The Economics 101 lesson of supply and demand is playing out across America’s wine industry. In this case, consumers will soon benefit from the lowest wine prices in over five years.
According to the annual State of the Wine Industry report published by Silicon Valley Bank, U.S. wine growers are faced with two major problems: oversupply, and reduced demand. According to Rob McMillan, the report’s author, “This is the worst combination of market conditions for growers since at least 2001 and perhaps of all time,”
Too many grapes are being grown in California, Allied Grape Growers President Jeff Bitter told CNN, citing a 2016 planting boom that overestimated demand when the vines matured. More efficient harvesting methods have also contributed to the oversupply, and Bitter estimates that 30 to 50,000 acres will need to be pulled to mitigate the issue.
Compounding the problem, demand for wine is down, especially among Millennial consumers, whose alcohol preferences skew toward “craft beer and spirits over wine,” according to McMillan. While the “lasting impacts of the Great Recession” on Millennials’ finances may be partly to blame, McMillan also admits that winemakers themselves need to adjust marketing strategies to engage this younger audience. Although this demographic is buying less wine as a whole, Millennials are spending the most per-bottle when they do buy wine, according to the State of the Wine Industry report.
Here McMillan sees a silver lining in the growing production hangover. While winemakers and the industry as a whole struggle to find stability in the marketplace, consumers “will discover unprecedented wine values in 2020.” Translation? There’s never been a better time to start trying new wines.