USA, How 2020 Changed the Market

Usually, when looking at a wine market, it is rather easy to tell whether wine consumption has risen or fallen during a given year. However, since nothing about 2020 was straightforward, neither is total wine consumption in the USA. The topic has been up for much debate over the past 12 months with the extreme growth in off-trade sales balancing against several shutdowns in the on-trade.

The total volume of still wines increased by 1.28% in 2020 to roughly 343 million 9-litre case equivalents. However, total sales value is expected to be lower than previous years due to relatively higher prices in the on-trade. The American restaurant and bar sector, like in most other markets, has been one of the hardest hit industries during the pandemic. According to Nielsen CGA, total on-trade wine sales declined by 43% in volume during the year ended October 2020.

On- & Off-Trade

It will be a long road to recovery for the sector, with the National Restaurant Association reporting roughly one in six restaurants have closed for the long-term or permanently. Additionally, those that have re-opened are very cautious with their ordering, streamlining their wine lists and opting for brands with name recognition that will sell quickly. This has affected American wineries, with a survey reporting that the on-trade share of winery sales dropped from 14.7% in 2019 to 11% in 2020.

On the other hand, off-trade sales have boomed, benefiting those brands more exposed to this channel. In the year ended December 2020, total wine sales in the USA off-trade grew by 13% in value to US$17.8 billion and 10% in volume to 170 million cases.

Online Surge

It is no secret that many in-person aspects of life have moved online in the past 12 months. Buying wine in the USA is no exception.

Analysts predict that the online trend is here to stay, as consumers are unlikely to delete their online accounts completely once it becomes easier to access brick and mortar stores. We have now been in a COVID world for 12 months – the habits formed are becoming increasingly established in consumer behavior.

Three-Tier system not unaffected

2020 also saw disruption in the three-tier system of alcohol sales in the USA. The diverging trend of more wineries and less distributors continued, with the number of distributors declining by 4% in 2020.

As the on-premise shut, distributors were left without on-trade accounts and receiving payments for already shipped orders was uncertain. Thankfully there has been some recovery in the on-trade and increased sales in the off-trade is balancing out that loss. E-commerce is forcing distributors to adapt, with companies such as Southern Glazers launching a business-to-consumer e-commerce team and the Wine & Spirits Wholesalers of America partnering with Drizly, an online alcohol delivery app.

Domestic versus imported performance

In 2018, California had a record size winegrape crop of 4.28 million US tons. This, coupled with a gradual decline in the volume of consumption, led to an oversupply of domestic wine in 2019 and the start of 2020. However, the panic buying that took place with the advent of COVID-19, rectified this issue very quickly. Inventories quickly fell and smaller vintages have helped keep supply in balance.

With a domestic oversupply receding, and tariffs impacting on bottled still wine imports from France, Spain and Germany imports of bulk wine increased by 9% during the 2020 calendar year. The biggest contributors to this increase were Canada, Chile, and France. Total wine imports held steady, the increase in bulk imports balancing out the 3% decline in bottled imports.

As previously stated, total off-trade consumption increased by 13% in value during 2020, however, imported wines grew at a faster rate than domestic wines, 16% and 12% respectively. The source countries driving the growth in import off-trade sales are Italy, France, and New Zealand.

Key Points

• Total on-trade wine sales declined by 43% in volume during the year 2020
• Total wine sales in the USA off-trade grew by 13% in value and 10% in volume
• One in six restaurants have closed for the long-term or permanently
• Disruption in the three-tier system with the number of distributors declining by 4%
• Imported wines grew at a faster rate than domestic wines, 16% and 12% respectively.