The wine business faces an existential threat

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For the first time since Prohibition, the global wine industry faces an existential threat. Consumption has fallen to levels not seen in decades, and the structural decline suggests this is not a temporary slump but a permanent realignment of the market.

Global wine consumption fell 3.3% in 2024 to 214.2 million hectoliters, the lowest level since 1961, according to the International Organisation of Vine and Wine (OIV). Production dropped 4.8% to 225.8 million hectoliters, also a six-decade low. The industry has seen a wave of vineyard removals across major wine-producing regions, from California’s Central Valley to France’s Languedoc-Roussillon to Germany’s Mosel.

California growers left an estimated 300,000 tons of grapes unharvested in 2024 and removed 37,000 acres of vines, with industry groups calling for another 50,000 acres to come out in 2025. French producers in some regions tore out 14% of their vines. Germany expects to lose up to 10% of Mosel’s vineyard area over the next decade.

The crisis cuts across price points and prestige levels. Germany’s bulk wine segment sells at 70 cents per liter against production costs of at least 1.30 euros. California’s Lodi region, which supplies grapes for mass-market brands, saw widespread contract cancellations from buyers who had purchased fruit for decades. Even premium regions felt the pressure, with Napa Valley growers struggling to find buyers in 2024.

The fundamental driver of declining consumption is demographic. Generation Z drinks 20% less alcohol than millennials did at the same age, and when younger consumers do drink, they increasingly choose spirits, hard seltzers, or THC beverages over wine.

The Baby Boomer generation, which turned wine into a lifestyle accessory and status symbol, is now aging out of its drinking years. Silicon Valley Bank, which has tracked the U.S. wine industry for decades, forecasts that the impact from declining Boomer consumption will peak between 2029 and 2031.

But that’s not the only thing holding wine back. Unlike the 1990s, when a 60 Minutes segment on the “French paradox” suggested red wine could be healthy, current scientific consensus holds that even moderate alcohol consumption carries cancer risks. Public health advocates are pushing for higher alcohol taxes, stricter marketing regulations, and prominent health warnings on bottles. Almost a quarter of French adults aged 25 and under (who, only a few decades ago, would have been served wine in school) now abstain from alcohol entirely.

Economic factors compound the demographic pressures. Consumers now pay about 30% more for a bottle than in 2019, according to the OIV. Producers across major wine regions face sharply higher expenses for labor, energy, packaging, and machinery. California growers contend with rising insurance premiums and farming costs that make lower-priced wines economically unviable.

Meanwhile, large American wine brands increasingly blend cheaper imported bulk wine into products labeled with American appellations, a practice that federal law allows up to 25% but which undercuts domestic grape growers.

While demographic and economic factors created the demand crisis, climate change is making the supply side increasingly unpredictable. The OIV attributed production declines partly to environmental extremes, including above-average rainfall in some regions and drought in others. These aren’t one-off weather events but the leading edge of systemic shifts that are forcing producers to recalculate which grapes can survive in traditional growing areas.

The climate factor makes strategic planning nearly impossible. Producers who might otherwise ride out a demand slump by maintaining their vineyards and waiting for markets to recover instead face the prospect of crops damaged by extreme weather events.

Some regions are exploring adaptation strategies. Producers are moving vineyards to higher elevations, experimenting with drought-resistant varietals, or switching to alternative crops entirely. But these adjustments require capital investment precisely when revenues are falling and credit is tightening.

The few bright spots in the market offer limited relief. Premium wines priced above $35 saw slight sales increases in the U.S. Organic and regeneratively farmed wines command higher prices. Some producers are pivoting to wine-based cocktails, alternative packaging formats, or direct-to-consumer models. But these segments can’t absorb the volume that mass-market wines once moved.

Wine survived the fall of Rome, two world wars, and even Prohibition. It will likely survive Gen Z too.

But the industry that emerges on the other side will look nothing like the Boomer-fueled boom years.