The Five Macro Trends Impacting the Wine Industry in 2022
Over the course of the past few decades, the development and evolution of the wine industry in the United States has largely been propelled by organic changes to culture, society, and technology. Population growth, demographic changes, the introduction of a wider variety of beverages, the implementation of widespread Internet communications. These have been the general trends that have given us the industry we have.
But it’s the one-offs that impress us and move the industry to immediate actions. The Trump Tariffs motivated us to immediate action. The 60 Minutes’ French Paradox broadcast moved the industry to open its arms and gather the ensuing wealth. Fires inspired parts of industry to seek responses to smoke invested grapes. And COVID-19, the ultimate one-off, inspired an industry to more fully and quickly embrace the promise of digital sales while momentarily rejiggering the path to sales in the wake of a retreat from socializing.
That was then. What of 2022?
With 2021 being the year of vaccines, the COVID-19 pandemic’s social restrictions and the altered consumer behavior waned. It meant folks returning to restaurants, bars, hotels and wine country. We saw a return to pre-pandemic divisions of wine sales, with on-premise sales marching toward 2019 levels if not entirely recovering. This also meant an expected retreat from inflated off-premise sales. 2022 is likely to be the year wine sales see their momentum governed by organic forces rather than catastrophic disruption. Recognizing this is important as the three years prior to the 2020 pandemic year saw relatively flat wine sales.
2-Rising Prices and Inflation
Increasing costs of labor, raw materials, packaging materials and logistics will lead to higher wine prices in 2022. How consumers react to higher wine prices, however, will likely have more to do with the duration of inflation in the general economy, rather than in wine prices. If increased levels of inflation continue through 2022 and into 2023 (not predicted by most economists) we could see a considerable negative impact on wine buying. Yet, if the general inflationary trend is moderated and begins to wane by the third quarter of 2022, then I wouldn’t expect severely negative impacts on wine sales.
Wine, beer and spirits had been the primary competitors where consumable vice was concerned. There is more today for people to spend their “inebriation dollars” on and this enhanced competition will continue to impact wine sales. Beer, spirits, seltzers, ciders, Ready-to-drinks, cannabis, etc all put pressure on wine sales. The only plausible reaction to this threat to wine sales is enhanced promotion of wine on an industry level: campaigns promoting wine as a general category that can only be financed by an industry-wide effort. I will be shocked if the industry can come together in 2022 to undertake this effort. But it really must if the flat sales trend is to be prevented from becoming a negative sales trend.
4-Enhanced Online Sales
It would be shocking if online sales of wine did not increase in 2022. Though we have no reliable metric to measure online retail sales of wine, they surely exceed the value of winery online sales and will continue to exceed them for the foreseeable future. But winery online sales will also increase as 2022 sees wineries continue to incorporate the lessons of 2020 into their marketing and sales efforts.
Whether via litigation or lobbying, the strict three-tier system will continue to erode. Expect at least 3 more decisions out of the Courts of Appeals in 2022 impacting the question of in-state presence requirements for retailers, which in turn will have a future impact on the disposition of wholesalers. Brewers and distillers too will help push back restrictions on direct-to-consumer shipping. This won’t happen with wholesalers sitting back on their heels and allowing it all without a fight. Wholesalers will continue to work to restrict consumer access to alcohol while continuing to represent fewer and fewer brands. We may also in 2022 see the federal government’s response to its inquiry into competitiveness in the alcohol industry. My guess is that at best this response will have a short-term reduction in consolidation in the wine industry.