The trend toward drinking less but better wine appears to be alive and well as the new year begins. Producers with wines at a range of price points are seeing a continued embrace of higher-end entrants even as demand has been uneven. “The state of the wine industry in the U.S. appears both promising and challenging,” says John Jordan, CEO of Jordan Vineyard & Winery. “We continue to see demand for high-quality, premium wines despite a challenging macroeconomic environment. People still want to seek out, invest in, and savor nice bottles of wine for all of life’s occasions.” 

Pete Przybylinski, executive vice president and chief sales officer for the Duckhorn Portfolio, says his company is closely monitoring the industry. “We’re confident that premiumization is more than just a trend and will continue in the long term,” he says. “Importantly, we see no apparent signs of consumers trading down—in fact our higher-priced Decoy Limited collection generated double-digit growth in the most recent quarter. The current environment favors proven wineries and suppliers, and we believe the strength of our portfolio positions us well as we move forward.” 

The ongoing premiumization trend is good news for wines selling for more than $15 a 750-ml., but obviously more concerning for producers who play in the lower pricing tiers. For some time now, premiumization has offset a bit of malaise in overall consumer demand. And with spirits, ready-to-drink cocktails, and long drinks grabbing a healthy slice of the consumption pie, wine volume has suffered. This year, leading producers say they expect more of the same. They’re sharpening their marketing efforts to expand their appeal to younger consumers while also focusing on delivering a premium or luxury experience to their loyal consumers of all ages. While some roadblocks remain, optimism abounds. 

Macro Uncertainty

Steve Spadarotto, chairman and CEO of Napa’s Far Niente Winery, says he is “super-positive” about the state of the wine market. He didn’t feel that way a year ago. “When we were doing our budgets this time last year, we were really planning on a recession in 2023,” he says. “Everybody was talking about it, everybody thought it was going to happen, but it didn’t really happen. There’s a lot of consumer anxiety out there, I suppose, and a lot of negative media. All that was macro and out of our control. But consumers came, our visitation numbers were strong, and interest from our distributor partners has been unbelievable. 

“Now as we move into 2024, there’s still a lot of negative media out there, but it’s an election year,” Spadarotto continues. “Election years tend to be good for the wine business, for whatever reason. For us—because we focus on what we can control—we have had the greatest wine scoring year of our history. We have tremendous inventory in the pipeline. We have a tremendous vintage on its way. This is finally an opportunity to grow in a very consistent managed way over the course of a number of years.” 

Stephanie Wycoff, general manager of Gary Farrell Winery in the Russian River Valley, sees 2024 a bit differently. While she’s confident there will be growth, she doesn’t anticipate a smooth ride. “Election years typically bring economic surprises, so we anticipate 2024 to be a bit tricky on both the DTC and three-tier sides of the business,” she says. “Sales strategies will continue to require agility and adaptation in the near-term and perhaps conservative assumptions for longer-term planning.” 

Wycoff adds that demand for higher-priced wines “may be challenged to a degree in the current economy, but consumers are almost always willing to pay a premium for an item of value. It comes down to what is deemed of value and emotionally rationalizing the purchase.” She warns that ongoing premiumization may come at the expense of volume, “so the challenge for wineries is in finding the sweet spot of supply and demand at increased price points.” 

Far Niente and Gary Farrell Winery are both luxury producers, offering wines at prices points of roughly $40 a 750-ml. and above. Ben Dollard, president of Treasury Wine Estates Americas, has direct visibility into a broader spectrum of wines. “We do continue to see trade-up occurring, and I anticipate that trend is going to continue as we evolve into 2024,” he says. Parent company Treasury Wine Estates in December finalized the acquisition of Paso Robles-based Daou Vineyards, which expands Treasury’s presence in the $20-$40 segment, as Daou garners nearly 70% of sales there, and a further 13% from bottles retailing at $100 and above. 

Dollard says Treasury continues to see solid growth from Frank Family Vineyards, which it acquired in 2021, and from Napa Valley winery Beaulieu Vineyard, both luxury brands. “With brands that are positioned at that $40 price point we continue to see opportunity,” he says. “I think like any market, there are headwinds and tailwinds, but we are seeing that [premiumization] trend generally continue, which is good.” 

For brands at the lower pricing tiers—below $20 a 750-ml.—Dollard still has confidence. “There are categories within that price band that have continued to perform well,” he says, pointing specifically to the Matua brand from New Zealand. “There are definitely opportunities in price points under $20 or under $15, but I think it requires clever innovation and careful communication,” he adds. 

Sauvignon Blanc is bucking the trend in the lower pricing tiers, contends Rick Tigner, president and CEO of Jackson Family Wines. He says the varietal is gaining ground at all price points, including the $11-$15 tier. But that’s not true for all wines. “We’re seeing growth in the $15-plus price segment, $25-plus, and even the $50-plus price segment, but a continued decline below that price point,” Tigner says. “While inflation has shifted some discretionary spending for consumers, they’re seeing that upward price increase in all areas of purchases, so it’s not isolated to only their wine purchases.” 

Pricing Strategies

The general consensus may be that premiumization is continuing and will likely extend through at least the early part of 2024, but that doesn’t mean producers can afford to push boundaries. Many plan to hold the line on pricing this year. Far Niente’s Spadarotto, for example, says the winery has no intention of taking price increases in 2024. “We think you have to be very careful with the markets—you just can’t run around taking price all the time,” he says. “There is a window in which you can do that, and when that window closes, you need to just stand pat and stay where you are. That’s where we are now.” 

Spadarotto notes that rising costs, including skyrocketing freight rates, might warrant a price increase passed to the consumer, but he plans to hold steady for now. “I don’t see that as a sign that premiumization is stopping or turning around,” he says. “I just see it [with the lens that] you have to be sensitive to where the consumers are.”

Jordan Vineyard & Winery is also opting to hold prices steady this year. “Despite a challenging economy, we are committed to keeping the price of our wines and experiences the same this year to ensure we represent real value for our customers,” Jordan says. “It’s imperative to us to continue to create our balanced, food-friendly Cabernet Sauvignon and Chardonnay wines and to overdeliver on quality and price.” 

Some wine executives also point to a bit of a slowdown in tasting rooms, where brand loyalty is created and DTC sales typically thrive. John Balletto, founder and owner of Balletto Vineyards, says visitor numbers have remained strong but purchasing is a bit weaker these days. “They come in, they taste, but they don’t walk away with a six pack of wine like they used to,” he says. “They’ll walk away with two bottles or four bottles. They’re buying less right now, and I think part of that is people are looking at the economy and [wondering whether we] are going to go into recession in early 2024.” 

Balletto says that reticence has prompted the winery to launch new events, many of which are geared toward attracting a younger audience. “We have our wine club events. We have music on the weekends, both Saturday and Sunday. We’ve added a library experience and different things,” he says. “We feel like we just have to be more creative in order to try to both retain our customers and try to get new ones.”

Spadarotto says Far Niente’s early 2023 was similar, when people still made their way to the tasting rooms but “the average order value was slightly soft,” he recalls. The turning point back to strong sales came when the 2021 vintage was released, he adds. 

Another shift has been geographic. Jake Krausz, estate director and second generation owner of Arkenstone Vineyards, says consumption may be down in some key markets but others are thriving. “The Colorado market, for example has been increasingly robust for Arkenstone, and other premium wineries as well,” he says. “We think this is due to how many coastal and major city wine drinkers moved there during the pandemic at the advent of remote work and have chosen to stay there. We’re seeing the rise of many regional markets that we used to consider secondary, as a result of this geographic shift of where wine drinkers and collectors are now based.

Connecting With Consumers

Premiumization may be continuing into 2024, but that doesn’t mean the outlook for premium wine is all rosy. The industry is still grappling with how to attract more consumers—particularly younger consumers—and convince them to add wine into their beverage alcohol repertoire. Anthony Beckman, vice president and winemaker at Balletto Vineyards, says the premiumization trend is intertwined with demographic changes. “Premiumization is ongoing—we’ve all seen it,” he says. “I think there will be a limit to it at some point. This younger generation is not drinking wine at the same level, and part of that is [due to] the price per bottle.” 

Many wineries are proactively engaging with a new swath of potential consumers, and trying to do so on their terms. “Appealing to these younger consumers means ensuring the brand resonates with them as much as it does with their parent, and it also means reshaping how we interact with them, such as shifting more to text messaging versus email marketing and tele-sales,” says Wycoff of Gary Farrell Winery. “We also must consider what elements of our brand and our consumer experience are seen as a staple versus stale. Being open-minded and challenging the status-quo are vital to this effort.” 

It’s widely believed that younger consumers are seeking experiences in their brand engagements, and the wine industry is responding. “We anticipate more wine drinkers to seek out distinctive experiential offerings, whether it’s in the choice of which winery to visit or where to enjoy dinner on a Saturday night,” says Jordan, who notes the winery’s “commitment to immersive experiences” that ranges from elevated food pairings to interactive tours to dinners and hikes throughout the winery estate. 

“We’ve also made significant renovations to our guest spaces at the winery to further improve the visitor experience,” Jordan says. “To create innovative and culinary-focused offerings, we need to have the proper spaces to do so. This summer, we’ll unveil our renovated kitchen, dining room, and outdoor terraces alongside new tasting experiences and immersive dinners.”

Far Niente is also drilling down to unique experiences. Currently under construction is the new Bella Union Winery at the site of the former Provenance Winery in Rutherford, California. Spadarotto says they’re taking “what was arguably the ugliest winery in Napa Valley,” and investing $17 million in a facility designed specifically for a demographic “leaning toward the younger generations” and equipped with space for visitor experiences. With that site “we will have three beautiful winery visitation sites on the Highway 29 corridor,” he says. “They’re going to all three be very different teaching experiences. We’re hoping with those three very different programs that we can really connect the dots and expand our consumer base.” 

Arkenstone’s Krausz says it’s important that young people are made to feel welcome regardless of their existing knowledge base. “We welcome collectors with extensive experience and cellars as well as younger people enjoying their first visit to Napa in the same way and with the same enthusiasm,” he says, noting that young people share their experiences readily with their peers. “We have been very fortunate to benefit from extensive word of mouth within this emerging community of young wine drinkers and collectors,” Krausz adds.

No matter what the approach, many in the wine industry acknowledge that new ways to engage are warranted. “The phrase ‘what got you here won’t get you there’ has never rung truer for the wine industry,” says Wycoff. “We should all see 2024 as an opportunity to stop looking back in comparison to brighter times and start looking forward with an evolutionary approach.”