Article | November 26, 2025

Wine Producers Squeezed by Powerful Consumer, Demographic, Industry & Trade Forces

Current changes in consumer, demographic and trade conditions are creating risks for the wine industry and lenders who serve wine-related companies. For savvy businesses, these forces may also present opportunities.

Running a winery or wine-related business has seldom been so complex. Sharp changes in consumer behavior and unfavorable demographic trends have affected everything from daily decisions at vineyards to long-term business and capital investment strategies. Years of excess investment, production and inventory also are having an effect while tariff policies are affecting how markets operate.

Massive divestments and consolidation in the market over the past 12 months are compounding the current environment, most notably with Accolade acquiring Pernot Riccard winemaker’s portfolio of brands in Australia, New Zealand and Spain.

These conditions are creating a slew of risks for wine-related companies and the lenders who serve them. For savvy businesses, they may also present opportunities.

Lifestyle Shifts Have Shifted Worldwide Demand

Consumers are drinking less alcohol worldwide with many shifting to energy drinks, hemp-infused beverages and other alternatives. Annual wine consumption worldwide declined from 245 million hectoliters (Mhl) in 2017 to just 214.2 Mhl in 2024, the lowest level since 1961.¹

In the United States, wine consumption dropped 7.2% by volume and 6.3% by sales in 2024, with spirits also seeing a significant decline.² Wine sales in the U.S. have dropped in each of the last four years. A July Gallup survey found U.S. alcohol consumption was at its lowest level in 90 years of tracking of the data.³

People are cutting back on their wine consumption for both health- and cost-related reasons. The U.S. government, which has long recommended that people drink no more than two alcoholic beverages per day, appeared likely to lower that recommendation earlier in 2025, however the latest actions by the Trump administration seem more likely to leave the guidance unchanged.⁴ Despite this reversal, medical associations and other health groups also have been vocal about the issue, adding to public concerns about the health effects of wine and spirits and fueling the drop in consumption.

Health concerns seem to be contributing to a cultural shift away from alcohol among younger people as health organizations and countries lower recommended daily alcohol limits and revise consumption guidelines. Just 16% of consumers aged 21-34 in the U.S. are likely to bring wine to a party, compared to 58% of people 65 and older and 32% of those 45-64.⁵ Wine consumption among young people in Canada and the European Union has also declined substantially with individuals between 19 and 24 representing 9% of Canadian wine drinkers in 2017 but only 5% of wine drinkers five years later.⁶

Similarly, fewer young people in Australia are drinking, and when they do, they are drinking less than previous generations. In 2001, 13.6% of Australians aged 18-24 drank less than once a month, which has since increased to 20% or one in five.⁷ In New Zealand, people in all age groups are drinking less and in a different way. In the calendar year ended 2023, drinking declined in all categories by 4.3% to 477 million litres. Beer declined by 4.4% to 281 million litres, wine by 2.4% to 99 million litres and spirits fell 5.7% to 97 million litres.⁸

Ready-to-drink (RTD) beverages such as canned cocktails and hard seltzers are quickly growing in popularity among young consumers because they are portion-controlled and marketed as lighter and “more fun” than traditional wine.

Consumption of RTD beverages at bars and restaurants has been increasing while on-premises wine consumption has declined.⁹ Lifestyle changes such as a decline in restaurant dining are also contributing to a drop in wine consumption outside the home. Meanwhile, tight household budgets have led to fewer purchases of many higher-end products from clothes to automobiles. Sales of U.S. premium wine, which grew 18.6% in 2021 amid the COVID-19 pandemic have turned negative with an annualized drop of 4.8% as of September 2024.¹⁰

Consumer preferences are also changing within the category, with many people now preferring lighter-bodied wines such as pinot noirs. There has also been a shift away from higher-alcohol-content wines, prompting many companies to offer reduced alcohol or “mid-strength” products and winemakers to produce lighter wine varietals and lower alcohol varieties. While this trend has caused a decline in demand for Australian Shiraz many producers are re-evaluating their vineyard growing decisions, removing decades old vines and replanting that acreage with other varietals to accommodate consumer demand.¹¹

Inventories Have Grown

Wine inventories have increased worldwide, weighing on prices, as some growing regions have overproduced, consumer preferences have shifted, and trade policies have inhibited sales in key markets.

In the U.S. wine inventories increased from just over $18 billion at the start of 2021 to nearly $24 billion in the fall of 2024.¹² The ratio of inventory on hand to wine sold in the U.S. grew by more than 20%, from 1.35 to 1.65, indicating that for every $100 in wine sales, $165 worth of wine sat in storage.

Surplus vineyard capacity in Washington, California and Oregon is a major cause of oversupply.¹³ Partly as a result, California bulk wine prices have cratered, falling from $30 to $40 per gallon in early 2023 to just $10 to $15 currently with some wines failing to sell at all.¹⁴

The state’s weak 2025 harvest—the smallest crush in 20 years—reinforces that demand remains soft in line with the global consumption slump, bulk inventories are high, and vineyard removals and abandonment will likely continue so growers are aiming smaller to restore balance.¹⁵ More coastal vineyards have been mothballed adding to the pause in activity at several central California vineyards since 2023.¹⁶

In 2023 French officials were alarmed enough about oversupply the government set aside more than €200 million to destroy excess inventory and another €57 million to pull up 9,500 hectares of vines in the Bordeaux region.¹⁷

New Zealand is sitting on excess Sauvignon Blanc and Pinot Noir, and Australia is struggling with Shiraz, but recent vintages have seen an improvement in bulk wine pricing.

The oversupply of wine has also put strong pressure on grape prices with many growers in Australia deliberately leaving a portion of their fruit because it’s not profitable to harvest. Some are even removing vines to begin farming other types of crops.

Production Costs Have Increased

Even as rising supplies and falling demand weigh on sales prices, climate change has made wine production more costly. In the U.S., wildfires, drought and floods have limited vineyard yields. Across Europe, record high temperatures have affected crops, particularly those in the grand cru, or the highest status, growing locations. Over time, new growing regions such as the Okanagan Valley in British Columbia, southern England and Tasmania might become more productive and cost competitive as a result.¹⁸

A mixture of market and environmental conditions, including drought in Australia, is causing a steep increase in water usage and prices, creating a difficult situation for growers who are contemplating pulling out of their vineyards to cut costs.¹⁹ The price of oak casks has been increasing globally due to production shortages and competition from the whiskey market. U.S. producers face additional cost increases from tariffs, which affect both oak casks and glass wine bottles.

Many wine producers are facing labor shortfalls. Almost half of growers worldwide said they struggled with staff shortages in recent years, and crackdowns on immigrant and migrant labor in countries such as the U.S. are expected to exacerbate the challenge.²⁰

Today’s Conditions Create Financial Headwinds

Lower demand, excess inventories, reduced crop quality and higher costs are making wineries’ day-to-day operations more complicated and undermining their financial performance. Lower demand is driving pricing down, and wine producers are increasingly resorting to promotions to clear excess stock. In turn, declines in wine prices reduce the value of inventory used as collateral, potentially making it harder for winemakers to secure financing while increasing lenders’ risks.

More financial strain is leading to an increase in bankruptcies, such as at Vintage Wine Estates and Kelham Vineyards. Mergers and acquisitions activity has increased as larger producers, which currently account for 40% of world wine revenue, see the opportunity to expand their acreage, move into new markets and drive more efficient operations.

Collectively, these trends are affecting wine brands’ sales and assets as well as the value of collateral held against loans. Lenders must use care in this environment to ensure they are adequately monitoring and correctly valuing wine-industry assets.

Tariff Policies Affect What Wines Consumers Choose to Buy

The Trump administration’s tariff proposals are far-reaching and will make it harder for producers in the EU, Australia, South Africa and Argentina to sell to the U.S. market by increasing the cost of their wines. In turn, this headwind will be a significant opportunity for winemakers in the U.S. to grow market share. Domestic wines are likely to represent a greater share of the overall U.S. market mix as a result.

The U.S. administration has imposed a 15% duty in imports from the EU, despite arguments from Italy, France and some others to exempt wine from the tariff.²¹ Exporters from Australia and Argentina are paying the global base tariff of 10% while South African producers face a 30% duty to sell into the U.S.²²

Chinese tariffs on Australian wine, imposed between March 2021 and March 2024, have contributed to a persistent glut of Australian wine inventories. Prior to those duties, Australian wine accounted for 27.5% of Chinese wine imports. In the first six months of 2023, they accounted for 0.14%.²³ Removal of those tariffs led to an initial restocking surge, but this pop in sales is showing signs of slowing.²⁴

Outlook

Winemakers will likely continue to grapple with supply issues and decreased demands.

In California, 40,000 acres have been removed over the course of the past year. As of October, 20,000 acres were added resulting in a net removal of 20,000; however, tens of thousands of acres have gone unharvested and abandoned where the input costs exceed returns. This will help further restore the balance between supply and demand.

In Australia and New Zealand, growers are removing vines and are planting alternative crops like almonds and oats, which is likely to will continue to happen in an effort to balance supply and maintain market integrity and pricing.

As asset experts in the wine industry, Gordon Brothers partner in any future sales, appraisals, consolidations or winddowns. Our firm can assist lenders in taking a deeper look at inventory, vineyards, distillers, production plants, machinery and equipment to review changing values or over exposure. To learn more, reach out to one of our experts or contact us.