, as millennials and Gen Z are drinking less than prior generations due to a societal movement toward prioritizing healthier lifestyle choices.
“The younger generations are very much concerned about wellness and what they put into their bodies,” says Kareem Massoud, a winemaker at the Paumanok and Palmer wineries in New York.
Only the spirits industry has remained resilient; in the process, stealing market share for 13 consecutive years from rivals.
Culture shifts and brands bucking the trend
“I can keep it chill like a sauvignon blanc,” sings rapper Paul Russell in his 2023 hit “Lil Boo Thang.” That was music to the ears of Steffanci, whose company’s wine brands include Josh Cellars and Yellow Tail. “Wine’s presence in youth pop culture is pretty limited,” he says.
Shows like Sex and the City and Mad Men helped popularize a stronger cocktail culture in the United States. Wine doesn’t have the same resonance. “I think there’s a lack of comfort, especially with younger consumers,” says Steffanci. “We accidentally created some rules and pretensions around wine that’s not there for spirits.”
Josh Cellars is among the brands bucking wine’s woes. It sells more than six million cases per year, notching consistent annual double-digit growth and is the largest wine brand in the U.S. “First and foremost, the wine quality has to deliver at that price,” says Wayne Donaldson, chief winemaker for Josh Cellars and head of production at Deutsch Family Wine & Spirits. “In a competitive market, you almost have to say it has to overdeliver.”
Earlier this month, Josh Cellars got a jolt from a consumer-driven meme craze that started on X and spread to other social platforms including Instagram and TikTok. “Why it's so viral all of a sudden is this combination of things: really good wine, honest stories, and very high availability,” says Steffanci.
But because Josh Cellars only commands a roughly 5% market share in the notoriously fragmented wine category, the amount of money it spends advertising the brand wouldn’t even rank it among the top 10 liquor advertisers. “There’s not the same amount of dollars getting the messaging out, which is why I think it is important to get connected into culture,” says Steffanci.
Topped off
The wine industry is also suffering from oversupply. There are too many grapes planted in states like California and Washington for wines sold under $12, a price point that has experienced a drop in demand. That may lead to further discounting and cut into profits for the margin-thin wine industry. Visits to winery tasting rooms have dropped for two straight years, even as travel rebounds.
“I purposely stock wines from Italy and France, from wineries I've been to and regions I've been to, so that I have real stories that I can tell about those regions, about those wines, and about the winemakers,” says Aaron Thompson, a sommelier and co-owner and operator of restaurants in Knoxville, Tennessee.
Fine dining is an occasion that wine used to dominate, but cocktails have encroached on this tuff. To educate drinkers, Thompson says younger guests are open to hearing a bit about a $75 pinot noir, but only if there is a truly interesting story to be told.
“You have to make it approachable and not pretentious,” says Thompson.
Massoud agrees that winemakers could be better storytellers. Paumanok is powered by 100% solar energy and is certified sustainable, but doesn’t talk enough about those practices. “Sustainability is not a fad or a trend,” says Massoud. “It is a mandate.”
“The consumers today really want to see themselves in a brand,” says Jenn Engel, chief customer and commercial officer at Republic National Distributing Company, a distributor of wine and spirits. Younger drinkers are more multicultural than older generations, and Engel says the industry should prioritize more diverse ownership of wine brands to reflect new drinkers as they age into the category.
By style, experts say the trends are moving in the right direction for white wines like sauvignon blanc and pinot grigio. There’s been a pivot away from oak-dominated chardonnays and other heavier wines that aren’t selling as strongly. Pinot noir is poised to see some positive momentum, insiders say, but prices tend to be high.
Preferences for different styles of wine are moving faster than ever, fueled by social media. That’s a challenge for wine, which doesn’t have the same agility as spirits and beer.
“We’ve got to figure out how to share enough information with consumers about wine, so they can enjoy it with some comfort and confidence, and do it in a TikTok world,” says Steffanci. “How do we do this in 10-second, bite-size pieces? We need to make consumers feel they know enough about wine to enjoy it.”
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