WINEAMERICA PERSPECTIVES: DC updates, market swings, cannabis and wine
New Initiative: American Jobs Plan
Even though Congress has been away for its Easter Recess, things have still been happening in Washington, primarily in the form of a newly proposed Biden Administration plan to restore the nation's infrastructure and other priorities. The $2.25 trillion proposal does not seem to directly affect the wine industry, but we will keep a close eye on it as it moves forward -- probably slowly, given the opposition it has already generated.
Meanwhile, the Small Business Administration is hoping to have clear guidelines by mid-April for the $28.6 billion of new funding for eating and drinking establishments (including winery tasting rooms) that was included in the American Rescue Plan. We will immediately notify WineAmerica members when this information becomes available.
We're also working with our partners in the new "Toasts Not Tariffs" coalition to make permanent the current suspension of tariffs on wine and other beverages traded between the US and European Union. This week we asked our winery members to contact their Representatives, urging them to sign on to a bipartisan letter to US Trade Representative Katherine Tai.
A Year of Covid: Market Swings
Q: What could possibly explain a 30% drop in wine sales in March compared with last March, yet an 18% increase over March 2019?
It has now been a year since the Covid crisis crashed the economy and changed the way consumers did many things, including purchasing and consuming wine. Danny Brager's analysis based on data from NielsenIQ provides an initial look at the overall effect so far.
"Pantry-loading" became a common descriptor for consumer behavior, and at first applied particularly to panic buying of toilet paper, bleach, water...and wine (plus beer and spirits). The March 2020 closing of restaurants and bars nationwide spurred an immediate and dramatic shift from on-premise to off-premise sales which lasted the entire year. Since that surge would make current sales appear weak, there are also comparisons to 2019 as the last "normal" year for a more complete perspective.
The good news so far: Off-premise wine sales are still significantly up compared with the old "normal" (2019) even as reopening proceeds.
For the overall beverage alcohol category, spirits have fared the best during Covid, followed by wine, then beer (and related products). For the month ending on March 20, off-premise sales of all three categories declined in both volume and value compared to the same month in 2020, but remain significantly higher than in 2019.
For example, year-over-year wine dollar sales fell 29.7% from 2020, with table wine off 38.8% and sparkling wines just 0.9%, but total wine registered an overall increase of 18.4% over the same period in 2019. In other words, wine is down...but up.
It will be interesting to watch the wine market's evolution this year as restaurants reopen and consumers feel more comfortable patronizing them. NielsenCGA reports that restaurants are now open at some capacity in all 50 states, and bars in 48.
At this point, visiting with friends in those settings was especially important for younger consumers (21-34), while dining with drinks with a spouse or partner was the top occasion for going out. The most popular venues are independent restaurants (45%) and casual chains (44%), followed by fine dining (27%) and neighborhood bars (24%).
Cannabis and Wine: A Trend to Watch
Last week New York State legalized recreational marijuana, joining several other states across the country. And there are serious discussions in Washington, D.C. about national legalization as well.
Why should the wine industry care? For several reasons. First, there are some wines and other beverages which already contain cannabis, so this could become a significant new category. Second, even non-liquid cannabis in smoke or edible form could be an alternative to wine for recreational pleasure. And there are some cannabis producers seeking to create regional identities or appellations -- like Napa Valley -- that could affect the wine appellations already in place for decades.
None of this necessarily means opposition to legalization, just prudence in adjusting to a new reality. Change is the only constant in our industry--as exemplified most recently by hard seltzers, RTD's (ready-to-drink beverages), alternative packaging (cans, boxes), and new marketing channels (curbside pickup, home delivery)--so staying ahead of the curve is key to survival. Watch for more information about this area in the coming weeks.
Back to New York state, where marijuana is now legal: Ironically, the nation's #3 wine-producing state is one of just a handful that don't allow consumers to buy wine in grocery stores. This actually came very close to happening in 1984 despite vehement opposition from wine wholesalers and liquor stores, but ultimately it was the grocery store lobby that killed it – with pure greed (long story). Ah, New York ...
Jim Trezise is president of WineAmerica.