Silicon Valley Bank Predicts the US Wine Industry is at the Tail End of a 20-Year Growth Period

NEWS RELEASE

Silicon Valley Bank Predicts the US Wine Industry is at the Tail End of a 20-Year Growth Period

Retiring baby boomers and frugal millennials are driving a rotation of consumer preferences

 

HELENA, Calif. – February 15, 2018 – Silicon Valley Bank (SVB) released its “State of the Wine Industry 2018”report today.

 

The 17^th annual report assesses current conditions in the wine industry and provides a unique forecast based on economic and behavioral trends.

 

Highlights and predictions from the 2018 report show that industry sales growth is ebbing as younger consumers and retiring baby boomers impact buying behaviors and preferences, which will have implications for wineries and their direct-to-consumer marketing efforts:

 

• Consumers continue to leave lower-price segments in favor of better-quality offerings, but total sales growth is leveling off.
• For the industry as whole, sales will rise by 2 to 4 percent, while volumes will increase up to one percent.
• Overall pricing will remain flat with price increases difficult to pass through to consumers.
• The premium wine segment – which we define as above $10 per bottle – will grow in the range of 4 to 8 percent, down from the estimate of 10 to 14 percent in 2017.
• Overall supply is balanced, with chardonnay demonstrating particularly strong demand. Cabernet is balanced with flat to downward pressure at the high end of the market.
• Increasing imports will continue in the lower premium price points.
• Acquisitions will cool somewhat from the torrid pace of the past three years. We still will see foreign purchases of US wineries and significant transactions for vineyard properties.
• North Coast grape prices, which have seen rapid growth in the past five years, should slow their growth rate.

 

“2018 will be a good year for the wine industry, and while there will still be sales growth, the rate of growth is slowing,” said Rob McMillan, founder of Silicon Valley Bank’s Wine Division and author of the report. “The successful wineries 10 years from now will be those that adapt to a different consumer with different values – a customer who uses the internet in new and interactive ways, is frugal and has less discretionary income than their generational predecessors.”

 

Additional findings and forecasts for 2018:

• Millennials are migrating away from red blends and introductory wines and are starting to have a positive impact on other lower-priced still wine categories, both domestic and foreign.
• While boomers are still the leading consumers of fine wine, they are consuming less as they age, are changing their spending patterns in dollars spent and are moving away from the high price points as they adjust to living on a fixed income.

 

McMillan discussed the annual report and the state of the wine industry in a live videocast on January 17, 2018 with Gretchen Boock, Chief Executive Officer of Dobbes Family Estate, Mary Jo Dale, Marketing Director of the Americas for Vinventions and Nomacorc, and Paul Mabray, Director of Getemetry.com. A replay of the discussion is available here.

Read the full report here: svb.com/wine-report/

 

About Silicon Valley Bank

For 35 years, Silicon Valley Bank (SVB) has helped innovative companies and their investors move bold ideas forward, fast. SVB provides targeted financial services and expertise through its offices in innovation centers around the world. With commercial, international and private banking services, SVB helps address the unique needs of innovators. Learn more at svb.com.

 

Silicon Valley Bank’s Wine Division

Founded in 1994, SVB’s Wine Division offers financial services and strategic advice to premium vineyards and wineries. With one of the largest banking teams in the country dedicated to the wine industry, SVB’s Wine Division has offices in Napa, Sonoma and Portland, and primarily serves clients in the fine wine producing regions along the West Coast of the United States. Learn more at svb.com/premium-wine-banking/

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