Wine market in United States

Domestic wine production is highly consolidated. The top eight producers account for 64% of total volume. The largest is Gallo, with more than 1 billion bottles per year (27% of total production and 24% of total consumption).^[9]

Many large producing conglomerates don’t put their names on wine labels. The names of their subsidiaries are used instead, or sometimes producer isn’t mentioned at all. Mergers and acquisitions are common.^[10] Brands can exist without any implicit and explicit ties to vineyards and production facilities, as large producers are accustomed to seeing their wines as a commodity.^[11]

Winemaking legislation is lenient. High color concentrates (HCC) are permitted and allegedly very common in large-scale wine production, even for the medium-priced and sometimes premium-priced wines.^[12] These wines are commonly referred to as commercial wines. Usually, technical sheets aren’t published, and production details aren’t disclosed for them.

Marketing for commercial wines is usually centered around selling stories, not on terroir differences or winegrowing or winemaking practices.

After Prohibition, the three-tier system was introduced, to prevent vertical integration between producers, distributors and retailers (making so-called “tied houses” illegal). Although altered in many states and having many exceptions, this system still defines the US wine market. Laws differ substantially at the state level. Seventeen US states (so-called “control states”) have various degrees of alcohol state monopoly.

Distribution is highly consolidated too, with 30% of revenue shared by three largest companies. The degree of consolidation, however, dramatically varies from state to state.^[13] Despite the original intent to prevent vertical integration, the system hinders free competition and empowers large distributors with dominant market power. Through agreements with distributors, large producers dominate the distribution market via incentives paid to those distributors.

For small independent producers, the road to market is difficult.^[14] Nowadays, where the legislation allows, they increasingly rely on direct-to-consumer sales, online or through tasting rooms.^[15]

Baby boomers are the defining cohort for wine consumption, favoring big, bold wines, especially from Cabernet Sauvignon and Chardonnay. They are accustomed to paying high prices for domestic wines they perceive as prestigious. Wine became the product for conspicuous consumption in the 1970s. Due to enormous market inertia, this is still perceived as status quo and the “natural” healthy state of the market by many players.

In terms of the Bandwagon/Snob dichotomy of market behavior introduced by Leibenstein,^[16] the US wine market can be described as a Bandwagon market. In the absence of historical tradition of wine drinking, looking at one’s peers is the effective heuristic. American conspicuous consumption, not necessarily in a sense of choosing expensive over affordable but in a sense of social signaling, is usually a means not to stand out, but to fit in. These cultural phenomena contribute to conditions that favor monopolies.

Currently, wine consumption in the US is declining. Domestic market is facing overproduction and problems with demand. The industry fails to respond to consumption habits of younger generations, with their increased interest in imported wines, better value to price ratio, and alternative paradigms of winemaking, such as natural, organic and biodynamic. The wines for $15-$20 per bottle in retail are relatively stable while other price segments decline.^[17]

On the other hand, the US is the world's largest consumer of fine wines. In 2024, the US market for Burgundy wines amounted to 369.6 million euros in export prices, with the growth of 26.2% compared to 2023, and 20.9 million bottles (with an average export price per bottle of EUR 17.68)^[18]. For Burgundy, Bordeaux, Champagne and many other wine regions, the US is the biggest foreign market.

In off-premise, supermarkets rarely act as importers and rarely rely on their own brands, with Trader Joe’s being a notable exception. Club stores such as Costco are one of the major off-premise channels.

Ilya Zabolotnov