Wine industry slumps amid demand and climate woes

The global wine industry is facing an unprecedented crisis, marked by its sharpest consumption decline in four years and the lowest production levels in over six decades. A recent report by Elara Capital highlights that in 2024, global wine consumption fell by 3.6% year-on-year to 214 million hectolitres (mhl), while production dropped by 4.8% to just 226 mhl—its weakest output since the 1960s.

The global wine industry is undergoing a seismic shift, confronting its sharpest downturn in recent history. According to a recent report by Elara Capital, 2024 marked a dramatic fall in both wine consumption and production, painting a bleak picture for an industry once considered resilient. Global wine consumption declined by 3.6% year-on-year to 214 million hectolitres (mhl), while production slumped by 4.8% to 226 mhl—its lowest level since the 1960s. This concurrent drop in demand and supply signals deep-rooted structural challenges, as consumer preferences shift and climate change continues to disrupt traditional wine-making regions.

Nowhere is this transformation more evident than in China, which just a few years ago was heralded as the next major frontier for global wine. Since 2019, the country’s wine consumption has nosedived at a compound annual rate of 18.2%, plunging from 15.0 mhl to 5.5 mhl. Its share of global wine consumption has shrunk from 13% to just 5%. The aftershocks of COVID-19, a weak real estate market, and evolving consumer preferences—now favouring beer and spirits—have eroded wine’s appeal. Meanwhile, established markets such as the United States, France, Italy, Germany, and the UK have also seen volumes decline by 3.3%. Even emerging markets like Brazil weren’t immune, posting an 11.4% drop in consumption year-on-year.

On the supply side, the scenario is equally concerning. Global vineyard area has contracted at a 1% CAGR over the past five years, reflecting both economic pressures and environmental constraints. Major producers like France and the U.S. have been hit hard by extreme weather events and crop diseases, with year-on-year production dropping 23.5% and 17.3% respectively. Collectively, the top five wine-producing nations—which account for 63% of global output—have seen production fall at a 2.6% CAGR since 2019.

Interestingly, the narrowing supply-demand gap—just 11.6 mhl in 2024, the second-lowest in two decades—has lent temporary support to wine prices. Yet, this balance remains precarious. A rebound in demand without corresponding supply recovery could trigger price surges, adding to inflationary strains globally.

The export landscape isn’t faring much better. Global wine trade volumes have dropped nearly 10% over the past five years, even as average export prices rose at a 6.8% CAGR. In 2024, global wine exports were valued at €35.9 billion, reflecting a marginal 0.3% decline from the previous year.

Against this global backdrop, India has quietly emerged as a bright spot. The country now commands a 2.6% share of the world’s vineyard area, buoyed by a 4.1% CAGR in expansion—contrary to global trends. Domestic players such as Sula Vineyards, which earns 99% of its revenue locally, are well-positioned to ride a projected 15% industry volume growth. However, this optimism should be tempered with realism: wine still accounts for less than 1% of India’s alcohol consumption.

Unless global producers and policymakers embrace bold strategies to redefine wine production and consumption, the sector may struggle to retain its relevance in an evolving marketplace.