The U.S. wine market is broadly returning to its pre-pandemic normal. This offers some real bright spots (e.g., on-premise sales improving, ongoing premiumization trends, etc.), but wine businesses are also back to facing some of their pre-pandemic challenges as well. Most notably, this includes declining volume trends as wine loses share to spirits and hard seltzer.

As the California wine industry seeks ways to regain interest from an evolving consumer, it can be valuable to look for pockets of growth in the market. As recently presented by RaboResearch analyst Stephen Rannekleiv for Sonoma State University’s Wine Business Institute Research Summit, there are at least three obvious growth segments that may merit exploration for new product development:

  1. Alternative packaging
  2. Health and wellness positioning
  3. Higher residual sugar

While all three will not be appropriate for all companies, read on for some useful food for thought.

Alternative packaging

We know that the traditional 750-milliliter glass wine bottle represents 75% of all off-premise wine sales. Interestingly, according to data from Nielsen IQ, wine sales in this category are more or less maintaining market share, while the formats that are outperforming are 3-liter bag-in-box offerings, cans and 375-milliliter glass bottles.

Trends like the consumer’s desire to avoid over-consumption and smaller average household sizes have all seemed to create opportunities for packaging formats that offer fewer portions.

And, while we are not recommending that cult Napa cabernet brands should be offered in 3-liter bag-in-box formats or that Russian River pinot noirs should all be offered in cans, we do think many wineries would benefit by exploring line extensions in alternative formats.

Think about it this way: The traditional 750-milliliter wine bottle is akin to the beer growler, a four-serving packaging format in which the product begins to lose quality once opened. How successful would the beer industry be if growlers represented 75% of the packaging options offered?

Consumers demand health and wellness

On an episode of RaboResearch’s “Liquid Assets” podcast series, Dale Stratton, president of the Wine Market Council, stated that one of the most common reasons consumers give for not engaging with wine is that it doesn’t fit within their wellness priorities.

Coupled with this, we have seen the rise of low- and no-alcohol brands in and outside of the wine industry. FitVine Wine️ is currently one of the fastest growing wine companies, and Michelob Ultra continues to buck the trend of the decline of light beers. There is certainly a compelling case that lower-alcohol wines can help a business attract new consumers.

A supplementary point that should be made here is that in addition to just touting a lower alcohol content, a brand’s messaging is critically important. For example, Michelob Ultra’s entire campaign is built on messaging positioned around living and maintaining an active lifestyle, which has proven to be a powerful consumer driver for the company.

Yet consumers also have a wine sweet tooth

Beyond health and wellness considerations, the same data presented by Stratton also found that the single biggest reason consumers cite for not drinking wine is because they do not like the taste. While we often hear American wine drinkers lamenting that they do not enjoy sweet wines, purchasing behavior actually shows us that wines with more residual sugar — up to a point — are more popular than those with less.

What might come as surprising is that higher residual sugar content is not necessarily inversely related to price.

In a session presented at this year’s Unified Wine & Grape Symposium, the top 25 fastest growing wine brands were looked at, mapping out residual sugar levels and price points, and little correlation was found between the two. Two-thirds of the brands on the list had 5 grams per liter (G/L) or more of residual sugar and the seven brands with 6 G/L or more had an average retail price of nearly $40.

This suggests that testing options for wines with slightly higher residual sugar at premium price points might prove fruitful for some brands in attracting a broader array of consumers.

The spirits and hard seltzer categories continue to lure new customer bases as they introduce alternative products that appeal to different lifestyles. And there’s no reason that wine businesses can’t do the same by taking a deep look at varied offerings that might make sense for their business models and brand identities.



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