What does the future hold for the US wine market?

By 2010, the USA is expected to become the world's largest wine consumer by volume, overtaking Italy and France. Sales are projected to reach $22.75 billion, compared with $19.7 billion in 2005 (IWSR for Vinexpo). The projections suggest a market that is not short of confidence. Unfortunately however, consumers are suddenly short of money - so how much of an impact is the recession going to have on the wine boom?

The effects have already started to be felt. The worst economic news arrived in September, right at the start of the most crucial sales period for wine, and it has had an impact on consumer behavior - especially in the on-premise sector.

The Wine Market Council reported in October 2008 that 59% of US wine drinkers felt that they were worse off than they were 12 months ago. Thus to understand the changing dynamics of this complicated marketplace, we need to talk to consumers and trade insiders - conversations that we at Wine Intelligence are having all the time.

The picture that emerges is one of a consumer base that has lost none of its interest in wine, but which is being forced to adjust spending habits - sometimes by drinking less but better, other times by reducing average spending but maintaining volumes.

Danny Brager of AC Nielsen reports that the number of new brands entering the category is at its lowest level since 2004, and strategic brand extensions are much less risky than new launches. We're also noticing that many consumers are more reluctant to experiment, preferring to stick with what they know and trust while disposable income is under pressure.

These are challenging times for everyone. But there seems little evidence that the recession will unravel the years of progress which the wine industry has enjoyed in the USA.