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Wine Consumer Trends: Millennials Rising

By Chris Bitter, Vintage Economics

· Consumer Trends,Wine Market,Demographics

The Spotlight is on the Millennials

The baby boomers have passed the peak of their careers as wine consumers and their exodus from the market will accelerate going forward. This will create a huge hole in wine sales to backfill. Gen X appears to be on a lower trajectory with wine. So, the spotlight now shines brightly on the millennials.

The general perception seems to be that wine is losing the battle for the millennials. And it is true that they punch below their weight in the wine market: they make up 27% of households but generate just 24% of wine consumer spending.

But, based on my analysis of data from the Bureau of Labor Statistics’ Consumer Expenditures Survey (CES), I find that the millennials continue to demonstrate clear progress in their wine careers. The three indicators highlighted below illustrate this.

The metrics in the graphics are two-year moving averages, which helps to smooth the annual volatility and elucidate the longer-term trends. Also note that the CES does not capture the total US wine market as it excludes spending by businesses, US residents while traveling away from home, and foreign residents and visitors, among others. Moreover, consumers tend to underreport
alcohol spending in surveys, so the figures should be viewed as low estimates.

Wine Buying Rates

Contrary to conventional wisdom, the millennials are not eschewing wine. The chart below compares the share of millennial households that reported a wine purchase during the past week to that of US households overall. The millennial buying rate has increased over time and converged with the overall rate. Buying has slipped in recent years – but this is likely attributable more to the pandemic than to a shift in preferences. Indeed, compared to the older generations, millennial wine buying has been more resilient since the pandemic began and is now on par with that of Gen X and the boomers.

Comparison of wine buying rates between millennials and all households

Wine Spending

The millennials are showing even faster progress in terms of spending. This chart shows estimated annual wine expenditures per household in inflation adjusted dollars. Millennials still generate lower average expenditures than boomers and Gen Xers, but their spending has grown at a faster clip with a noticeable acceleration over the past five years. Millennial spending now stands at just under 90% of the overall average – up from 66% ten years ago.

Comparison of per capita wine expenditures between millennials and households overall

Wine's Market Share

The final graphic pertains to wine’s share of total beverage alcohol consumer spending. Wine’s market share is lower with millennial consumers than Gen Xers and substantially below that of the older generations. Nonetheless, despite heightened competition from craft beer, spirits, and seltzers, the millennials have devoted a larger portion of their alcohol budgets to wine over time. Wine’s millennial market share has grown from 20% to 30% over the past ten years and a
substantial part of the gain has come in just the last four. Thus, millennial wine preferences are still blossoming.

Comparison of wine's beverage alcohol market share between millennials and households overall

Will this Progress Continue?

The CES data provides convincing evidence that wine is still gaining ground with millennial consumers, though perhaps more slowly than hoped for. And they still have a long way to go to match the boomers at their peak. The key question is whether this progress will continue. I see several reasons for optimism.

First, my research shows that educational attainment is a powerful predictor of wine buying and spending – and the millennials are the most highly educated generation yet. Furthermore, over five million millennials are still attending school and many from the final wave of college graduates are destined to become high-value wine consumers in the years to come. So, the millennials may have a higher ceiling than the older generations.

More importantly, wine spending rises even more rapidly with income and the millennials have not yet reached the peak earnings period of life. Their spending should continue to climb as their incomes rise and finances improve. Millennial spending is already on par with Gen Xers in the same income brackets, despite their youth and lower net worth. Thus, they appear to be on track to surpass Gen X as wine consumers.

However, the wine industry cannot take continued progress for granted. The beverage alcohol marketplace is more competitive than ever and changing attitudes toward alcohol and its effect on health are a threat.

Mass market brands must be more intentional in courting millennial consumers and tailor marketing messages to address their values, concerns, and preferences if progress is to continue. The millennials are more diverse than the older generations, so messaging must be more inclusive as well.

For smaller wineries focused on the higher tiers of the wine market, winery and tasting room experiences are a key to converting millennial wine consumers into wine aficionados and eventually wine club members. Wineries must ensure these experiences remain accessible to younger, less affluent consumers. For those that distribute, it will be important to provide trial opportunities such as tastings and by the glass programs in areas where highly educated millennials live.

Ultimately, even under an optimistic scenario the millennials may not be able to make up for the impending decline in boomer spending on their own. Gen X and Gen Z will also need to be part of the solution if the industry is to continue to thrive.

Vintage Economics offers geodemographic targeting services to help clients identify locations where potential customers are concentrated and focus their marketing and expansion strategies. Visit the website at www.vineconomics.com to learn more.

 

Chris Bitter

Bitter@VinEconomics.com

206-981-6885

 

 

 

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