Wine and 2021 — Predictions

The point of identifying trends is to help hedge one’s future risk. If we can predict what will come we are more likely to flourish where there is a real risk of being overrun by events.

As I have for many years, here I look ahead a year to two out and attempt to articulate how current trends will impact the wine industry. In some respects, this year’s foray into predicting the future is easier than in past years. For example, I could predict that 2021 restaurant wine sales will increase over 2020. But given the disaster that restaurants have faced during the Year of Covid, that’s like predicting that the coming winter rains will fill potholes.

All that said, below are my seven predictions for what’s coming down the pike for the wine industry. It is a list dominated by the reality of the COVID-19 pandemic and the impact it has had on the wine world.

VALUE WILL DOMINATE WINE SALES
For many years “premiumization” (the act of consumers choosing more expensive wines) has been the norm in the wine world. I think the economic impact of COVID and the experience of living in an economically precarious year, changes that trend. While there is a pent-up desire to spend, I believe we will continue to see wine consumers looking for value (read: less expensive wines that mimick the quality perception of more expensive wines). The economic impact of the COVID-19 shutdowns and layoffs and furloughs required reduced spending. I think this creates habits. I think this trains consumers to see they can find delicious wines at lower prices. And I think the economy, though growing in 2021, will still require more budgeting than in the five to 10 years preceding the pandemic. This means wines like Sauvignon Blanc, Pinot Gris, Rosé, Red Blends, and other wines that tend to sell at lower prices will benefit.

PRODUCER CONSOLIDATION
“Producer Consolidation” is a euphemism for winery owners who need to bail out of their hard-hit winery business. The winery business is not the restaurant business, but it has very similar dynamics to restaurants. This is particularly so for smaller wineries that depend on the visitors that have been forced by state order to stay away from tasting rooms or that have chosen to avoid venues where groups gather. Moreover, my discussions with various winemakers suggest to me that the economics of winemaking and selling in the Pandemic make them far more open to fielding offers for their vineyards, production facilities and hospitality centers. Again, I see winery sales occurring most commonly among the smaller, 5,000 – 10,000 case wineries, with well-placed wineries on tourist roads best positioned to receive offers. 2021 will be a year when we watch a number of well-known brands change hands.

THE COMEBACK OF NAPA AND OTHER COASTAL VALLEYS
Some may disagree, but I see Napa Valley as ‘too big to fail” — even in the face of the very ugly optics of locals fleeing a landscape engulfed in flames. In fact, Napa Valley isn’t simply a destination. It is an idea…an aspirational idea similar to Venice, Paris, the Disneyland: an iconic ideal of the good life and the profound; the best man’s artistic pursuits can muster. This same kind of view of wine country also applies to Sonoma County, Mendocino, Willamette Valley and other regions around the country that produce fine wine and welcome visitors. The visitors will return. And if all goes well, they will return in larger than expected numbers by the Fall, when the vaccines have done their work, when brides and grooms are looking for a memorable wedding, when couples decide they can take that getaway they put off for more than a year, when a retreat to pampering and hedonism is felt to be deserved.

A YOUNGER TASTING ROOM VISITOR WILL DRIVE WINERY HOSPITALITY
A number of surveys have shown that it is younger adults who are most ready to engage in social gatherings and to embark on long-delayed travel. When I say younger, I’m talking about older members of Gen Z and younger members of the Millennial generation. If you operate a tasting room, expect to see a much larger percentage of these groups, along with their lower spending habits and a greater desire for wine education. These factors also suggest that it is the less expensive regions that will see this influx of younger visitors. Get ready…the kids are coming

THE DISTILLERS DIRECT ASSAULT
2021 will mark the year that distillers, particularly the smaller, artisan distillers, decide to flex their muscle and push lawmakers to legalize direct to consumer shipments of spirits. And don’t expect to see new laws that discriminate against out-of-state distillers. It is well understood that laws that discriminate against out-of-state producers where shipping is concerned are unconstitutional. So, if a state’s distillers want to be able to ship wine to their supporters in their state they’ll need to support laws that allow out-of-state distillers to interact with their customers. They’ll happily support this free trade approach. I expect a number of states (upwards of 10) to enact or make more reasonable laws allowing spirits to be shipped interstate. I expect this move toward distiller shipping to sweep the country much much more quickly than winery shipping laws spread.

COVID LEADS TO REGULATORY REFORM
The ripples emanating out from the COVID crater will be significant. Among the changes that will result from the COVID-19 pandemic will be quicker reform of the alcohol regulatory landscape. Not only will we see reform that leads to more distiller shipping as mentioned above, but brewers too will see their road to market widened and diversified by liberal shipping and delivery laws. I expect more states to allow interstate retailer shipping if only to capture the significant tax revenue this kind of activity promises. I expect a movement to begin in 2021 that breaks down the regulatory barriers between producers and retailers: Self-distribution is certainly on the agenda. While I believe a good deal of these long-needed reforms will come out of the state legislatures, don’t be surprised to see federal lawsuits force legislatures to act.

ROSE IS ESTABLISHED AS THE THIRD WINE
For many years we categorized wine broadly as Red, White or Rose. But the inclusion of rosé in that categorization was really just honorary. It represented a very tiny percent of bottled wine, was mostly considered plonk too sweet to take seriously, and was often pushed aside as this thing we called “blush” that was bottled in jugs. Going forward Rosé will earn its legitimate place besides Red and White as a legitimate, recognized, celebrated and competing category of wine. It will be helped along by the move to value-priced wines noted above. There were not quite as many Rosé wines approved for sale in 2020 as in 2019, but this was really just a function of pandemic economics. In the coming, two to three years expect Federal approval of COLAs for Rosé to increase substantially. Some of this embrace of Rosé will result from the drink moving out well beyond its spring and summer seasons and into the fall and winter. Some of the embrace of Rosé is due to retailers and restaurants finally having a much larger number of well-made Rosé to choose from. Regardless, Rosé is the trend that will finally stick and have a significant impact on sales going forward.

 

Happy 2021!!


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  1. Jeff Carroll - December 23, 2020

    Tom, I like these predictions. Wow 10 new states for spirits DTC would be an enormous change. I think that’s going to be tougher sledding than it may seem. I’d set the over/under at 3 new states.

  2. David Bantly - January 4, 2021

    Thank you Tom, for these insights. Any thoughts on US distributor changes, 2021 – forward?


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