Silicon Valley Bank Predicts the Wine Industry Will See a Spike in Demand When Consumers Celebrate Postponed Life Events in 2021

20th annual report indicates changes to wine sales in a post-COVID world

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Jan 13, 2021, 08:00 ET

NAPA, Calif., Jan. 13, 2021 /PRNewswire/ -- Silicon Valley Bank (SVB), the bank of the world's most innovative companies and their investors, today released its 2021 State of the Wine Industry Report. Now in its 20^th year, this authoritative annual report assesses current conditions in the wine industry and provides a unique forecast for the year ahead based on proprietary research and economic and behavioral trends.

Highlights and predictions from the 2021 wine industry conditions survey and report:

As the hospitality, travel and entertainment industries rebuild, there will be strong consumer demand and a bounce in overall sales that will gain momentum in 2021, but may not be sustainable into 2022.
The wine sales growth rate across all price segments has been declining for many years. The wine industry will need a national marketing organization to deliver a unified consumer message.

Price

Overall bottle pricing should hold in both off- and on-premise sales, as well as in the direct-to-consumer channels, as demand for alcohol and special occasions undergoes a temporary growth spurt in 2021.
Premiumization, a move to higher-priced wine, is nearing an apex but will continue into 2021 as deferred celebrations and reduced supply stall the expected change.

Sales Channels

Retailers with existing ecommerce strategies will have a strong 2021. Online sales could represent 20 percent of an average winery's sales within 5 years.
Surviving restaurants will come out of the pandemic financially damaged and will require investment for new revenue-generating strategies. Wine sales through restaurant channels will not recover to pre-COVID levels in 2021, nor for many years.
Off-premise grocery sales will show year-over-year declines.
Wineries with direct-to-consumer models will focus on COVID-era sales strategies in the front half of the year and will likely finish 2021 with strong tasting room sales.

Supply

When 2020 totals are calculated, we forecast that California will have crushed 3.3 million tons, resulting in the smallest harvest since 2011. The Pacific Northwest harvests in both Oregon and Washington will also come in smaller than normal.
Wine supply in California is largely in balance after starting the year with an acute over-supply. With limited growth in volume and an expected reduction in wine sold at grocery stores, a large 2021 harvest could put the industry back into a position of being over-supplied once again.

Demand

Retiring baby boomers will moderate their wine purchasing, both in price and volume, as they age. Online sales to boomers at home will be a growth channel.
The under-40 cohorts are where the wine industry will find growth in the next decade with 30.3 million Americans crossing age 40 in the next 5 years. The wine industry has to evolve its messaging to attract this new consumer.

"2021 will be a year of two phases for the wine industry: the continuation of a COVID-restricted mode during the first part of the year, followed by a gradual reopening of businesses and a resurgence in hospitality, travel and entertainment made possible by the success of widespread vaccinations," said Rob McMillan, founder of Silicon Valley Bank's Wine Division and author of the report.

"Those wineries that evolved in 2020, were creative in their sales channels, and recognize the permanent societal changes that will impact the industry forever will be successful in meeting the anticipated demand post-vaccine and beyond."

SVB will host a live videocast with Rob McMillan to discuss the annual report and the state of the wine industry on January 13, 2021 at 9:00 a.m. PT with Amy Hoopes, President of Wente Family Estates; Devin Joshua, Managing Director of Merryvale Vineyards; Erik McLaughlin, CEO of Metis; and Paul Mabray, CEO of Pix.wine. Register for the live event here. A replay of the discussion will be available after the event.

Read the full 2021 State of the Wine Industry report here: svb.com/wine-report

About Silicon Valley Bank

For more than 35 years, Silicon Valley Bank (SVB) has helped innovative companies and their investors move bold ideas forward, fast. SVB provides targeted financial services and expertise through its offices in innovation centers around the world. With commercial, international and private banking services, SVB helps address the unique needs of innovators. Learn more at svb.com.

Silicon Valley Bank's Wine Division

Founded in 1994, SVB's Wine Division offers financial services and strategic advice to premium vineyards and wineries. With one of the largest banking teams in the country dedicated to the wine industry, SVB's Wine Division has offices in Napa, Sonoma and Portland, and primarily serves clients in the fine wine producing regions along the West Coast of the United States. Learn more at svb.com/premium-wine-banking/

SOURCE Silicon Valley Bank