Wine Distribution Market in the US

• In 2019, boxed wine represented 9% of table wine retail volume and 5% in dollar value, canned wine represented 1% with a 70% growth since the previous year. Sparkling wines represented over 10% in dollar value, driven "by double-digit growth of Prosecco and Sparkling Rosé."
• According to Wines Vines Analytics, "wine imports are weak in retail shops but strong in bars and restaurants." In 2019, from the $17.9 billion of wine sold on-premise, imports represented $5.9 billion.
• Wine demand volume in the US is expected to increase by 1.0% each year from 2020 to 2024. This growth will be driven by an increase in disposable personal income levels, as well as current trends of premium alcoholic product adoption and millennials' increased casual drinking.
• In 2018, fortified wine experienced stagnation in total volume sales, even Vermouth's volume sales declined this period. However, since this year, rice wine sales started growing and are predicted to keep increasing in the upcoming years.
• Also in 2018, the value of US wine exports decreased by about 5% to $1.47 billion. The California-based Wine Institute states that overall export volume decreased over 1% this year. For example, "exports to China and Japan fell by double-digit percentages."
• The Silicon Valley Wine Bank Division (SVB) predicted that in 2020 the premium wine segment will grow between 3 and 7%, and the off-premise retail store channel value will fall between -2 and 0%, while the volume will fall between -1 and -3%.
• Over the past years, generic wines and wines under $9 "declined in their growth rate alongside the aging of the mature generation," while higher-priced premium wine grew. However, in late 2019, about 70% of wine sold by volume traded below $9. Currently, millennials appear to be trying wines under $9, but as they think these don't have enough quality, they prefer spirits instead.

Changes Driven by COVID-19

Shift to Off-Premise Accounts and E-commerce

• Wine importers, distributors, and wholesalers have experienced a drastic swift "from a mix of off- and on-premise" sales to a higher percentage on off-premise operations, as bars and restaurants have closed or transitioned to takeout.
• For example, Banfi Vintners, whose normal sales are about 60% to stores and 40% to restaurants, started shifting in March to 84% and 16%, respectively and expected its on-premise operations to drop down to zero eventually.
• Delivery and contact-less pickup are gaining popularity among distributors. Southern Glazer’s Wine & Spirits, is offering delivery services via Drizly and a new business-to-business e-commerce platform in April, while the Republic National Distributing Company is working on marketing solutions for companies seeking to grow direct-to-consumer sales.
• According to SVB, phone and e-commerce sales represent 26% of sales, wine club sales have grown from 23% to 35%, and off-premise sales have grown from 18% to 20%.

Consumers are Buying Wine Online and Drinking More During the Lockdown

• The COVID-19 pandemic has encouraged new consumers to buy wine online as there has been a 72% increase in new alcohol buyers online compared to the previous year, especially in seniors who had not purchased wine online.
• With the lockdowns, more people are buying wine online and having it delivered to their homes. At Wine.com, revenue has quadrupled to more than $1 million per day since the end of March and April revenue topped $40 million. Also, "the company has hired 500 people and tripled its marketing spend."
• Recently increased sales (by 24%) in off-premise suggests that wine consumption during lockdown is on the rise while other kinds of consumer activities have decreased. Consumers may be buying extra alcohol in case it is not available later or "to reduce the frequency of their shopping trips."
• According to Intelligencer, people's drinking habits have changed because they are bored, frustrated, or they don’t have to worry about driving home after drinking.

Revenue Losses

• The US wine industry may lose up to $6 billion in the next year due to the current pandemic. According to Jon Moramarco, managing partner of bw166, despite the increased consumer wine purchases from grocery stores and e-platforms, the impact of on-premises and tasting room closures, along with direct-to-consumer sales reduction, will impact short-term sales gains across all sales channels.
• On-premise businesses are estimated to lose 80% in revenue, representing a $2.54 billion loss, direct-to-consumer shipments for wine club and allocation sales are expected to decrease by 10%, representing a $323 million loss, and tasting room sales are also expected to lose 80%, representing a $3.0 billion loss.
• Moramarco also predicts a 50% recovery of on-premise sales "within three months of shutdown lifting," which will begin in late May. However, this recovery time-lapse may be different in each state as local officials evaluate shutdown lifting risks.