The constant shift in consumer behavior in many industries around the world, at an unprecedented pace of change, is keeping everyone in a state of perpetual awareness and wonder. Many crunch data, research trends and rely on algorithms to predict their sales. The upcoming global trend in the wine industry may follow the path of its sister category, spirits.
Not too long ago, early 2000’s perhaps, your request for an American spirit at any bar, upscale restaurant, or hotel anywhere in the world and you’d have likely been limited to Jack Daniels. Today, brands such as Bulleit Bourbon, Maker’s Mark and Tito’s vodka are gaining shelf real estate worldwide. American spirits are quickly culturally integrating a diverse, global generation of consumers. Jack Daniels is now just as relevant in middle-class Russia as it is in the French hip-hop community. Premium Kentucky Bourbons like Jim Beam or Maker’s Mark are gaining popularity in Asia and other parts of the world like never before. Why such a surge in demand for American spirits and why is this so relevant to the wine industry?
There are more than a few factors contributing to the current shift in the world’s consumer preferences for American flavor profiles:
- The success and dominance of American brands in many consumer goods.
- American brands are highly perceived as innovative and trendsetting. “Made in USA” is a symbol of quality, luxury, and confidence.
- American popular culture influencing the emergence of a diverse global middle class with an incremental income, taste for luxury and obsession with status.
- The availability of easier shipping methods and travel transportation options.
- The quality, craftsmanship, innovation and unique taste that American spirits offer.
While wine and spirits are often consumed on the same occasion, wine is typically enjoyed as a complement to a meal in many cultures and societies. Wine’s popularity is fast-growing, especially as it pertains to women and millennial consumers thanks to its reputation as a healthier alternative.
Women purchased 80% of the wine in the US last year while millennials accounted for 40% of the wine consumed. The up and coming, health-conscious generations are turning down calorie-laden beer and spirits and opting for wine instead. One can only expect that, as wine gains global popularity, the thirst for Premium American wine will follow suit. Napa Valley wines like Opus One are already highly praised gifts in China and a symbol of status at the finest dining establishments around the world.
The export of American wine over the past two decades is the result of a full century of innovation, progress, and an ongoing chase for higher standards in winemaking. The total U.S. wine export value, which totaled $415M in 1997, tripled to $1.5B in 2017. As the demands and trends continue towards premiumization, U.S. wine export values are expected to continue improving. In the past 3 years, several major players in the global wine industry have chosen to ditch their high-volume, bottom shelf brands to focus on premium offerings retailing at $13 and above. Whether the dollar fluctuates or the new trade war with China (which recently imposed a 25% Tariff Tax on American wine) continues indefinitely, the growth longevity of American wine should at least double over the next 20 years.
While the biggest threat in this industry remains the unpredictability of climate change and natural disasters, it has been proven over time that less production can lead to more demand as it has done in Bordeaux, Burgundy, and Champagne¹. Mother Nature’s unpredictability affects every wine region on the planet, but the size and diversity of American soil give the U.S. an advantage in the long run. Wines from Oregon and Washington State are now found globally, thereby increasing production and promoting quality as the number of French winemakers in the regions rise.
Much like international interest, local consumers are also demonstrating a preference for American-made wines. Millennials find it easier to purchase American wines than old-world or European brands. It is rare to spot a twenty-seven-year-old searching for a Chianti or a Cotes du Rhone in the wine aisle like their predecessors. We can attribute this generational shift, in part, to the simplicity of buying American wines and the quality to value quotient that they offer.
Hang out at the wine outlet for a bit and you’ll notice that the majority of wine buyers have their mind made up before they even enter the shop. More local and global producers are entering the market, making authenticity, quality, value and brand recognition more relevant. The market is more competitive than it has ever been and the average consumer attention span is shorter than it has ever been but, at the end of the day, wine purchases are driven by grape varietals, label design, brand name and, of course, price point.
The American wine industry has demonstrated exponential growth in the last four decades without showing signs of fatigue in the face of climate changes, labor shortages, dollar fluctuations and political unrest in international trade. Brand nationalism (locally) and the hierarchy status that American brands are gaining (globally) will continue to drive the thirst for American wines. We have come a long way as a wine-producing nation in the past century. In fact, we are now the 4th largest producer of wines behind Spain, France, and Italy— countries that have been producing wine for centuries. It is only a matter of time until “Made in USA” wines lead global wine production, consumption, and trends.
In my opinion, no algorithm can predict how long it will take until the United States becomes the world’s wine-producing leader but one thing is for sure: American-based artificial intelligence and automated algorithms will certainly contribute to the growth of American wine sales as long as marketing remains the single most powerful tool in the fermented grape juice industry.
¹The exaggeration in my comparison to the most prestigious and historical appellations in France reminds me of the magnificent price per acre one can pay in Napa Valley. Try to explain to the French back in 1976, that the most expensive bottle of wine sold to date (2018) is Screaming Eagle 1992 Napa Valley