THE NEW NORMAL

Over the past year people in the industry have debated the idea of a "new normal." Are US consumers forever changed from the downturn? The "new normal" has meant so far: (1) Consumption continues to rise but there is an "undeniable" shift from the on- to the off-premise; (2) the $20 and $50 wine categories are demarcation lines at retail; (3) core wine drinkers are increasing, while marginal drinkers are bailing; (4) more imports are coming to the US in search of growth; (5) and direct to consumer wine sales are growing.

CORE VS MARGINAL WINE DRINKERS. A recurring theme is that both core and marginal wine drinkers plan on continuing to purchase cheaper wines after the recession. In the US, about 43% of the population are "non-drinkers;" 15.9% are "core wine drinkers," which means they drink wine once a week or more; 14.1% are "marginal wine drinkers," which means they drink wine less than once a week; and 27% are beer or spirits drinkers. Core drinkers are by far the most important group to the wine industry because they account for most of the sales.

As core drinkers have been trading down in price points, they're finding good quality wines they're pleased with. Survey results show that 69% of core drinkers and 64% of marginal drinkers believe they "are finding good quality wines available at lower prices. Once the economy turns around, 43% of core and 32% of marginal drinkers say they "will to continue to buy wine that is less expensive than the wine I used to buy." Thirty percent of core wine drinkers said "if the economy turns around, I will buy more expensive wines."

Not surprisingly, core and marginal wine drinkers mainly stick to domestics, but core drinkers are more willing to experiment with imports. Core drinkers are increasingly purchasing wines from Spain, Argentina and Chile.

In looking at domestics, core and marginal drinkers are also purchasing wines outside of California. One out of four core drinkers and 1 out of 6 marginal drinkers are buying more wine from Washington, Oregon, New York, Vermont and/or Texas. When surveyed online, however, the majority of respondents say they prefer wines from California when compared to other domestics.

MILLENNIALS ALREADY LOVE WINE. Right from the get-go millennials have begun drinking wine at core consumption levels, while gen X and baby boomers have increased wine consumption with age. Twenty million of the 70 million millennials aren't even at legal drinking age yet, so this is great news for the industry. We have the pipeline full for core wine drinkers for the next 5 years, assuming the 20 million who aren't 21 yet will follow in the older millennials' footsteps.

Last year 9% of the US population was trading off to wine. This means they were either choosing to decrease their consumption of beer or spirits while increasing consumption of wine, or choosing to drink wine on occasions when in the past they would have drunken beer or spirits. Interestingly, 32% of millennials traded over to wine, which means young people are increasingly favoring wine over beer and spirits.

A series of focus groups taught Wine Market Council that millennials are much more adventurous than older Americans. For example, they consume more imports than other generations, are more likely to belong to a wine club, and dine out more often. Millennials view wine as an affordable luxury. They don't see wine as elitist or unattainable but believe it denotes maturity and sophistication not given by beer or spirits. This age group is also the first truly gender neutral generation when it comes to drinking wine.
(Information from WineSpiritsDaily.com)