Millennials driving premium wine trade

Millennials are driving premiumisation in the wine trade, but producers are struggling to take advantage of increased demand, according to a recent Rabobank report.

Millennials are increasingly shaping global wine consumption

The report, Premium Wine: It’s A Long Way To The Top, explores how changing generational preferences are playing a role in driving wine consumption around the world. This generation, the report states, is typically choosing to drink less wine, but of high-quality.

While the “Baby Boomer” generation was the first to make the shift to wine consumption, and still present within the premium market, the millennial generation is increasingly driving premium wine sales and shaping global wine consumption.

Report author and senior Rabobank analyst Marc Soccio observed: “These consumers have a higher level of awareness of wine and wine quality that any generation before them. This fact face, mixed with increasing warnings and regulations designed to curb excessive and irresponsible alcohol consumption, has many younger consumers choosing to drink less, but higher-quality wine that their parents’ generation.”

Millennial’s “confidence and enthusiasm” in selecting wine, the report notes, has allowed for the uptake of Prosecco and Marlborough Sauvignon Blanc by a generation less likely to “blindly follow the norms”.

“The experience of these and other emergent wines suggest that, in today’s market, fresh and vibrant wine brands and styles with a distinct point of different are appealing to the less formal attitudes that many of today’s consumers bring to wine.”

However despite rising levels of demand for premium wines, producers are struggling to take advantage due to continuing tough economic conditions and restrictions imposed by large retailers.

“Wine suppliers and wine retailers have sensed a growing appetite for wines beyond the mainstream. Somewhat paradoxically, the markets are still seeing many premium wine producers struggling for growth and profitability as their capacity to reach out to modern-day consumers has become more limited,” said Soccio.

Large grocery chains, which typically favour bigger brands and suppliers, are forcing smaller consumers to seek new ways to connect with consumers looking to trade up, according to Soccio. “The high volume off-premise channel – particularly the major grocery retail chains – is growing more and more influential in determining which products find their way to consumers”, he noted.

Emerging tactics to circumvent these restrictions include online retail channels and on-premise formats, with café wine bars accounting for more than half of all on-trade openings, with a bigger focus on food and wine matching.

Concluding Soccio notes that those “with the necessary scale and brand recognition” remain best placed to capitalise on pockets of increasing premiumisation.

However while demand for premium wine might be on the rise, only a few markets have been successful in translating this into “both higher consumption and higher prices” – the US and Canada.