Published in October 2024, the arguments within this article have become profoundly more relevant now that we know the outcome of the US general election and the impacts the republican administration are proposing will affect the global wine industries.

Whether you agree or not with the ideas presented in this piece I am personally worried that the NZ wine sector is putting too many eggs in the basket of ‘hope’ t hat is the USA market.

You’ll read that NZ “lost 2.5 points of market share from 2023 to 2024”.

You can source the original publication here: https://www.meiningers-international.com/wine/insights/us-wine-market-faces-unwelcome-new-normal. Written by Jeff Siegel

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The US Wine Market Faces an Unwelcome New Normal

Understanding the US import market was once simple. Mass market brands like Yellow Tail and Santa Margherita dominated sales, the French and Italians shipped wave after wave of their wines – premium and otherwise — to the US, and a handful of other countries had their well-defined niches.

But this may no longer be the case.

There is no next big thing

“I think we’ve reached some sort of saturation point with the market the way it is,” says Mary Taylor, whose self-named company brings in small producer wine from France, Spain, Portugal, and Italy. “When people ask me, ‘What’s the next big thing?’ my answer: ‘Nothing is.’”

In other words, it shouldn’t be surprising that the current state of US imports mirrors what’s going on in the larger US wine market — slow, sluggish, and confusing, with the emphasis on confusing.

Consumers are buying less wine and getting choosier about what they do buy, and retailers are adjusting their inventories to match.

In the first six months of 2024, as measured by the US Trade Commission, the volume of wine imports into the US increased by 1.5% from the same period in 2023. But both value and the average price declined, by 1.1% and 2.5%. Ask the experts about what’s going on, and it’s not unusual to get contradictory answers to the same questions.

Given this, what’s happening with imports may not necessarily be trends as they were once understood, but more like hints of a possible future direction. This includes a focus on value, as opposed to the ever-higher prices and premiumisation that have dominated the past decade, as well as less emphasis on mass-market brands and the increasing popularity of regions and grapes that, for lack of a better term, are unique.

In other words, consumers are buying less wine and getting choosier about what they do buy, and retailers are adjusting their inventories to match.

A nuanced understanding

All of this is being played out against an importer and wholesaler marketplace that is shrinking, as each streamlines its portfolios — and as producers outside the US try to adjust to this reality in different ways.

“So many businesses are not increasing their portfolios, but are looking to downsize,” says Gerald Weisl, an independent retailer in the San Francisco Bay area. “And we have seen this when we are looking to re-stock, only to have sales reps simply say they are sold out. If we ask when those items will return to inventory the reps have admitted, ‘Uh, we're no longer working with that winery.’ "

None of this means, of course, that mass-market brands still aren’t selling and that the traditional regions and varieties aren’t still popular. Red Bordeaux and Italian Pinot Grigio, as several people interviewed for this article noted, aren’t going away anytime soon, and neither is Gallo’s La Marco Prosecco, which seems immune to any sort of downturn or fluctuation.

"So many businesses are not increasing their portfolios, but are looking to downsize."

Italy and France, the traditional import leaders, still account for about half of US import volume, according to the US trade figures.

Many of these import leaders are just less popular than they have been, according to many analysts. A case in point is Champagne, which saw sales decline for 14 consecutive months through the first quarter of 2024. That included a decline in the US, one of Champagne’s biggest markets after France. And who can account for what happened to New Zealand, which had barreled its way into third place among US importers on the strength of Sauvignon Blanc? Yet it lost 2.5 points of market share from 2023 to 2024.

“What’s interesting is that the overall market is soft and there seems to be a slowdown in every category,” says David Gordon, executive vice president for Manhattan’s Bowler Wine, a national importer that also distributes in some states. “That usually doesn’t happen. And it seems like price matters too. The high end is still strong, but we’re seeing declines from the mid-tier on down – even though mid-tier had been growing.”

What about pricing?

This indicates that consumers are not necessarily buying on price and opting for the most expensive imports but on value. Weisl says his customers are not so much looking for expensive wines, “but for a good value. That might be might be a $600 case of wine if the wines were worth $100 a bottle. Pricing has to be sensible.”

Meanwhile, Julio Alonso, the executive director for North America for the Wines of Chile trade group, says Chile’s strong showing in the 2024 numbers, gaining almost two points of market share even though its average price declined almost 10%, came from value.

“I think we’re beginning to see the de-acceleration of the premiumisation trend,” says Alonso. “Sales in our wines around $11 retail have been strong, and I think that’s because of inflation pressures.”

Consumers are looking for less expensive wines that still offer quality.

And, he adds, that $11 price corresponds with Chilean Sauvignon Blanc, long one of the country’s export staples. So, Alonso says, it’s probably not a coincidence that Chile gained market share as New Zealand lost share over the last share, with consumers looking for less expensive wines that still offered quality.

Again, this doesn’t mean consumers are abandoning market leaders; rather, they are expanding their search to include wines and regions that may not have garnered much attention before. That could be Portugal, with its affordable and myriad red grapes. In Spain, says Gordon, that could include Mencia and Garnacha and not just Tempranillo from Rioja and Ribera del Duero. In Italy, says Taylor, that could be Sicilian Grillo.

Rosé seems to have had its day – it still sells, but it’s peaked.

On the other hand — and there is little disagreement about this — rosé seems to have had its day. “It’s still a thing,” says Gordon, “and it still sells, but it’s peaked.”

And, says Weisl, retailers don’t need any more Prosecco or Pinot Grigio. This outlook also probably doesn’t include any upticks for South Africa and Australia, which have languished in the US for several years.

“When you look at these numbers, you have to understand that flat is the new up,” says Frank Paredes, formerly president of Portuguese importer NOW Wine Imports and currently the founder of Wine Sense Brand Builders, a marketing and consulting company. “Tastes are changing, and there is little brand loyalty among younger wine drinkers. So they are more willing to try something different.”

New players and products

It’s also worth noting, say analysts, that some foreign producers — given the continuing cuts in US wholesaler and importer portfolios — are forming companies to import and distribute their wines themselves. This started almost a decade ago with Santa Margherita, and has become more popular since. Alonso notes that several Chilean producers of the 100,000+ cases size have found this a cost-effective alternative, provided they have the size and resources to manage the process. It’s probably not a practical option for smaller producers.

Finally, there is the muddle around low-alcohol wines, which may be the most confusing part of the current import climate. Most analysts see growth in demand, but Parades sees a variety of problems with this approach. Most notably, he says, what is low alcohol? Is it Portuguese Vinho Verde and German-style Rieslings, with their 10% — or even lower — ABVs? If so, that excludes many European red wines, where appellation rules prohibit levels that low.

“It’s a huge contradiction,” he says, “and it’s something that all those distributors who are jumping on the low-alcohol train don’t understand.”

In the US market low alcohol for imports is likely less than 13% ABV, but not Vinho Verde low. That may not be low by European standards, but it is by US tastes; many mass-market domestic brands are 13.5% or more. Both red and white wines can be 14% or more.

Just one more conundrum for those who want to export to the US to try and figure out.