Aging baby boomers not a positive outlook for wine sales

Hey fellow boomers, the fortunes of the wine industry depend on us! Who knew?! Decanter.com says, the growth of the American wine sales might suffer as we retire.

Young wine drinkers in the U.S. will struggle to match the financial firepower of the retiring Baby Boomer generation in the next decade, potentially putting pressure on sales, researchers have warned.

California’s wine producers are hitting something of a sweet spot in 2014, with higher consumer demand and improved financial health flowing alongside strong, back-to-back harvests. There has also been investment in other regions, including Oregon and Washington, but analysts at Silicon Valley Bank believe tougher times lie ahead.

Sonoma vineyard in the morning mist.

Sonoma vineyard in the morning mist.

In their state of the industry report for 2014, the analysts warned of a coming lapse in consumer purchasing power as the wealthy Baby Boomer generation reaches retirement age. Baby Boomers aged between 48 and 65 account for 44 percent of U.S. wine sales and are retiring at a pace of 11,500 per day, the analysts said.

In 2013, total U.S. wine consumption rose by 1.9 percent to reach 318-million nine-liter cases, with a value of $28.9-billion, according to the U.S. Beverage Information Group’s 2013 Wine Handbook.

The Silicon Valley researchers believe a key pressure point will arrive within the next decade, and probably in around seven years.

They likened the situation to the retirement of the World War Two generation in the mid-to-late 1980s, and a concurrent drop in wine consumption in the U.S. until Baby Boomers picked up the slack in 1994 and propelled consumption to two decades of unparalleled growth.

Vineyard in Napa, California.

Vineyard in Napa, California.

Rob McMillan, founder of Silicon Valley Bank’s wine division, said there is now particular concern about the spending power of the youngest group of consumers— the so-called Millennials. They have long been courted by the wine trade, but are emerging from the U.S. recession to face the prospect of being worse-off in the future than their parents.

“Younger consumers from all reports are more engaged in wine than older generations,” McMillan told Decanter.com. “But, it’s not only the desire to consume wine that’s important, it’s the capacity to purchase wine.”

“Do the younger cohorts coming up have the same opportunity for wealth creation and income [as the Boomers]? The answer in my opinion is no. The economic headwinds that the younger generation faces are of a magnitude worse than they were for Boomers.”

In the short- to medium-term, a lot could depend on so-called Generation X, which sits between the Millennials and Boomers in an age range of 36 to 47. “Generation X is the growth cohort that is being overlooked by marketers.”

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