Wine Marketing Council 2006 Market Overview

CONSUMER RESEARCH SUMMARY
The following is an excerpt from the Wine Market Council's 2006 Consumer Tracking Study final report. The complete report and study results are available to current Wine Market Council members. For more information about membership, please click here

MARKET OVERVIEW

The year 2006 provided many milestones for the U.S. wine market, and all of them were positive. The consumption of table wine exceeded 250 million cases for the first time ever; adult per capita consumption of table wine set a new record high; and the 13th straight year of gains in total wine sales was logged. This more than decade-long period of growth is unusual, as the modern history of the U.S. wine market is one of ups and downs measured in decade-long periods: a sudden surge in consumption beginning in 1970; lengthy retrenchment through the 1980s; and a slow and steady climb beginning in 1994 and continuing to this day. Moreover, the outlook for continued expansion of the wine market in the U.S. is excellent.

Beginning at just over the one gallon in 1970, adult per capita consumption of table wine zoomed to more than two and a half gallons in just over ten years. Then, from a high point of 174 million cases of table wine consumed in 1982, a long period of decline began, taking total table wine per capita consumption down to 1.89 gallons per adult in 1991, with only 140 million cases of table wine consumed that year.

Table wine consumption in the U.S. began an uninterrupted climb again in 1994. Consumption has grown every year since, surpassing the 1982 case level in 1996, when 176 million cases of table wine were consumed. The 200-million-case level was surpassed in 2000, and growth has continued through 2006, with an all-time record 259 million cases of table wine estimated to have been consumed in the U.S., and adult per capita consumption estimated at a new record of 2.88 gallons.

Demand for table wine in the U.S. is today surging more strongly than any time since the late 1970s, and immediate prospects for continued growth are excellent. Recent consumption gains for table wine have been driven (as research data cited later in this report will show) by the continuing assimilation of news relating moderate wine consumption to positive health outcomes (which is driving consumption growth among adults aged 61 – plus), increased and more highly evolved marketing campaigns by major brand marketers, and the ongoing media campaign conducted by Wine Market Council since 1995 which has changed consumer attitudes about the ‘occasion appropriateness’ of wine. Gains in table wine consumption since 2000 are also highly attributable to the adoption of wine in early adulthood by the leading edge of Millennial generation young adults.

A look back at the rise, decline, and resurgence of the table wine market in the U.S. reveals both long term trends and independent factors that account for the movement of this market.

The wine boom of the 1970s and early 1980s occurred as the leading edge of the Baby Boom generation (persons born between 1946 and 1955) matured, and drove the consumer market with their unique set of tastes and lifestyle choices. Many of these were distinctly if not adamantly different than the tastes and choices of the generations preceding them. Wine as a preferred form of beverage alcohol was among these. White wine growth dominated this period, with the ubiquitous ‘glass of Chablis’ spurring increased table wine consumption by displacing other beverage choices (mainly other beverage alcohol choices) on occasions which often were previously outside the realm of deemed appropriateness for wine. The simultaneous proliferation of high quality, premium table wines from emerging U.S. producers and from Europe was both a stimulus and response to the burgeoning demand for table wine during this period.

As a generational phenomenon, the wine boom reached its peak in the mid-1980s. For more than a decade following the high point in both total and adult per capita table wine consumption the market sagged, until the upturn which began in 1994. From just 1.05 gallons of table wine per adult in 1970, adult per capita table wine consumption more than doubled in a decade, reaching 2.58 gallons in 1982, as previously noted. The gallonage and per capita losses which followed, through the 1980s and early 1990s occurred during a period of continually rising per capita disposable income, and despite the fact that the consumer price index for wine had lagged behind that of beer, spirits, food, and the average of all consumer goods.

Numerous factors contributed to the market decline in table wines through the 1980s and early 1990s, including the following:

• The raising of the legal drinking age universally to 21, which culminated in the late 1980s.

• The health/fitness trends of the 1980s.

• The implementation of mandatory labeling for sulfites (1987) and mandatory alcohol warning labels (1989).

• Lowered state blood-alcohol levels for DUI offenses.

These factors all contributed to the erosion of gallonage and per capita consumption of table wine. Contributing also to the period of decline were cuts in marketing expenditures by the major wine brands, and the failure of Generation X adults to incorporate wine into their lifestyles as thoroughly as the Baby Boomers who drove the wine boom in the 1970s and early 1980s and today represent the largest segment of the core wine consuming population.

This report will show that Generation X adults, now mostly in their 30s, are finally taking to wine in significant numbers. Moreover, the Millennial generation, now entering young adulthood, is exhibiting the same receptivity to wine that leading edge Baby Boomers did more than 30 years ago. Like the Baby Boom generation, their numbers are so great as to make their dominance in the market inevitable, and they offer the wine industry the kind of growth potential not seen in more than thirty years.

There are 77 million Baby Boomers (ages 42 to 60 in 2006), compared to a 44 million Generation X population (ages 30 to 41 in 2006). But the Millennial generation is a group of some 70 million. The eldest among this group turned 29 in 2006. They add, on average, 5 percent more new adults to the U.S. population per year than did Generation X, and their taste and lifestyle choices will drive the beverage alcohol market for many years to come.

As noted above, adult per capita consumption of table wine in the U.S. now stands at an all-time high. Compared to consumption levels in other countries, however, the U.S. lags far behind. The opportunities of the market today, however, give rise to the belief that while the U.S. will not equal consumption levels in France or Italy, growth to parity with per capita consumption in Canada, the U.K., and Australia may indeed be possible. Further, it should be noted that the U.S. is the fourth largest producer of wine among all countries, and in 2006 the U.S. moved past Germany and into third place for total consumption of table wine.

With thirteen straight years of wine consumption growth in the U.S. now on record, and adult per capita table wine consumption at an all-time high, there has never been a better moment to capitalize on the positive trends and emerging demographic imperatives of the market. Meeting the challenges of building the consumer base of the U.S. wine market will provide for long-term increases in demand for wine and profitability for the industry for many years to come.

INTRODUCTION TO THE WINE MARKET COUNCIL


Wine Wine Market Council is an independent, non-profit trade association of grape growers, wine producers and importers, wholesalers, retailers, and others in the industry working together to grow the consumer base of the U.S. wine market for the benefit of the industry as a whole. The council’s mission is to establish the widespread acceptance of wine as a rewarding part of American culture, and to encourage the responsible enjoyment of wine by current and future generations of adults in the United States.

The means by which the council is working toward its goal are ongoing consumer research and a national public relations campaign, carried out through the mainstream consumer media.

In 1994, the Wine Market Council commissioned the first consumer survey to study the attitudes and behaviors of wine drinkers to be conducted by Merrill Research. The study was repeated in 1997, 2000, and 2003. Beginning in 2005, the Merrill study became an annual undertaking of Wine Market Council. Numerous focus groups consisting of core and marginal wine consumers segmented by age and gender have also been conducted over the years. This qualitative work has helped us to delve into the underlying attitudes and perceptions of these wine consumers.

Each year, Wine Market Council is placing increased focus on timely issues in the industry, for example emerging consumer segments such as Millennial generation young adults, or the root of increased wine consumption. In addition to in-depth analysis of our tracking study data to investigate these topics, each year a series of focus groups are conducted to supplement what is learned from the quantitative data. In 2006, Wine Market Council used this focus group method to find out more about why some consumers are drinking more wine today than they had in the past. The results of this research are summarized in a separate report available to members of Wine Market Council.


The complete Wine Market Council 2006 Consumer Tracking Study report and study results are available to current Wine Market Council members.