Wine, beer, liquor, Four Loko, it doesn’t matter. Americans are drinking less alcohol, especially the country’s youth.
That’s affecting the alcohol industry in the U.S., including California’s vineyards. More than 80% of all wine produced in the U.S. comes from California. Like the rest of the industry, many of those vineyards are feeling the squeeze as much as their grapes do.
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Drinking less
“Consumption is declining,” Jim Lapsley, a retired economic historian who focused on the economics of wine production, marketing, and the history of California wine, told Straight Arrow.
Like most other alcoholic drinks, wine consumption spiked during the COVID-19 pandemic but has since been on the decline. Wine sales recently hit a 20-year low.
“Demand has decreased, and one of the issues with grapes is that they’re a perennial crop,” Lapsley said.
That means those crops last a long time, or more specifically, live for more than two years.
The decline in youth drinking impacts all facets of the alcohol industry but could impact wine more disproportionately over the long-term.
“The longer someone puts off having that first drink, the less likely they are to drink heavily, and the less likely they are to have alcohol kind of a part of their habitual routine,” said Christopher Kahler, director of the Center for Alcohol and Addiction Studies at the Brown University School of Public Health.
Impact on wineries
For the big boys of California winemaking like Gallo, The Wine Group and Trinchero Family Estates, the hit still stings but is more manageable.
“These big guys have deep pockets, probably are not deeply in debt, and have the ability to just kind of scale back and wait,” Lapsley said.
For those smaller wineries and vineyards, the decline in drinking, especially amongst the youth, can be a death sentence.
Farm bankruptcies across the country are way up. When it comes specifically to California wineries, there is very little data on just how many wineries in California have gone under.
But it’s enough that industry experts have noticed, especially as Americans drink less.
“Wine seems to be dropping more so than beer and spirits,” Lapsley said, adding that the COVID-19 pandemic may have had an impact.
“It’s hard to sit down and split a bottle of wine or have a couple of drinks with your friends when they’re all on Zoom,” he said.
But they call us Americans, not American’ts.
Our livers worked overtime from home during the COVID-19 pandemic, as many Americans turned to the bottle. By the end of March 2020, Nielsen reported a 54% increase in national alcohol sales compared to the same time a year prior. The women of the country really got after it, reporting a 17% increase in the frequency of their drinking. Heavy drinking, defined by four or more drinks in a short time, shot up 41% for the ladies.
For the booze industry, those days are mostly gone. Constellation Brands, which reported $1.7 billion in net profit last year, also announced it was closing a massive winery in the Golden State.
Even Gallo, the top producer in the state, shuttered a major winery.
Impact on consumers
When supply goes up and demand goes down, simple economics kick in.
“We’re right now in part of a cycle where it’s wonderful for consumers,” Lapsley said. “There are great values of wine out there, from all over the world. But it may or may not be profitable for the producer and/or for the distributor.”
The latest data from the Bureau of Labor Statistics shows just that, with the price index having fallen.
However, with fewer people drinking, it’s unclear if those better prices will bring those numbers up.
“Certainly there’s going to be some adjustments economically, right?” Kahler said.
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