Wineries in the US Industry Market Research Report Now Available from IBISWorld

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While many industries have been hit hard by the recession, wine production has achieved solid growth, with revenue and demand on the rise. A younger generation of wine consumers, the millennials, has boosted demand for wine, especially for bottles in the lower price range. Still, the possibility of higher grape prices, poor harvest conditions and increased regulations will continue to threaten profitability in the next five years. For these reasons, industry research firm IBISWorld has added a report on the Wineries in the US industry to its growing industry report collection.

IBISWorld Market Research

IBISWorld Market Research

A growing base of wine drinkers trading up after the recession will bolster growth

The Wineries industry has a growing base of wine drinkers, particularly among the millennial generation. Rising consumption is expected to increase revenue at a rate of 4.6% per year on average in the five years to 2012. During the economic recession, however, demand shifted to lower-price wines, and sales declined. In 2009, revenue fell 2.1%. After rebounding strongly in 2011, revenue is expected to grow at a more moderate rate of 4.4% in 2012 to total $16.6 billion. Alcohol consumption is expected to decline somewhat during the year, mirroring the improving economy. Rising wine prices due to grape shortages will also dampen demand. Lower price points have benefited the larger players that are able to produce in bulk. Meanwhile, smaller wineries are struggling to cope with consolidation among suppliers, wholesalers and retailers. “Consolidation throughout the supply chain is expected to continue through 2017 as producers try to work with larger wholesalers and strive to meet increasing demand from consumers, particularly for low- to medium-price wines,” said IBISWorld industry analyst Sophia Snyder. As consumers started to “trade up” in 2011, operating profit increased. Profit is expected to decrease in 2012 as producers struggle to pass along all of the rising costs of grapes. And despite the consolidation trend, new wineries are still entering the industry. During the five years to 2012, the number of operators is expected to increase at an annualized rate of 4.3% to total 7,069.

Smaller wineries are finding refuge in direct-to-consumer wines. Retail and on-premise (i.e. restaurant and bar) sales fell sharply during the economic recession, so many producers turned to selling via the internet and in tasting rooms. Regulations for direct sales vary by state, though, complicating this distribution method. Pending legislation is likely to increase hurdles in the coming years, which could negatively influence industry profit margins. In another blow to profit, grape prices are forecast to continue their upward climb. Revenue is projected to rise through 2017.

The Wineries industry has a medium level of market share concentration; the top four producers hold about 49.6% of the industry's US market share. Concentration increased during the five years to 2012 as a result of larger corporations acquiring some independent vineyards and wineries, especially in the Napa Valley and Sonoma County. However, since 2008, there has been a noticeable absence of winery acquisitions by publicly traded beverage and consumer companies. This absence is not by coincidence. According to Snyder, industry companies had to engage in a thorough analysis of the profitability of each of their consumer divisions during the economic downturn. This resulted in a decreased willingness to acquire additional brands and divisions. There is much anticipation within the industry that 2012 and the following five years will see a noticeable increase in acquisition activity as the economy improves. Small to medium sized wineries will be acquired by larger operators, which benefit from greater economies of scale and scope. For more information, visit IBISWorld’s Wineries in the US industry report page.

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IBISWorld industry Report Key Topics

Wineries make a beverage made of the fermented juice from various kinds of grapes, usually containing 10.0% to 15.0% alcohol by volume. Wineries are involved in any of the following: growing grapes and manufacturing wines and brandies, manufacturing wine and brandies from grapes and other fruits grown elsewhere, and blending wines and brandies

Industry Performance
Executive Summary
Key External Drivers
Current Performance
Industry Outlook
Industry Life Cycle
Products & Markets
Supply Chain
Products & Services
Major Markets
Globalization & Trade
Business Locations
Competitive Landscape
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
Major Companies
Operating Conditions
Capital Intensity
Key Statistics
Industry Data
Annual Change
Key Ratios

About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.

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Gavin Smith
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