Canada’s wine market paradox

Depending on which way you look at it, Canada’s wine market represents the best of times – and the worst of times. The glass-half-full camp would point to a long-term move towards drinking more premium wines and sparkling wines, and a healthy overall demographic profile of wine drinking, where almost two-thirds of Canadian monthly wine drinkers are under 55.

The glass-half-empty view says that the regular wine drinking population has declined since 2017, and that sales volumes of still wine have showed no growth over the past five years – and are forecast to remain static for the next five. At the same time, ready-to-drink alcoholic beverages have shown very strong growth in Canada, mainly stealing share from beer but also impacting wine volumes.

The past two years in particular have exposed the wine category’s struggle to recruit younger LDA+ wine drinkers. Part of this is a legacy of the pandemic, as on-premise or social settings were the chief recruitment ground for new wine drinkers. In 2017, 19-24s made up 9% of all wine drinkers. Five years later, they are just 5% and the trend seems to be firmly downwards. It is particularly severe among Canada’s French-speaking population in Quebec – the proportion of the latter has tumbled from 10% to just 3% of the total.

LDA Generation Z see the attraction of wine – more than any other group they think it is fashionable and makes them seem sophisticated – but they find it both expensive and complicated, and buy it significantly less often than any other age cohort. 40% of them drink it only 1-3 times a month.

Pulling in more of these younger LDA consumers – and then increasing their engagement – looks to be a key challenge for the health of the Canadian wine industry over the next few years, and to achieve this a willingness to innovate could be important.

The number of people who have bought ‘alternative wine types’ such as organic or natural wines is growing strongly. In fact, twice as many people bought a natural wine in 2021 as just two years earlier. And LDA Generation Z are right at the forefront of this trend. Almost a quarter of them have bought an organic or natural wine over the last 12 months.

They are open to alternative formats, too – particularly cans and single-serve bottles, both of which fit their lifestyle. And the fact that 12% of them have also bought a non-alcoholic wine over the same period, suggests that these areas, while niche, represent an opportunity.

In the mass-market, the most obvious success story of the last five years has been the continued rise of Prosecco.  Since 2016 volumes of the latter have grown 14.9%, and while the next five years are predicted to be slower (11.6%) it remains the most buoyant of all the sparkling wine styles.

But while Prosecco has driven sparkling wine forward and is expected to continue to do so, still wine sales remain sluggish. Within the scrabble for share in a stagnant market, the decline of New World countries such as Chile, Argentina, Australia and the US is expected to continue. But one of the biggest losers could be the Canadian domestic industry itself, whose volumes have grown steadily for a decade, but which are forecast to have lower volumes over the next five years.

Wine’s lethargic performance compares poorly with most other established drinks categories. While it has done better than beer, it has lost ground to both spirits and ciders which are in (gentle) growth, while RTDs are buoyant. The latter’s explosive growth rate of the last five years (+23%) is expected to slow down as the category matures, but its predicted increase of 7% to 2026 is still significantly better than any other BWS group.

RTDs are a particular threat to wine going forward, since they are an attractive category to the LDA Generation Z demographic who wine is struggling to attract and retain.

Still wine sales might be flat, but it is not all bad news. Prices are going up, and consumers seem to be sticking with them. Premium segments (>Ca$14) are now a quarter of all sales and this steady move up the price points is expected to continue – even if Canadians themselves admit they are buying slightly less often and looking for bargains where they can.

But, besides price, there remain some intriguing trends, the most obvious of which seems to be a shift away from ‘established’ grape varieties and a willingness to branch out. Significantly fewer regular wine drinkers tried the ‘mainstream’ white grapes in the past six months – Sauvignon Blanc, Chardonnay, Riesling and Pinot Grigio were all bought less often – while Albarino, Torrontes and Viognier saw their popularity increase.

It was a similar story for reds, where Merlot, Pinot Noir and Shiraz saw a dip, while Garnacha seems to be undergoing something of a renaissance.

It suggests that, as one Canadian sommelier put it, consumers are moving into a ‘discovery phase’, even if (paradoxically again) consumer levels of awareness of countries, regions and even brands have dipped markedly over the last 12 months.

This latter knowledge deficit may be attributable to Covid-induced isolation. Though the influence of the latter has not been entirely negative. For instance, some of the stringent rules on retailing were relaxed during the pandemic.

And though retail (and government liquor stores) dominate the drinks landscape (almost 90% of all sales are off-trade with state shops by far the most-used channel) there are signs of a nascent online industry too. 18% of regular wine drinkers have bought wine online in the last six months, up 4% on the previous year.

A more vibrant online retailing scene, coupled with a willingness to innovate and promote different formats and styles, could help to achieve what seems to be one of the Canadian wine world’s key objectives – of attracting and retaining Millennial and LDA Gen Z consumers.

You may also be interested in reading:

• Why has our relationship with wine changed in the Covid-era?
• Which key macro factors are driving the global wine industry in 2021?
• Millennials drive the sparkling wine category