An educated Advisor you can count on



West Coast Phone: 949-226-8342
East Coast Phone: 732-226-3113

Resources

Demographics Are in Good Spirits

Demographics Are in Good Spirits

The world seems to be running dry. Vintners are ramping up wine production, trying to keep pace with ever increasing demand. This means the bottles you are buying today could be significantly more expensive in the next couple of years. But before you run out to the store to load up on your favorite vino, take a minute to consider what caused the casks to run dry…and what might lie ahead.

Global wine production has slackened over the last decade as the industry tried to recover from a glut of supply in the mid 2000s. Some farmers, such as in California, turned their soil over to more profitable crops, with almonds and walnuts paying more per acre.

Meanwhile, demand has been growing at a healthy clip. The increase in consumption has come primarily from two nations: China and the United States. China's rapid economic expansion has given millions of consumers the access to the global wine market in a way that was absent just a decade ago.

It is somewhat excusable for the wine industry to have missed the rise in affluence of China's upper and middle class. It far less understood how the industry failed to anticipate the growth of wine consumption in the United States. Since 2000, U.S. wine consumption has doubled on a per capita basis, and the trend was right there for everyone to see.

The reason for America's growing thirst for wine is, unsurprisingly, demographics.

Based on data from the Bureau of Labor Statistics’ Consumer Expenditure Survey, spending on alcoholic beverages hits a secondary peak during a person’s early-to-mid-20s, and then hits a primary peak during a person’s early 50s. One may not think of 20-somethings drinking wine, but data from the Wine Market Counsel confirms that millennials, along with baby boomers make up the core wine-drinking generations. It also turns out that when you divide the U.S. population into five-year age groups the two largest categories in our economy are those aged 20 to 24 and those aged 50 to 54. Is it any mystery that U.S. demand for wine would grow to its current levels?

Demographics are a powerful force on our economy. Companies and industries that understand their consumers will do well. Harley Davidson smartly reorganized its business model, knowing that its prime consumer base was shrinking. The diaper industry is increasing production of adult products to serve aging populations.

On the other hand, those who ignore demographics do so at their own peril. The wine industry may have just missed a huge opportunity to sell their goods to two very large audiences. As millennials and boomers move past their mid-20s and mid-50s, respectively, they will develop a thirst for something else.


Comments
Login to post comments.