Navigate Consumer Challenges Facing the Wine Industry for 2025 and Beyond
After declining sales and economic uncertainty dampened hopes for continued progress in the premium and luxury segments for late 2024, 2025 trends went on to suggest that significant wine-sales improvement is unlikely in the near term. Adapt your wine business to 2025’s challenges by understanding shifting consumer trends to capture new growth opportunities.
Decreased Sales Across Channels
Wine sales were off to a slow start in early 2025, with glimmers of progress from latter 2024 mostly disappearing. Economic uncertainty and concerns about tariffs have significantly impacted consumer confidence and demand for wine.
Off-premise retail sales, based on NielsenIQ (NIQ) data, saw a 5% decrease in value and a 6% decrease in volume during the first four months of 2025 compared to the same period last year. Distributor depletions also continued to fall below retail sales. While April showed a slight improvement as the strongest month of the new year for both retail sales and depletions, overall trend remains concerning.
Even the higher priced segments, while holding up better than the lower end, are experiencing declines in dollar terms. Luxury wine sales have shown less deterioration, though this may be driven by discounting.
The direct-to-consumer (DTC) channel hasn’t been immune to the downturn, with indications of a 6% drop in total DTC revenues and an 8% decrease in visitor counts during the first four months of 2025 compared to 2024. DTC shipment volumes have seen double-digit declines.
US wine exports also faced significant headwinds, declining 18% in value in the first quarter, despite an increase in volume due to resilient bulk exports. A major contributor to this decline is the plummeting sales to Canada, which is the most significant buyer of American wine, down by 32%.
Canada sales may pick up if the political posture between the two countries improves but that positive impact isn’t likely to be felt until 2026 at the earliest. Sales to China, the third-largest market, have also fallen dramatically by 84% for the quarter.
Grape Market Softens and Vineyard Values Decline
The softening wine sales have had a direct impact on the grape market, which continues to be slow. The early-year pick-up has subsided, particularly for grapes, due to heightened economic uncertainty and weak first-quarter wine sales.
The abundance of reasonably priced bulk wine is further depressing grape demand, especially in coastal regions with excess inventory. Most activity in 2025 has been limited to sporadic contract re-signs. Many growers are minimally farming or mothballing vineyards due to copious uncontracted fruit, and vineyard removal continues at a steady pace.
Despite no major issues with the 2025 crop apparent and normal timing expected, with ample moisture in California and warmer than average temperatures forecast, grape demand isn’t expected to improve significantly before harvest without a decisive change in wine sales or growing conditions.
Tariffs remain a wild card, but their near-term impact on growers isn’t expected to be major. More targeted and substantial tariffs would be needed to favor domestic growers.
The vineyard sales market remains subdued, with commercial vineyard values declining by 10% to 35% from their previous peak in most regions, with the prime segment of Napa Valley being the main exception where values are holding steady.
Declining Alcohol Consumption Across Demographics
A broader trend impacting the wine industry is the moderation movement, which signifies a decline in alcohol consumption in the United States after nearly three decades of uninterrupted growth. This trend, coupled with evolving demographics of alcohol consumers, has significant repercussions for the wine industry.
Evidence for declining alcohol consumption is mounting. While the National Institute for Alcohol Abuse and Alcoholism (NIAAA) data, the most definitive source, are only available through 2022, they show a surge during the pandemic followed by a drop in 2022 in both per capita and absolute terms. This was only the second annual decline since 1994.
Alcohol sales data from broad coverage sources like NIQ (off-premise retail sales) and SipSource (distributor depletions) indicate that sales volumes across beer, wine, and spirits have declined in 2023 and 2024, continuing into 2025. International Wine and Spirits Record (IWSR), which compiles retail sales data, estimates that global alcohol sales volumes fell by 2.6% in 2023, the first decline in 30 years, with preliminary estimates for 2024 showing no progress. Global sales further decreased by an additional 1% in 2024.
Surveys such as the Gallup Poll show that the percentage of Americans who use alcoholic beverages fell to 58% in 2024, the lowest figure in at least 25 years.
The National Survey on Drug Use and Health (NSDUH) indicates that the percentage of legal drinking age adults who reported consuming alcohol in the past 30 days began decreasing in the mid-2010s and accelerated since 2019, now standing at 52%, a three-percentage point drop from its pre-pandemic level.
The NSDUH survey also shows that the number of past-month drinkers, approximating regular alcohol consumers, plateaued in the mid-to-late 2010s before declining by 4.6 million between 2019 and 2023.
Who’s Drinking Less?
The decline in alcohol use isn’t uniform across all demographics but is concentrated among specific groups. The NSDUH data suggest that young adults, men, and non-Hispanic white people have shown the most pronounced decline in self-reported alcohol use.
Generation Z (aged 11 to 26 in 2023) is indeed showing less interest in drinking than prior generations at the same age. Past-month drinking rates have declined 10 percentage points for 21- to 24-year-olds over the past decade. However, the decline in alcohol use in this age range began before Generation Z occupied it, and underage drinking has been steadily falling for decades.
Noticeable drops in alcohol use have also occurred for the 26–34 and 35–49 age cohorts over the last decade and drinking rates for 50- to 64-year-olds have slipped in the past five years. If Generation Z continues to drink at significantly lower rates as it ages, it will exert increasing downward pressure on overall alcohol consumption.
Alcohol use by mature adults aged 50 to 64 has been steadier, and those 65 and older report slightly higher alcohol use rates than 10 years ago. Overall, each successive generation appears to be drinking less than the prior one, with the drop being particularly pronounced for Generation Z.
The reduction in reported drinking rates has been more severe for men than women, though men remain more likely to be drinkers. The share of men reporting past-month alcohol consumption has declined by seven percentage points over the last 10 years, compared to just a two-point drop for women.
More detailed analysis reveals that adult men under 35, across all races, report drinking at much lower rates compared to those of the same age 10 years ago. Past-month drinking rates for young men fell from 70% in 2013 to 57% in 2023, while those for young women only modestly decreased from 59% to 56%.
Black and Hispanic women are reporting higher drinking rates than in the past, primarily driven by surging alcohol use by Black women over 49 and Hispanic women aged 35–49.
Implications for the Wine Industry
The evidence strongly suggests that alcohol consumption is declining, a troubling development for wine producers. Wine will need to gain market share to avoid declining sales volumes due to less consumption on average. The changing demographics of alcohol consumers present both challenges and opportunities for the wine industry. The shrinking number of younger drinkers and the rapid growth of older drinkers are significant shifts.
Alcohol consumers are also becoming more diverse, with a climbing number of multicultural drinkers, particularly among Hispanic consumers, while the number of white alcohol users is declining.
This changing demography poses a challenge for wine, as it has traditionally under-indexed with multicultural consumers, potentially explaining wine's declining market share. It’s crucial for the wine industry to understand these shifts and find ways to connect more effectively with multicultural alcohol consumers, as they represent an expanding share of its potential audience.
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If you have questions about these impacts on the wine industry, please contact your firm professional.