Wine Needs a Fresh Start in 2025

Work has begun on second BMO Wine Market Report with added focus on Canada 

Weighed down by excess inventory and too much supply, the U.S. wine industry is in sore need of an uptick in consumer demand to prevent another year of declining sales. 

Unfortunately, that reversal isn’t likely, but 2025 may see the end of wine’s recent sales declines as trend lines fully normalize from the disruptions of the past five years. 

“It appears we’re seeing a slowing of the declines, but the market hasn’t flattened out or started to recover yet,” said Jon Moramarco, founder of the market research firm bw166 and partner and editor of Gomberg, Fredrikson & Associates, which has tracked the U.S. wine market for decades. 

Moramarco, bw166 and Gomberg Fredrikson joined with the BMO Wine and Spirits group and WineBusiness Analytics to produce a definitive report on the U.S. wine market in 2024. Work has begun on the 2025 BMO Wine Market Report that will include a comprehensive survey of wineries across the United States and Canada to bolster the data and analysis by members of the partnership. 

The improved reporting and analysis come at a challenging — and potentially cathartic — moment for wine as it looks to engage with a new generation of drinkers amid historic economic, political and cultural changes. 

“I’m excited that we have started to work on our second annual 2025 BMO Wine Market Report as we received such a positive reception for the first edition,” said Adam Beak who is the managing director and head of BMO’s Wine & Spirits Group. “We strive to produce a balanced, data driven analysis that allows readers to draw their own conclusions. We expect it to be valuable to the industry given the current environment.” 

Considering both sides of the supply and demand equation, Beak said headwinds from the consumer side seem fiercer. “While painful, the production side can be solved fairly quickly, and we are seeing some businesses already making difficult but needed changes,” he said. “Consumer behavior is a bigger lift, especially with the demographic changes we are experiencing.” 

In 2023, total U.S. wine market volume came to 377 million 9 L cases, and it appears total market volume will have declined by up to 5% by the end of 2024. Value may well increase by 1% to remain close to last year’s total of $107 billion because of inflation and modest growth among premium brands. Throughout 2024, preliminary data by bw166 has confirmed the trend of modest value growth coupled with volume declines against the previous year. That scant growth is reflected in off-premise sales as tracked by NIQ that have run 5% to 8% less than the previous year, and winery direct-to-consumer (DTC) shipments through the 12 months ended November that are down 6% by value and 10% by volume compared to the same period a year earlier. 

Wine, however, is not alone in its struggles. Total shipments of tax-paid cases of liquor and beer were both down 3% in the 12 months through September. In the on-premise sector as tracked by CGA by NIQ, wine was down 4% in the 52 weeks ended Sept. 7 while beer was down 2% and spirits had also fallen by 4%.

Yet on-premise spending on wine, as tracked by Gomberg Fredrikson has generally been positive in the past year, growing 5% in the past 12 months. That growth has been key to value gains versus the previous year but hasn't been enough to push total market volumes brought down by less spending overall.

The weakening of consumer demand appears to have been accelerated by the resurgence in anti-alcohol health messaging. “It’s not helping,” Moramarco said of the health debate that has included the World Health Organization defining a healthy lifestyle as free of drinking any alcohol.

Decades of allowing the possibility of some positive health effects enjoyed through moderate drinking have been replaced by a more draconian, prohibitionist view. That message appears to have resonated with per capita consumption of wine falling in the past 12 months. “I actually believe it’s hurting wine more than spirits and beer,” Moramarco said.

The health warnings come at a time when many of wine’s most loyal consumers of the boomer generation continue to reduce or eliminate their drinking, and younger consumers are not acquiring a taste for wine as they have for other beverages.

Wine, and beverage alcohol sales in general, tend to peak during the fourth quarter in step with holiday gift-giving and festivities. While the year-end sales high in 2024 is not going to outpace the previous year, it will help draw down inventories that have been backed up since the on-premise sector began to recover from pandemic lockdowns.

“Wholesalers are pinched in holding too much higher-value inventory and with higher interest rates,” Moramarco said.

There are indications wine could see a turnaround especially if an anticipated reduction in interest rates can help spur spending among consumers that have been hit hard by inflation. Political uncertainty — and a corresponding lack of capital movement and consumer purchases — has been replaced by either optimism or apprehension following the November election and both emotions can trigger spending.

The ready-to-drink (RTD) category comprised of liquor, wine and malt-derived beverages continues to outperform the beverage alcohol category as a whole and these flavorful brands may well create a taste for wine among new consumers or bring others back. As volumes of still, sparkling and bulk imports declined in the past 12 months, flavored wines grew albeit from a very small base. The ongoing oversupply of winegrapes, and now bulk wine, does offer an abundance of affordable product that could support new opportunities.

Where U.S. consumers are buying wine has also changed. Club stores such as Costco, which opened a new location near the heart of Napa Valley earlier this year, account for a growing share of U.S. grocery sales and wine sales and that growth has largely gone unaccounted for in recent years. A shift in where wine drinkers are spending their grocery dollars also helps explain why grocery store wine sales have steadily declined. According to federal economic statistics, total spending in traditional food stores grew by less than 1% in the past year while club store spending was up by nearly 5%.

The growth of RTD beverages and flavored wines, reduced inventories and improving year-to-date comparisons should help the U.S. wine business transition into a new year with a better understanding of how to compete for market share at all price points. That competition for market share is set to become even more heated between the categories of wine, spirits, beer and, increasingly, cannabis while also pitting craft and premium producers against each other for a limited pool of engaged and enthusiastic drinkers. Competition in the on-premise, DTC and independent retail channels will be fierce.