White paper: How wine businesses can grow in a post-growth world

The wine industry has spent much of the past five years debating whether the post-Covid trend of shrinking wine volumes across major consumption markets for wine (beyond those traditional Continental European markets where wine has been in steady retreat for decades) is a cyclical downturn or a structural decline. Similar conversations are taking place across hospitality, retail, media and numerous other consumer-facing sectors as they too face flat or declining sales.

When challenged on this point, public company executives generally cite inflation, changing demographics, digital disruption, health trends and shifting consumer preferences.

Each of these explanations sound sensible on their own. Viewed together, they suggest a larger and more consequential possibility, that the future is not going to be about market growth in our industry.

Which begs a fundamental strategic question: are businesses that assume market growth for their strategy to work operating under a false premise? Business leaders of today have inherited operating models that evolved during an era of expanding demand that are increasingly being asked to function in a world where growth can no longer be taken for granted.

For much of the era after the Second World War, branded consumer businesses benefited from a remarkable alignment of forces. Rising incomes, expanding populations, increasing globalisation, greater leisure time and the emergence of mass consumer culture combined to create what was, in retrospect, an unusually favourable environment for growth. Brands succeeded by establishing clear positions, building distribution, creating distinctive identities and capturing their share of a steadily expanding market.

The difficulty is that consumers no longer inhabit the same economic and cultural landscape in which those models were developed. Much attention has been paid to generational change, particularly the behaviour of Millennials and Generation Z. While demographics undoubtedly matter, focusing exclusively on age groups risks obscuring a deeper structural transformation.

A good example of this apparent confusion is the persistent myth that Gen Z are not drinking at all, and this is the cause of declining volumes in wine (and other beverage alcohol). While blaming the young for why the past seemed better than the present is a long-established and tempting heuristic, the data doesn’t support this narrative: according to IWSR Bevtrac, there is no difference in participation rates in alcohol between Gen Z and other age groups; and while an analysis of historical data from the US Bureau of Labor Statistics and the UK ONS suggests this younger legal drinking age cohort appear to be drinking less, and less often, compared with previous generations at the same age, the effect seems too small (also given the size of the legal drinking age element of the cohort) to account for the 20% fall in wine volumes across leading markets since 2019 according to IWSR.

Instead, market and consumer data actually supports the idea that older consumers (those in their 50s and 60s) are steadily reducing their consumption, either drinking less at “nothing” occasions – the non-social, at-home, in-front-of-TV-or-smartphone moments, or not going out as much, with negative perceptions about cost and value for money the main friction elements here. Given how much more wine consumption these age groups account for, even a small change in behaviour would have a material effect on volumes. This would also explain other beverage industry phenomena, such as the biggest reduction in wine volumes coming from lower price bands (where older people shop more) while higher price and niche wines see growth (where younger adult consumers tend to shop).

If we discount at least some of the generational theory of decline, the most obvious candidates for the observed changes in wine are technological and cultural.

Many commentators have shown how digital technology has fundamentally altered how consumers spend their time, discover products, form relationships, access information and construct identities. More significantly, it has accelerated the speed at which these changes occur. Previous generations experienced technological transitions over decades. Today's consumers – who include older generations as well as the young - adapt to new platforms, behaviours and norms within years or even months.

Strategists such as Rita McGrath, author of The End of Competitive Advantage, have argued that organisations increasingly operate in a world of transient rather than sustainable competitive advantage. The challenge is no longer achieving a stable position and defending it indefinitely. Instead, firms must continuously adapt to changing conditions while recognising that success itself can become a source of inertia.

This is particularly evident when examining how attitudes towards wealth and prosperity have evolved. For much of the twentieth century, economic success was relatively straightforward and consistently defined. Home ownership, career progression, income growth and material accumulation were widely accepted markers of achievement. Increasingly, however, younger adults of today appear to evaluate prosperity through a broader lens that incorporates autonomy, flexibility, wellbeing and personal fulfilment.

The individual who chooses a lower-paying role that provides greater freedom, or who rents rather than buys in order to preserve mobility, is making a rational calculation according to a different value system. Behavioural economists have long observed that people optimise for perceived utility rather than purely financial outcomes. Richard Thaler's work on behavioural decision-making and Daniel Kahneman's research into wellbeing both highlight the extent to which human choices reflect psychological and social goals as much as economic ones – sometimes more so.

This matters because businesses are ultimately competing to fit into people's lives. When lifestyles change, the basis of competition changes with them.

One consequence is a growing expectation that organisations adapt to consumers rather than the reverse. Historically, businesses often required customers to travel physically or metaphorically towards them. Consumers visited stores, joined clubs, travelled to destinations or navigated complex purchasing processes. Increasingly, the expectation is that products, services and experiences integrate seamlessly into existing routines.

The principle is hardly new. Clayton Christensen's Jobs-to-Be-Done theory argues that consumers "hire" products to solve problems within their lives. What appears different today is the extent to which convenience has become a baseline expectation rather than a competitive advantage. Businesses that continue to design experiences around their own operational preferences rather than consumer realities risk finding themselves disconnected from demand. The only sectors which appear to be immune from this trend are ones which operate local monopolies or where the switching costs are high, such as utilities, banks and local government.

The implications extend beyond distribution and convenience – they also challenge traditional notions of community, loyalty and competition. Many companies continue to invest heavily in building proprietary communities around their brands. Yet contemporary consumer behaviour often suggests something different. People increasingly participate in self-selecting networks organised around shared interests rather than corporate affiliation. These communities are fluid, overlapping and often independent of any single organisation.

The role of the brand, therefore, becomes less about creating a proprietary community and more about participating meaningfully within communities that already exist. Influence flows through trusted networks, recommendations and shared experiences rather than through direct corporate messaging. The sociologist Mark Granovetter's concept of "the strength of weak ties" feels particularly relevant in an era where discovery often occurs through loosely connected social networks rather than formal institutional structures.

Perhaps the most challenging implication concerns competition itself. Many industries continue to behave as though consumers make exclusive choices between brands. The assumption underpins much conventional strategy. Yet decades of research from the Ehrenberg-Bass Institute have demonstrated that most consumers operate repertoires rather than exclusive loyalties. They buy multiple brands, switch frequently and make decisions based on awareness, availability, occasion and context as much as preference.

This distinction becomes increasingly important in mature categories such as beverage alcohol. When markets are growing, defending market share is often sufficient to generate growth. A company that maintains a stable share of an expanding market continues to prosper. In mature or declining markets, however, growth must come from somewhere else. The challenge shifts from defending territory to creating meaningful relevance.

The wine industry offers an illuminating example. When asked to define their competition, many producers talk as though they are engaged in a battle against neighbouring wineries for consumer loyalty. Yet in our 25 years as consumer researchers in wine, the data consistently showed premium wine consumers routinely purchase across regions, producers, styles, and price points as well. The luxury wine buyer on a Saturday can be the supermarket deal buyer on a Tuesday, and vice versa. The real competition is frequently not another wine brand but alternative uses of time, money and attention. In that context, collaborative approaches that expose consumers to broader experiences may create more value than defensive strategies focused on exclusion.

This is not a new insight. Theodore Levitt made a similar argument more than sixty years ago in his famous Harvard Business Review article, "Marketing Myopia", identifying four fallacies of marketing, including the false notion that product categories compete solely within their own universe rather than in a broader lifestyle context.

Wine and its supply chain partners today risk repeating the mistake. Wine companies believe they compete with other wine companies. Hospitality businesses believe they compete with neighbouring restaurants. In reality, they compete within a much broader marketplace of experiences, leisure activities and lifestyle choices.

None of this necessarily points towards a future of perma-decline in wine. Indeed, there are signs that some of the sharpest consumer retrenchment observed in recent years is beginning to moderate – though key markets remain on a downward consumption curve following the distortions of the pandemic years and the declining spending habits of the relatively large Baby Boomer generation.

If the past fifty years represented an unusually favourable environment for consumer growth, then the task facing businesses is not to recreate those conditions. It is to build models suited to a different reality. That reality appears more fragmented, more networked, more experience-driven and more consumer-centric than the one that preceded it.

The winners are unlikely to be those who defend the assumptions of the previous era most vigorously. They will be those prepared to recognise that the consumer has not disappeared. Rather, the consumer has moved on, and businesses must decide whether they are willing to follow.