Fine wines are set for a major uptick in the US this year

Fine wines are set for a major uptick in the US this year

How are wine producers operating in the US set to fare in 2015? 

A new report by Silicon Valley Bank (SVB) suggests producers at the higher- and mid-end are well set, whereas cheaper wines could again struggle. The 56-page study paints a positive picture for the industry as a whole, based on the improving state of the US economy. Demand is expected to be pushed up by: falling oil prices that boost consumer spending; dropping unemployment; and EU, Japan and China currencies weakening against the dollar. 

In particular, the fine wine segment - brands priced US$20 and above - will see major benefits, SVB predicts. “For 2015, we are forecasting a breakout sales year in fine wine wines with a year-over-year increase of 14-18%,” the report says. 

'Trading up', SVB suggests, is now a “clear trend” again with red wines in particular showing the strongest growth. “We expect that to continue throughout 2015,” the report says. The segment will see volume and price rises, helped by the improving economy and growing demand, according to the report.

However, at the other end of the spectrum things could remain tough. SVB predicts that wines priced below $9 will continue their poor performance in the US on- and off-trade into 2015. 

This trend perhaps explains Treasury Wines Estates' move to up its focus on its more premium labels, such as Penfolds, in the US and “retire” some of its non-core brands

In general terms, the SVB report suggests that “massive bulk imports” will continue to dominate among the lowest priced wines, but bulk imports “should be held back by the size of the 2014 harvest and supplies currently in cellar”. 

Turning to consumers, the report agrees with a Rabobank report earlier this week that suggests a growing interest in wine among Millennials will boost sales in the $10-$20 segment.  However, issues such as student debt and weak job prospects mean it will be some time before this generation starts looking towards the fine wine segment. 

There is also a warning for US wine producers as younger generations have their heads turned by imported wine. “The Millennial generation is consuming more foreign wine than other cohorts today,” the report notes.  “The likely outcome is not positive for US producers going forward.” SVB recommends that industry should consider a “mass-market message to consumers about domestic wine quality”. 

So, plenty for producers to ponder as 2015 gets into full swing.