The US wine market is expected to see more consolidation this year

The US wine market is expected to see more consolidation this year

M&A activity among US wineries will come at a “record pace” this year, while bulk imports will continue to dominate the lower end of the market, according to a new report. 

Silicon Valley Bank's (SVB) Annual State of the Wine Industry Report, published this week, said that it expects to see "more transitions, sales and mergers taking place than at any time in memory" in the US in 2013. It also predicts a "continuation of new mergers among wholesalers". 

Wineries' profits will also be hit by higher grape costs this year, the report suggests. Companies will raise their bottle prices, but the bank believes the move will “prove difficult”. 

“The general financial condition of the (US) wine industry continues to improve at a slow and steady pace,” the report says.

The report predicts that “massive bulk imports will continue to dominate the lowest price point wine categories” and that “direct-to-consumer sales will continue as the largest growth channel for most wineries”.

On fine wine, overall US sales will grow between 4% and 8% this year, SVB predicts. 

“It’s another good-news, bad-news year in fine wine," said Rob McMillan, founder of Silicon Valley Bank’s wine division and the report's author. "While we are quite optimistic about the future prospects in the US wine business, a combination of events will continue to hold back robust growth in 2013.”

He added: “Economic uncertainty, slowing domestic GDP, lack of economic leadership worldwide, aging (Baby) 'Boomers', and a heavy 2012 harvest provide headwinds against forecasting higher growth.”