Controversial trends in the development of the global wine industry are named

Inflation, declining sales, labor shortages, climate crises – the wine world has experienced a lot of stress in 2023. But there are also reasons for hope. As eco-conscious winemakers adopt greener practices and a new generation puts its stamp on the way wine is made and enjoyed, creativity and expansion are on the horizon—if we’re willing to think outside the box. Here’s what to expect in 2024, according to analysts at The International Wine and Spirits Research magazine.

Structural decline persists

The wine industry faces long-term structural decline, particularly in traditional markets and especially in the Asia-Pacific region. This trend continued into the first half of 2023, with wine production volumes falling in 20 key markets and sparkling wines growing.

Major wine markets such as France and Italy have been in structural decline for decades, while the US, the world’s most valuable wine market, appears to be in a long cycle of decline. Among emerging markets, wine consumption in Brazil surged during Covid-19 but has since fallen as people swap wine for beer in stores, consistent with pre-pandemic behavior.

The resumption of online retail in China in 2023 has boosted sales of premium and higher-end goods, while the appeal of emerging Asian economies such as Thailand, Malaysia, Vietnam, the Philippines and Indonesia is growing due to increased consumption and heavy reliance on luxury imports.

While each market has its own local factors, some of the common reasons for declining wine production are clear from IWSR consumer usage data. This points to a rapid decline in alcohol consumption overall, especially among younger consumers, and increasing competition at social and non-food events from other categories of alcoholic beverages, such as fruit-flavored low-alcohol drinks.

Recruitment problems

The wine category has become increasingly reliant on older consumers due to a number of factors, including aging populations in regions such as Europe and North Asia and difficulties in attracting younger consumers at the minimum age at which a person can legally drink alcoholic beverages. Representatives of Generation Z are no longer passionate about wine as much as they were 10-15 years ago. Today’s consumers tend to drink less alcohol – compared to previous generations at the same age – and they are increasingly exposed to other, non-traditional segments such as low-alcohol cocktails and craft beer.

Where millennials are successfully recruited in some markets, such as the US, they tend to be lighter users who are more discovery-oriented and therefore more driven by short-term trends and not as loyal in the long term to brands or a particular origin.

Category Engagement and Knowledge

Young consumers who are passionate about wine are more confident and passionate about wine than previous generations, and more adventurous in exploring the category.

Gen Z and millennials under 42 are significantly more open to trying new products than those over 55. This has always been the case—younger people tend to be more experimental—but IWSR long-term tracking data shows that younger generations are now much more more confident about wine than the same age groups in 2010. However, the same data also shows a significant expansion in the typical drink selection for those aged between the legal drinking age and 42, indicating that wine has to compete in a more crowded field.

In Australia, the proportion of consumers under 24 who express confidence in their wine knowledge increased from 19 percent in 2010 to 50 percent in 2023; Similar dynamics are observed in Germany and the UK. The exception is the United States, where trust was already relatively high, from 33 to 38 percent.

At the same time, levels of objective knowledge have declined over the same period of time, especially in the US, Australia and China, but also – to a lesser extent – ​​in the UK, Sweden, Germany, Brazil and France. There are several reasons why confidence among wine drinkers may increase while knowledge decreases. The use of smartphones reduces the need to remember a lot of detailed information, while country and region of origin appear to be less relevant for new wine drinkers. There is also a growing dependence and trust on retailers and local operators who develop interesting products for consumers – in other words, think for them.

Smaller but better dynamics

With younger regular consumers reaching the legal drinking age, the premiumization of wine production continues but is showing signs of slowing, with production volumes of champagne, sparkling and premium wines declining in the first half of 2023. However, the market for standard and below wines is shrinking faster, meaning the overall share of premium and above wines continues to increase.

India and China are also among the bright spots, with production volumes of super-premium and above wines continuing to grow. This easing of the “less but better” trend is being driven by a number of factors, including an aging population reducing the proportion of younger drinkers, key drivers of premiumisation. Younger consumers see the cost of living crisis in 2022-23 impacting their ability to shop; and the fact that young people tend to be less frequent consumers of wine.

Low-alcohol drink dominates

Wine dominates the low-alcohol drinks segment, expanding significantly from a small base and achieving record volume growth of plus 8 percent in 2023 in 10 key markets, with growth primarily driven by the United States. Innovation in the low-alcohol wine industry in the United States is increasingly focusing on the health benefits of wine, such as fewer calories, lower carbohydrates, lower alcohol content and, in many cases, zero residual sugar.

The lack of a reliable supply of non-alcoholic wines is causing some consumers to move to other non-alcoholic drink categories such as beer and low-alcohol soft drinks.

E-commerce growth, but share has declined

Wine’s share of e-commerce continues to grow, but at a slower pace. In key markets, wine accounted for 38 percent of total alcoholic beverages (TBA) e-commerce volume in 2020, but this fell to 33 percent in 2022 and is expected to decline further to 28 percent by 2027.

The accelerated growth in online wine sales seen during the pandemic is fading as the world returns to normal. As before, wine, as the most mature category, suffered the greatest drop in value.

However, brand owners should continue to invest as it is expected to increase its share of total OTC trading in the long term. This investment will also allow them to more effectively engage with digitally savvy consumers.

Climate problem

Climate change continues to impact wine production, with rising temperatures and increased frequency of extreme weather events, including frost, hail and wildfires, affecting the timing of harvest, size and quality of grapes. This also makes it difficult to respond to the growing trend towards softer, lighter wines.

This is encouraging greater adoption of growing practices and methods, including organics, biodynamics and regenerative viticulture, as well as adaptive changes such as planting alternative grape varieties and exploring cooler, highland or coastal regions.

Meanwhile, sustainability is becoming an increasingly important priority for consumers, with two-thirds of regular wine consumers in major markets describing it as important to them.

There is growing evidence that premium brands are joining the alternative packaging trend. Many premium wine producers have begun to offer their wines in larger packaging formats.