Unprecedented crisis for US wines: Silicon Valley Bank report praises Prosecco

Jan 27 2025, 16:21
The decline of baby boomers, anti-alcohol campaigns, and the stagnation of premium wines: a harsh assessment for American viticulture. Some are even hoping for EU tariffs to reboot the market

The year 2024 was one of the most challenging for US wineries, with 30% of respondents reporting revenue losses (compared to 24% in 2023), according to the 2025 Silicon Valley Bank (SVB) report. The data reveals that the sector’s confidence index is at its lowest point in a decade.

The market faces numerous challenges. On one hand, there’s the need to address declining wine consumption and the resulting supply imbalance linked to the shrinking baby boomer population and strengthened anti-alcohol campaigns. On the other hand, the premium wine segment is stagnating, highlighting the need for targeted communication strategies for consumers aged 30 to 45 to compensate for the decline in older age groups, whose maximum effects are expected to be felt between 2029 and 2031.

Tariffs could benefit US wine production

The start of Donald Trump’s second term as US president, bringing numerous uncertainties, could lead to increased tariffs on European imported wines. This would have two main outcomes: Large buyers currently sourcing bulk wine from abroad to bottle and sell in the US market may switch to domestic wines. New tariffs on European goods would favour American wine producers, most of whom already focus on the domestic market rather than exports.

However, these benefits would be offset by the economic damages to US importers and distributors whose core business relies on EU-made wines.

Prosecco praised as a gateway to lighter wines

In a general context of declining wine consumption, the most positive results are seen for Sauvignon Blanc, Pinot Grigio, Prosecco, and blends of white grape varieties. Conversely, double-digit losses were reported for red wines, including Merlot, Zinfandel, Malbec, and Shiraz. Even historically strong performers like Cabernet and Chardonnay, which still account for 30% of US wine sales, have faded from the radar of top-performing wines.

According to Rob McMillan, head of SVB’s wine division and author of the report, the success of these varietal wines, especially whites like Prosecco, can be attributed to their approachability for beginners and their lower alcohol content compared to reds. Prosecco, in particular, is perceived as a celebratory beverage that “offers affordable fun, making it a potential gateway to wine for younger consumers who currently favour flavoured sparkling waters.”

Converting younger consumers to wine

The wine industry must grapple with the structural decline of the boomer demographic, long-time wine enthusiasts, whose numbers are expected to drop by 4.4 million by 2037. The focus is now on the 31-to-39 age group: “They’ve tried wine, they’re not inexperienced, but they need to be converted,” McMillan writes. “It’s a tough task, but it’s the crucial challenge.”

Currently, only 3% of consumers under 60 drink exclusively wine, while the figure for those over 60 ranges between 7% and 10%. This latter group, however, is in decline. Younger consumers, meanwhile, tend to choose beer and spirits over wine, a trend that is expected to persist through 2025. The most reachable demographic with appropriate marketing is aged 30 to 45, and the objective must be to make wine their more frequent choice.

The 2025 outlook

On the demand side, 2025 is expected to see a continued decline in online wine sales, a slight drop in winery tasting visits, and a preference among younger demographics for beverages other than wine. Overall, after a 2024 estimated at -1% to -3% in volume and zero growth in value, 2025 sales are projected to decrease by 1% in both volume and value.

However, if the industry leverages pricing strategies by lowering wine prices, it could mitigate the damage, according to the SVB. Considering the abundant inventory in US wineries, this discounting strategy could apply across all categories: grapes, bulk wines, and bottled products. Therefore, 2025 could be a good year for consumers seeking bargains, even though 42% of producers intend to raise prices.

It may also be an opportune year for companies looking to purchase vineyards, as more properties are coming onto the market. Sellers in 2025 (whether due to opportunity or necessity) are expected to do so at lower prices than in previous years.

Finally, the premium wine segment underperformed in 2024, contrary to last year’s forecasts by the Silicon Valley Bank. The 2025 report adjusts its projections, suggesting that after the decline, this category will grow again, albeit flatly between 2027 and 2029, and subsequently track inflation rates.

In summary, tough times lie ahead for everyone.

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