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US millennials' consumption may impact California regions and provide opportunities for imported wine

Published:  03 July, 2015

In a report by Rabobank released this week, the changing preferences of US' millennial consumers is starting to have an impact on consumption patterns and thus could affect wine regions domestically as well as providing opportunities for imported wine.

According to the report: "Within the US, there are a number of demographic changes that are currently driving dramatic shifts in wine demand, including the increase of millennial's buying power and the rapid rise in income levels of top US earners."

Specifically the research shows that between 2012 to 2014, consumers within the US are consuming less wines under $10 per bottle, while wines from both the $10 to $25 per bottle range and those wines over $25 per bottle have seen substantial growth.

This change in consumption for lower priced wines is having an negative effect on the San Joaquin Valley where approximately 45% of the wine made in California comes from. "A vast majority of this wine is sold under $10 per bottle," with the exception of Lodi American Viticulture Area (AVA).  This is driving a trend in the region to remove vineyards.

The changing demographics of the average consumer continue to evolve toward more premium wine consumption inventories have increased in the San Joaquin Valley and created an oversupply for the region.  Further the North Coast California regions like Napa and Sonoma as well as the Central Coast wine producing regions are set to be undersupplied in the near future, despite having several healthy harvests.

California

Projected wine supply and demand in California through 2017Projected wine supply and demand in California through 2017

With the possibility of demand outstripping supply and the rather strong dollar which makes imported wine more competitively priced there is an opportunity within the US market for imported wines and not just on the value end of the market.  

According to Rabobank report "barring any major shocks to the economy, we project the demand for $25+ wines to rise approximately 10% per year through 2017."

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