The wine market is current facing its share of challenges, with volume declines expected to continue. But opportunities in the premium segment exist, likewise for sparkling and alternative wines. This is according to the latest research from UK-based drinks market analyst IWSR, which also predicts that the influence of e-commerce will expand in the category.
Unlike spirits, which is bouncing back strongly following the pandemic, the wine market continues its slow decline as consumers reduce their discretionary spending, particularly on the on-trade. New research from IWSR highlights a “challenging” outlook over the short- and medium-term, with the slow drop in volumes seen across many markets forecast to continue.
Wine in decline
In the first half of 2021-2022 wine volume sales declined by 5%. Out of the top 20 wine markets, only Brazil has a higher wine consumption than in 2017. The drop in the number of wine drinkers in many core markets is greatest among those who are between legal drinking age and 34-years-old.
That said, the number of wine drinkers in the US, and UK and Japan has seen an uptick. While still lower than in 2015, overall figures are “significantly better” than in 2021 says IWSR. And sales in the on-trade saw an increase in key markets last year – notably the US, UK, Australia and Brazil –, driven by younger consumers. Yet, the next 12 months will be crucial for the segment given the cost of living crisis, and will determine whether this “post-Covid hospitality boom” is here to stay.
Wine segments with potential
Brands will need to innovate to capture younger consumers, says IWSR, a discerning demographic that is contributing to the premiumisation of the category. These consumers are said to consume less but better; they are not as engaged with mainstream brands, but are willing to explore.
Premium wines are performing “significantly better” than lower-priced wines, says IWSR, a trend that is expected to continue. Within this category, the sparkling segment is seeing growth; with Prosecco and Champagne being consumed more informally at home, sparkling wines emerged stronger from the pandemic, and have seen a shift in consumer attitudes.
Growth too, is evident among still wines although at lower levels. Premium-and-above still wines saw global volume growth of just under 1% in the first half of 2022 compared with the first half of 2021, in contrast to the overall market decline.
Fitting in with the ‘less but better’ trend, organic, natural and sustainably produced wines are seeing a much more positive reception from consumers, and could also capitalize on this shift towards premiumisation. They also resonate with the health and environmental concerns among Gen Y and Gen Z, says IWSR.
Low-alcohol wine is driving growth in the no/low category in the US, Germany, Japan and the UK. IWSR highlights that new technology is improving the quality and taste of alcohol-free wine, which “struggles to gain acceptance in many markets.”
Online continues to grow
Online’s share of alcohol sales in key markets is on the increase, says IWSR, noting that e-commerce in the wine segment was given a boost by the pandemic as many consumers ordered online for the first time. Further growth opportunities are to be had. In the US, Canada and Brazil, up to one third of wine drinkers who do not purchase online are open to the idea, says the research.