Wine exports to our largest market are slowing, and bold moves are needed to turn things around, says a new report.
Rabobank's latest global Wine Quarterly report said wine consumption growth in the United States was easing as consumer behaviour changed.
RaboResearch senior wine analyst Hayden Higgins said the US wine industry had become accustomed to annual wine consumption growth rates of two per cent or more and the decline in recent years to one percent annual growth was cause for concern.
He said bold moves would be needed to respond to a changing market structure and an emerging US consumer with different values.
"This year will mark an important inflection point in this shift, as the emerging generations - the Millennials and Gen Z - will overtake older generations - the Boomers and Silent - in terms of influence," said Higgins.
"And we'd expect to see the next 10 years become increasingly painful for wineries that fail to find ways to effectively connect with younger consumers."
For the US wine industry to return to the days of heady growth, the report said it needed to adjust to a rapidly changing environment where e-commerce is transforming the operational context and evolving consumer preferences require updated branding strategies.
"While US wine sales via its two largest channels - on premise and grocery - fell in 2019, online wine sales grew by 22 per cent, and significant focus needs to be directed towards investing in building out the industry's e-commerce capabilities."
"Improving brand-building skills - in particular in relation to what we will call 'the revised Four P's of marketing': Purpose, Presence, Personality and Packaging - will also be essential to help reach a consumer that engages with brands differently."
The report said New Zealand wine exports to all markets recorded strong growth in 2019 rising by 8.8 percent in volume and 8.2 percent in value.
Higgins said further US export growth in 2019 had established the market as New Zealand's largest destination for wine exports by value, while it was now a close second behind the UK by volume.
"Despite flat overall US wine consumption in 2019, sales of New Zealand wines continued to grow strongly into the US market, growing by eight percent in value and 14 percent in volume," he said.
New Zealand producers would also be closely watching global trade developments, with tariffs, trade agreements and the coronavirus outbreak shaping global trade in recent months.
"Tariffs and trade disputes are here to stay, and although they may not affect absolute volumes of consumption in the countries involved, they will trigger some reshuffling in global trade," he said.
The recent coronavirus outbreak was also a further factor which had impacted global wine trade.
"New Zealand wine exports have not been significantly impacted at this stage, due primarily to the fact that less than one percent of our wine exports go to China - the country who have been hardest hit by the virus thus far.
"However, there is potential for the virus to have a larger impact on New Zealand wine producers if its spread continues further and leads to reduced consumer demand in some of our larger wine export markets."
