As Baby Boomers retire, fine wine producers could see a drop in demand, the report suggests

As Baby Boomers retire, fine wine producers could see a drop in demand, the report suggests

US fine wine producers must alter their long-term strategies as demand among 'Baby Boomers' is set to decline, a new report suggests. 

Silicon Valley bank's Annual State of the Wine Industry Report, published yesterday (16 January), flagged that around half of US fine wine, defined as a bottle costing between US$20 and $60, is purchased by "50- and 60-somethings". But, as they retire, their purchasing power will drop and will not be immediately replaced by younger generations, the report said. 

“The younger generation can't pick up the slack immediately, due to lower income, and access and the proclivity to purchase more foreign wine,” said Rob McMillan, the report's author. “Astute fine wine producers will be adjusting their strategies accordingly."

However, this year, the fine wine category is expected to help lead the US wine trade to its highest rate of sales growth since the recession, the report says. The $20-plus sector is predicted to register sales growth of between 6% and 10% in 2014, according to the report.

Meanwhile, 'Luxury' wines, priced $60-plus priced, and low-end wines, between US$10 and $18, are expected to see the biggest boost in demand in 2014, the report suggests. 

"Despite news to the contrary in recent months, wine supply is in balance heading into 2014 and we expect the highest rate of sales growth since the recession, despite a tough economy," said  McMillan.

On pricing, the report suggests that the retail level of bottles will remain “stable”, but as “increased grape and bulk wine costs are not being passed onto the consumer ... winery gross profits will be down.” 

The report also predicted that M&A activity among US vineyards will “continue at a record pace” in 2014.