Wine Industry Analysis

The US winery industry had a growth rate of 4.7% between 2006 and 2011, and is expected to grow by a rate of 4.9% over the next five years [ (IBISWorld) ]. In California alone an average of 175 wineries have opened every year since 2000 [ (Richard Green) ]. The states of New York and Virginia have been major players in the US wine industry. The data shows that the demand for wine has been increasing at an exponential rate over the past 5 years. Average annual revenue for the wine industry is expected to be estimated at $20.2 billion through 2016 [ (IBISWorld) ]. The growth of the wine industry, particularly over the past 10 years, can be attributed to a few key drivers in the market. Per capita consumption of alcohol has increased consistently and is expected to grow. Wine and spirits in particular have surpassed beer, due to the growing trend in the US towards living a healthy lifestyle. Beer contains high levels of carbohydrates, which explains the drop in popularity in the market. The recent trend in the diet and food industry has revolved around cutting carbohydrates out of the diet. Wine and spirits in small amounts has been proven to actually improve the health of the consumer. The price of grapes over the past five years has dropped making it more attractive for winemakers to increase their supply and stimulate new entrants into the market. As of recently the price of grapes has been on the rise, which is expected to cut into the profits of wineries. The price of grapes is determined by how successful the harvest is, which weather and pests can affect. Typically, the winery will have a contract for a set price on the grapes in order to help stabilize the price, thus preventing unexpected swings in cost. The demand from beer, wine and liquor stores has been on the rise. These stores account for a high percentage of the wine sold in the US. The demand from bars and clubs has also been on the rise. The consumer sentiment index has increased, meaning

Cited: IBISWorld. 2011. 18 February 2012 <http://teach.belmont.edu:2470/industryus/default.aspx?indid=289>. Mariani, John. "Cheeky Monkey, Colorado Wineries Emerge to Battle California." 27 June 2011. Bloomberg. 18 February 2012 <http://www.bloomberg.com/news/print/2011-06-27/cheeky-monkey-colorado-wineries-emerge-to-battle-california-john-mariani.html>. Richard Green, Dale Heien, Richard Howitt, and Richard James Volpe. "Wine-grape production trends reflect evolving consumer demand over 30 years. ." California Agriculture (2010): 42. Schoenfeld, Bruce. "The New Watering Hole." Entrepreneur December 2010: 89-92. Tincknell & Tincknell, Inc. marketingwine.com. 2012. 18 February 2012 <http://www.marketingwine.com/rackings/rackings-3_tier_overview.htm>.