Canada, a two-sided market: value grows, but young people “run away” from wine

Canada, in recent years, has been able to climb position after position, becoming the fifth largest market for Italian wine exports, with imports touching 134.5 million euros in the first 4 months of 2022, thanks to a 26.7% growth over the same period last year. This is a country that continues to grow, experiencing a certain economic stability and widespread prosperity, but looking at it more closely, and focusing precisely on wine consumption, it is decidedly more complex than one might imagine, not to say, paraphrasing the words used by “Wine Intelligence” in its analysis of the North American country: paradoxical.

But let’s go in order. The wine market in Canada, depending on your vantage point, can represent both the best and the worst possible at the same time. The half-full glass is represented by consumption that increasingly looks to sparkling and premium wines and a demographic profile in which nearly two-thirds of regular consumers (who drink wine at least once a month) are under the age of 55. The glass half-empty, on the other hand, is the other side of the coin: the number of overall wine lovers steadily declined since 2017 and wine consumption that has been stagnant for five years and is set to stagnate for the next five as well. At the same time, the renowned ready-to-drinks, wildly popular among young people, continue to grow, eroding share from both beer and, to a much lesser extent, wine.

Going back to young people, in 2017 the 19-24 age group made up 9% of all wine drinkers, and five years later it has dropped to 5%. Particularly severe dynamics among Canada's French-speaking population in Quebec, where the percentage has dropped from 10% to just 3% of the total. Evident, in this area, is the weight of the pandemic and the closures of clubs, where young people, in addition to socializing, were and still are learning about and appreciating wine. In this sense, Generation Z has a decidedly positive opinion of wine, which they consider fashionable and sophisticated, but also very expensive and complicated to understand, which is why 40% of them drink it just 1-3 times a month. Winning over Generation Z, in Canada as in any other market, is the real challenge, which also comes through a certain ability to innovate.

Perhaps by focusing on sustainable and organic viticulture, which in Canada has more and more admirers and therefore consumers, doubling between 2019 and 2021. With Generation Z at the forefront: 25% of them have purchased an organic or natural wine in the past 12 months. But the opening goes far beyond that, embracing alternative formats such as cans and single-serve bottles, as well as non-alcoholic wine purchased by 12% of young people. Interesting niches, however contradictory, that the wine industry, to approach younger consumers, should focus on.

In the mass market, on the other hand, the most obvious success story of the past five years has been Prosecco: from 2016 to 2021 imported volumes grew by 14.9%, and in the next five years the forecast is for a further +11.6%, a slowdown that does not undermine the position of Italian bubbles, destined to remain the most vibrant in the sparkling wine market. The trend for still wines, on the other hand, is different, a stagnant market that is experiencing a decline in New World countries - such as Chile, Argentina, Australia and the United States - that is destined to continue. Also bad is Canadian wine itself, expected to experience a five-year period fraught with difficulties after ten years of growth in volumes consumed.

Broadening the analysis to alcohol consumption more generally, the performance of wine, which has grown by 23% in the past five years, and will grow by 7% in the next five, is still better than that of beer, losing ground to spirits, ciders and ready-to-drinks instead. And while still wine consumption is flat, average prices continue to rise, so much so that premium wines (bottles above $14 Canadian) account for 25% of the market, and the forecast is for continued steady growth in the average price.

In addition to price, some interesting trends endure, the most noticeable of which seems to be a move away from well-known varietals and toward broadening the horizon to something else. In the past six months, significantly fewer regular wine drinkers have chosen “mainstream” whites, such as Sauvignon Blanc, Chardonnay, Riesling, and Pinot Gris, while the slice of those who focus on Albarino, Torrontes, and Viognier is growing. And the same thing has happened with the reds, Merlot, Pinot Noir and Shiraz have seen a decline, while Grenache seems to be experiencing something of a renaissance. The Canadian consumer has entered the “discovery” phase, despite the fact that knowledge levels have dropped over the past 12 months, a further negative effect of Covid and restrictions on purchases during lockdowns.

Channel-wise, retail is worth 90% of all sales, with Monopoly liquor stores being by far the most used channel, but there are finally early signs of a nascent online industry: 18% of regular wine consumers have purchased wine online in the past six months, 4% more than the previous year. A more vibrant e-commerce sector, coupled with a willingness to innovate and promote different formats and styles, could help achieve what appears to be one of the key goals of the Canadian wine world (and beyond): winning over Millennial and Gen Z consumers.