US wine shipments increase in 2018, the 24th year of annual sales growth

SACRAMENTO - Despite fears of a slowdown, wine shipments in the United States increased by 1.2 percent in 2018, continuing an upward sales trend that began 24 years ago.

However, declining consumption and stiffer competition from other beverages may end the streak of annual wine shipment increases this year.

The wine industry sold 405 million cases of domestic and foreign wine last year, according to preliminary data released by consulting firm bw166 in Sacramento at the Unified Wine and Grape Symposium, the largest wine trade show in North America.

The value of the wine sold in 2018 was 3.7 percent greater on a wholesale basis over 2017, according to bw 166, further signifying the industry's move to more premium wines, a market Napa and Sonoma county winemakers dominate in the U.S.“The tide is now receding a little bit. The tailwind that is behind us isn't quite as robust as I have seen in the last few years,” said Danny Brager, senior vice president of the beverage alcohol practice at Nielsen, the marketing and analytics firm.

The worries are twofold, Brager told attendees. Consumers are not drinking as much wine as they did in the past and vintners now face a wide array of other product categories in the drink sector.

Per-capita consumption of wine has remained flat, Brager said, and the wine industry is in a battle for consumers' hearts, minds and dollars. He also said that almost 50 percent of regular wine drinkers are making efforts to reduce their consumption of alcohol, including two-thirds of millennials ages 21 to 34.

At the same time, the wine industry has more competition not only from beer and spirits, but also new entrants such as hard seltzer water, kombucha and even cannabis-infused drinks, including the recent collaborative offering by Lagunitas Brewing Co. of Petaluma and CannaCraft Inc. of Santa Rosa.

The cannabis-infused drink sector reported $40 million in sales in state-licensed marijuana dispensaries in 2018, and that sector is slated to do as much as $100 million a year in sales by the end of 2021. The category had a 61 percent increase from 2017.

It's still too early to draw many conclusions on the effect of legalized cannabis, but Brager said he would imagine there would be some impact on wine “as it's looking over your shoulder.”

“The only thing I saw from consumer research is that beer and spirits consumers are more as a percentage of people who tried cannabis as opposed to wine,” he said.

The wine industry also faces other challenges, including consolidation by retailers and wholesalers, making smaller wineries more reliant on selling directly to consumers over the internet.

For example, the seven largest wine companies in the United States now sell 70 percent of all wine in the country. Those seven companies had a 0.7 percent sales decrease for the period from August 2017 through last August, said Marissa Lange, president of Lange Twins Family Winery and Vineyards just outside of Stockton.

“The health of their business directly affects the health of mine,” Lange said of the large wineries. “You can understand our concerns as we head into the season of grape sales renegotiation (with grape growers).”

Over at Iron Horse Vineyards in Sebastopol, CEO Joy Sterling said her family-owned winery had a fantastic year in 2018, but she still remains cautious, especially as it only bottles wine made with grapes grown on its estate vineyards. It typically averages about 25,000 cases annually, varying around 1,000 cases either way.

Sterling said in an interview that she can't boost her wine production to help grow revenue.

“I am cautious by nature. …We are planning that we will be flat,” she said. “But I am happy with January (sales). That's a great start.”

To help keep pace, Iron Horse has focused on seasonal offerings and special bottlings that have attracted consumer interest for those who are willing to pay more for premium wines.

Sterling said the winery's Gratitude sparkling rosé cuvee of 400 cases sold out within three months even with a $65 a bottle price tag. Many buyers were lured to buy it since $5 of every bottle sold went to Santa Rosa's Redwood Empire Food Bank, money which provided meals to more than 48,000 local people.

“We are not growing in case numbers. Our growth comes in quality,” she said.

You can reach Staff Writer Bill Swindell at 707-521-5223 or bill.swindell@pressdemocrat.com. On Twitter @BillSwindell