Misdiagnosing a Crisis
The uncomfortable economics underlying falling wine consumption
There is a persistent narrative being pushed that wine is doomed. Sensationalist articles like this beauty titled: ‘Bloodbath’ hits wine country as millennials and boomers abandon alcohol are a prime example of how click-bait articles are skewing a narrative. They work especially well when people are passionate about the topic, and when that passion is paired with limited understanding of the macroeconomic environment behind the data. The above article states “Older wine enthusiasts are aging out of the market and are not being replaced at the same rate by millennials and Gen Z, experts say.”. Naturally no mention is made of who these experts might be, but in principle it is not wrong. Yet it then proceeds to draw highly tenuous and anecdotal links to this shift being a consequence of increasing health concerns, something which a survey conducted by IWSR Bevtrac has thoroughly debunked. Younger generations, given the opportunity, drink as much as generations gone by. There remains tremendous confirmation bias for this sort of narrative as wine sales are contracting, which I suspect is why many in the drinks business have also bought into the idea that this is a true behavioural shift among the broader consumer base. We like simple explanations, and this is one, no matter how damaging its perpetuation might be for the business itself. Aside from playing right into the hands of the neo-prohibitionist lobbies, confirming to anyone who asks that alcohol is now uncool and on the same path as smoking was in the late 90’s, it also muddies the waters, making sound business decisions to handle the market contraction much harder to make.
Further complicating the matter is that the global wine market contraction is not uniform, nor necessarily driven (to the same extent) by the same drivers. Comparing the European market and that in the US for instance is very difficult given their major cultural differences when it comes to how and when wine is consumed. The US had their prohibition and took a long time to recover fully, building their own culture around wine which only really began to bloom in the late 70’s with the rise of Napa Valley. In France meanwhile, it was not unusual for children to be served wine as part of their school lunches, up until the practice was banned in 1956. This ban however, was limited to the enfants, children under the age of 14, and it would take until 1981 for the practice to be banned from schools entirely. Culturally, the starting points for what we can call modern wine consumption could not possibly be more different. The French are of course a bit of an outlier, but generally the consumption drop in European countries has been ongoing for far longer than the current fear-mongering suggests, reflecting societal changes not only in how and where we consume wine, but more importantly how we eat. After all, wine is, and has long been considered, food. The distancing of it as such has hurt European consumption greatly.
That the US and European markets behave very differently is very clear from the data. The below graphs showing production and consumption data from the International Organisation of Vine and Wine do not paint a pretty picture, but it does suggest that the US market was, up until very recently, quite healthy. Since the pandemic however things have taken a marked turn for the worse. Since we can conclude, thanks to the IWSR Bevtrac survey mentioned earlier, that this is not a cultural shift, the conclusion that remains available to us is that the down-turn is driven by economic factors.
Wine behaves differently from most goods in conditions of oversupply. A glut, in theory, should push prices down and stimulate demand. In practice however, wine production is too fragmented, and pricing too closely tied to cost and positioning, for that adjustment to occur efficiently. The result is a surplus that exists largely out of sight of the consumer. Unless it translates into materially cheaper bottles, a glut has little bearing on how people choose to drink and at present, it largely hasn’t.
What matters then in understanding the drop in sales is therefore not going to be linked to production side issues, though that is most certainly creating problems for those who over-invested in production capacity on the back of the pandemic.
Wine is a luxury good. It is so in the broadest sense, meaning that, despite what people likely to read this might think, is not an essential purchase. Spending on wine therefore falls into what is known as discretionary consumption, namely the portion of income that remains after housing, food, energy transport and other fixed costs have been accounted for. It is this residual pool of spending power, rather than headline income figures, that ultimately determines how much wine is bought and consumed. There is of course also a saturation problem. Even if wine was free, you would eventually reach a point where those who would consume alcohol could not possibly consume more. With prices being what they are however, it is more a matter of those who will consume alcohol choosing more cost effective options, or simply not allocating resources towards that at all.
Since the end of the Covid-19 pandemic, essential costs, particularly housing and energy, have risen disproportionately, absorbing a larger share of income. Real income growth has at the same time failed to keep pace, forcing many households to maintain overall spending levels through savings depletion and credit. It is not a data point that is accurately captured in any single published US statistic, but when you look at the available discretionary income available to people, it is easy to see why people are opting to buy wines less than before.
When discretionary income is compressed, consumption does not collapse uniformly. Instead, it is optimised. Households begin to make small, incremental trade-offs: a bottle not opened, a second glass skipped, a cheaper alternative chosen. These decisions are rarely framed as conscious cutbacks, but in aggregate they exert a powerful effect. Wine, with its relatively high cost per occasion and inherent variability in quality, becomes particularly vulnerable. As mentioned above, it is easier to replace than many other forms of consumption, and easier to justify foregoing altogether.
Looking more specifically at the age bracket which most represents the up and coming wine consumer, 25-34, the figures are even more revealing.
There is a clear uptick in annual expenditures following the pandemic, culminating in an average $74,745 per year for 2024, reflecting broader real-world inflation. For comparison, the average annual income according to the U.S. Bureau of Labor Statistics for the same age bracket was $58,500 in 2025 (I could unfortunately not locate the 2024 figure). This is a pretty shocking disconnect (if potentially a bit misleading, as we’re dealing in averages across a population). The official figures showing discretionary spending omit debt servicing. The consequences are self evident, and debt accumulation in this age-bracket (and in the broader US economy) is rampant. Would you prioritise wine if cash was this tight?
Final Thoughts
As the current US administration is looking to loosen the capital restrictions put on banks following the 2008 financial crisis, potentially allowing banks to hold billions of dollars less in capital on their books, it is easy to look at the above accumulation of debt and wonder where the US economy is actually heading. Paired with the ongoing war in Iran which has pushed oil prices close to USD 120 per barrel and which may well have long term infrastructure consequences that would keep energy prices elevated for some time to come, to say that the economic outlook is uncertain is an understatement. Yet this is not a financial forecast, and predicting market crashes is not my business.
The insistence of the media however to blame the consumer for their disinterest in wine does however seem unfair. The simple fact of the matter is that wine sits at the frontline of discretionary spending, and will invariably take a hit when people don’t feel flush with cash. Those whose business it is to sell and make wine should therefore make decisions accordingly. For bulk wine producers, this is perhaps not the time to gamble on a rapid market up-tick.
Pretty spot on. As an older American who has been producing (and consuming) wine for over 50 years it does come back to that cliche from some political campaign "its the economy, stupid!" When the average glass of wine in a San Francisco restaurant goes for $25, if I were young and wasn't a tech bro/private equity vulture I'd be hard pressed not to order a couple of fancy cocktails for less money (and more "bang" for your bucks). Many years ago I heard the former PR/communications director for the California Wine Institute, Leon Adams tell people that if we truly want a wine and food culture in the US we need to make decent wines available for not much more than a gallon of milk. That view obviously didn't prevail. Yes, we can't go back to prices of the 1970's, if only because of inflation, but so much of the current prices for California wines is driven by greed combined with ego. Wine isn't a necessity, but I would like to see it as "an affordable luxury". In many ways wine and the current wine business is the proverbial "canary in the coal mine", but part and parcel of a general craziness and cultural/economic excess. Good wine will survive, but the pendulum needs to swing back from being so far out there and that will take some time and more pain for those of us growing grapes and making wine.
Thank you for this great analysis George. However, from a European perspective ( and Europe remains the continent where the most wine is consumed) there is not only the disconnect of food and wine. In France - historically one of the largest wine drinking countries - stricter laws and drink diversity are as much to blame as economic factors. For instance, I lived in France for a brief period in 2000 and at the canteen, people were drinking whole bottles of wine at lunch time. Today, work canteens do not provide wine anymore. One of the reasons is the Loi Evin, that hammered home the message about the dangers of alcohol, reminding people wine is alcohol. Higher education schools have not been able to serve - never mind sell - wine for about a decade now, again for the same reasons. Secondly, getting caught for DUI costs you 6 points (half of the ones attributed), a trip to the court, a hefty fine, loss of your licence for 6 months, and a obligatory medical exam and r2 day class on the dangers of alcohol behind the wheel. In other words it is a very costly mistake to make, and the tolerance for young drivers is 0. This means many young people do not drink out of fear to lose their licence. In 15 years of teaching Bachelor and Master students, I have personally witnessed the decline in alcohol consumption, as many people are further afraid of GBH at partie (of which there are less as well). Lastly, many Gen Z and millennials drink beer now (this was not the case 20 years ago). Spirits are also more popular as they are relatively cheap (compared to wine). Lastly, wine is an acquired taste, and it is not acquired anymore at a young age as pointed out in your article. All of this does not bode well to boost the French wine sales hence the big crisis in the French wine industry.