Each year, Silicon Valley Bank issues a wine report. “But Silicon Valley is about tech, isn’t it?” you ask, and that’s partly true but the other side of the story is Silicon Valley Bank’s strong investment and venture capital activities in wine country. The bank’s annual report is a closely watched indicator of the health of the American wine industry. It’s also a good marker for wine trends in general, and that is where this year’s report is particularly interesting, offering both positive and negative notes for us wine lovers.

Overall, wine sales are down in many parts of the world. Equally concerning is that younger consumers are trending toward low alcohol or no alcohol wines. Now, to my mind if it is truly no alcohol, then the beverage fits no reasonable definition of wine…but it’s still a beverage that is giving traditional wine a lot of competition. To make matters worse, the World Health Organization issued a report last year saying no amount of alcohol consumption is safe. Many in the medical community have noted significant disagreement with that assessment, but that is a story for another post. For today’s commentary, let’s just note that there has been a good deal of vocal support for those eschewing alcohol of any kind. We are seeing a significant portion of Gen Z consumers moving to hard seltzers (still alcohol but not wine) and marijuana that is now legal in many areas.

As wine consumption is falling, vineyards are being replaced with other crops in former wine stalwarts like California, Australia and even Bordeaux. However this big picture doesn’t tell the whole story. The Wine Enthusiast magazine recently noted a report by a Canadian financial group arguing that, “the American wine industry has surpassed $107 billion in sales over 2023—an increase of 46% since 2018.” The report goes on to explain that nuances are important and that not all the news is bad. The Wine Enthusiast’s article continued, “the report is threaded with cautious optimism: Case sales and volume sales are slumping—particularly with budget bottles—but premiumization persists. In 2023, sales of wines over $10 in grocery stores rose to $4.8 billion, which is 34% more than in 2019. Seventy percent of wineries reported that they expect increased sales growth in the future.” So, some interesting points here in what people are actually buying.

Back to the Silicon Valley Bank report, bank president Rob McMillan says, “We need to get off this doom and gloom crap…We can’t be passive anymore. I believe our industry will translate to something better than it’s ever been, but we need to have an active approach.” 

The Wine Enthusiast points out that, “There are bright points in the findings: oversupply issues are creating what SVB calls a “golden era” for consumers, with great deals and incredible value abound.”

“We’ve never made better wines in the history of wine making,” says McMillan. “We’re just not telling that to new consumers.” So marketing has to catch up with the high quality of wine being produced. Among the good news that should be noted, McMillan cites the growth of white wine sales, especially with Sauvignon Blanc (sales up 8.5%) and Pinot Grigio (up 8%). White blends are also up and Prosecco continues to enjoy growing popularity with consumers. One note about the wines that are trending up – they are mostly less expensive wines, lower in alcohol and easy to drink on their own or with food. These are also “gateway wines” that may indicate younger consumers are exploring wine, a taste that may grow with time.

Sales by volume may be down, but in many segments, sales by value are increasing, so those who already consume wine are perhaps trending to even higher quality, or are less fazed by increasing prices. In areas where sales are down, many producers ended  last year with a surplus of wine, wine that they are repackaging and selling through private labels. This means odds are we’ll see even better wine at Trader Joe’s and Costco.

There are other points in the report to note, and we can explore those another time. Morale in the wine industry is falling, and there is a long road ahead, but for now, if you are a wine lover, continue to love, continue to explore – there are good wines out there.

McMillan concludes his report on an upbeat note. “I know I’m delivering difficult news [but] if we work together, market the industry and increase the occasions when people choose to drink wine, we can shorten this and we can grow even more as an industry when we come out of it.” You and I can be an important part of that recovery – I’ll drink to that.