Despite consumers "trading up," the rising cost of grapes will likely cause declines in profit.
Los Angeles, CA (PRWEB) November 01, 2013
The Wineries industry is benefiting from a growing number of wine drinkers, particularly among the millennial generation. Rising wine consumption has increased revenue at an annualized rate of 3.0% over the five years to 2013. However, the industry has not been without its troubles. During the peak of the economic recession, sales fell and demand shifted to lower-priced wines, causing rapid revenue growth to stall in 2010 and contract 1.4%. Nonetheless, revenue growth has continued since. Mirroring the improving economy, wine consumption is expected to increases further in 2013, boosting revenue a modest 1.1% to total $16.7 billion.
As consumers continue to “trade up”, operating profit is expected to continue increasing in 2013. According to IBISWorld Industry Analyst Vanessa Giraldo, “Over the past five years, lower price points have helped larger players that are able to produce in bulk.” However, smaller wineries struggled to cope with consolidation among suppliers, wholesalers and retailers. Despite the consolidation trend, new wineries are still entering the industry. During the five years to 2013, the number of companies in the Wineries industry is expected to increase at an annualized rate of 6.8% to total 2,980.
“Smaller wineries are finding refuge in direct-to-consumer wines,” says Giraldo. 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. However, regulations for direct sales vary by state, complicating this distribution method. Pending legislation is likely to increase hurdles in the coming years, which could negatively influence industry profit. In another blow to profit, grape prices are forecast to continue their upward climb. Regardless, revenue is projected to rise over the next five years.
The Wineries in the US industry has a medium level of industry concentration. Although the top for players account for more than half of the revenue, the rest of the industry is highly fragmented, and is made up of a large number of small operations.
Over the past five years, industry concentration has been on the rise, primarily as a result of larger corporations acquiring some independent wineries and vineyards. This trend is expected to continue moving forward as the economic climate continues to improve and larger companies continue to expand their portfolios through additional mergers and acquisitions.
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IBISWorld industry Report Key Topics
The Wineries industry grow grapes and manufacture wines and brandies; manufacture wines and brandies using grapes grown in other vineyards; and blend wines and brandies. While this report primarily focuses on wine production, it also includes operators that produce brandies and ciders.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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