Wine consumption growth in the US – New Zealand’s largest market for wine exports by value – is slowing and bold moves will be required to respond to a changing market structure and an emerging consumer with different values, according to Rabobank’s latest global Wine Quarterly.
The quarterly says the US wine industry has become accustomed to annual wine consumption growth rates of two per cent or more and the decline in recent years to one per cent annual growth is cause for concern.
RaboResearch senior wine analyst Hayden Higgins (pictured) said one of the major drivers of change in the US market – not just for wine – has been the rising influence of younger consumers.
“This year will mark an important inflection point in this shift, as the emerging generations – the Millennials and Gen Z – will overtake older generations – the Boomers and Silent – in terms of influence,” he said.
“And we’d expect to see the next 10 years become increasingly painful for wineries that fail to find ways to effectively connect with younger consumers.”
For the US wine industry to return to the days of heady growth, the quarterly says it needs to adjust to a rapidly changing environment where e-commerce is transforming the operational context and evolving consumer preferences require updated branding strategies.
“While US wine sales via its two largest channels – on premise and grocery – fell in 2019, online wine sales grew by 22 percent, and significant focus needs to be directed towards investing in building out the industries e-commerce capabilities,” Mr Higgins said.
“Improving brand-building skills – in particular in relation to what we will call ‘the revised Four P’s of marketing’: Purpose, Presence, Personality and Packaging – will also be essential to help reach a consumer that engages with brands differently.”
The report says New Zealand wine exports to all markets recorded strong growth in 2019 rising by 8.8 per cent in volume and 8.2 per cent in value.
Mr Higgins said further US export growth in 2019 has established this market as New Zealand’s largest destination for wine exports by value, while it is now a close second behind the UK by volume.
“Despite flat overall US wine consumption in 2019, sales of New Zealand wines continued to grow strongly into the US market, growing by eight per cent in value and 14 per cent in volume,” he said.
“And for this growth trend to continue, it will be essential that New Zealand producers understand the trends in the US market so they can adapt to the changes that are taking place.”
Mr Higgins said New Zealand producers will also be closely watching global trade developments, with tariffs, trade agreements and the coronavirus outbreak shaping global trade in recent months.
“Tariffs and trade disputes are here to stay, and although they may not affect absolute volumes of consumption in the countries involved, they will trigger some reshuffling in global trade,” he said.
“The recent coronavirus outbreak is a further factor which has impacted global wine trade, and the lost demand as a result of this will not be recovered. New Zealand wine exports have not been significantly impacted at this stage, due primarily to the fact that less than one per cent of our wine exports go to China – the country who have been hardest hit by the virus thus far. However, there is potential for the virus to have a larger impact on New Zealand wine producers if its spread continues further and leads to reduced consumer demand in some of our larger wine export markets.”
