Wine shipments in US increase slightly in 2020 amid pandemic
Wine shipments in the United States narrowly increased in 2020 despite the coronavirus pandemic that upended the sector, forcing vintners to sell more wines online and in supermarkets to make up for lost restaurant and tasting room sales.
American and foreign wineries shipped an estimated 369 million wine cases nationwide last year, up 1.2% from 2019, according to a preliminary analysis of federal excise taxes on the shipments by alcohol beverage industry consulting firm bw166.
The data was released Wednesday during the annual Unified Wine and Grape Symposium, held virtually instead of its typical Sacramento location.
“Given everything that we had to contend with such as pandemic, fires and many other forces of nature lined up against us, the numbers would suggest as an industry we have done extremely well,” said Danny Brager of Brager Beverage Alcohol Consulting.
Indeed, the resilience of the U.S. wine marketplace showed even though wildfires torched the North Coast and other areas around California, the epicenter of the industry, last year.
Along with stubborn climate challenges each year, the industry faces a growing dilemma: how to add more regular wine drinkers. Success with that will largely determine the wine sector’s fortune in years ahead.
Last year’s blazes resulted in a much smaller wine grape harvest, as tons of grapes went unpicked on vines because of smoke damage. For example, Sonoma County is expected to have at least a 30% smaller crop yield in tonnage and value, when the tally is soon released.
The wine industry damage caused by 2020 wildfires across the state likely will amount to $3.7 billion over the next 10 years, said Jon Moramarco, managing partner of bw166 in Santa Rosa.
Still, the sharply lighter grape crop last year actually helped a lot in the North Coast because there was a surplus of the fruit. And, therefore, wineries can adjust and “a number of people will do fine through this,” Moramarco said.
Consumers in a pandemic drove significant wine market changes last year, too. Wineries had to pivot last spring to online sales once stay-home public health orders went into effect, curtailing on-site consumption at restaurants and tasting rooms.
The potential for digital sales growth is promising, as Moramarco noted the big revenue year that Wine.com had in 2020 with $329 million in revenue. But even that number represents only 0.62% of annual retail wine sales.
“The genie of e-commerce is unlikely to go back (in the bottle), though also unlikely to grow at the fantastic growth rates ... now and there’s some future return to stores,” Brager said.
That scenario played out at Kokomo Winery in the Dry Creek Valley. The winery’s digital sales helped offset money lost by its tasting room closure and steep decline in restaurant beverage business. The boutique winery typically produces about 10,000 cases annually, said Erik Miller, owner and winemaker.
“We had wine club members join online and they weren't even in the tasting room,” Miller said. “That doesn’t happen very often. I think more and more of these people were looking at these digital platforms and reaching out.”
The winery will produce about 4,000 cases from the 2020 vintage because of smoke damage reducing its inventory of red grapes. Kokomo likely will be looking to add some more grape contracts this year to make up the inventory reduction.
“Most importantly, I’m just looking for a boring harvest,” Miller said, meaning free of infernos and favorable weather overall.
Although the wine industry fared well considering tough headwinds in 2020, the sector faces even more challenges in coming years trying to grow its market. The United States has about 247 million adults of legal drinking age, but the number of regular wine drinkers is a small share of that population.
The Wine Market Council estimated that roughly 35 million people consume about 85% of the wine served in the country. “We need to increase that percentage of people drinking wine,” Moramarco said.
The sector also needs to improve in attracting younger and more multicultural wine drinkers, and induce them to drink the beverage more frequently, Brager said.
One possible opportunity to expand the market is the growth of nontraditional wine products. For example, shipments of flavored wine items almost doubled to 32 million cases in 2020. Much of that was agave wine coming from Mexico, a fortified wine made from fermented blue agave.
The wine industry could be poised for disruption by these niche products similar to how the hard seltzer category has rocked the beer industry, going from $500 million in seltzer sales two years ago to now $2 billion last year.
Premade gin & tonic and other cocktails in a can also have taken the spirits sector by storm and added another wine rival, Brager said.
“My feeling is the younger consumer these days thinks that the base liquid is less important than these things, such as flavors and lower calories,” he said.
Moramarco agreed and said he sees a comparison to when wine coolers shot up in the early 1980s and became ubiquitous for Baby Boomer consumers. While some wine professionals may denigrate such products, he said that they may appeal to more wine drinkers.
“I think it’s a great on-ramp for people to become a traditional wine drinker,” Moramarco said. “I think it’s going to be a great thing, but there is going to be some unusual products.”
You can reach Staff Writer Bill Swindell at 707-521-5223 or firstname.lastname@example.org. On Twitter @BillSwindell.