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The World of Wine: Visualizing an Industry Ripe for Disruption

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global wine industry infographic

Visualizing an Industry Ripe for Disruption

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Winemaking is often thought of as a symbol of transformation.

While the fermented drink dates back 9,000 years, the wine market is now experiencing its own transformation due to technological innovation, and the introduction of new business models. Generating $370 billion in revenue in 2019, the global industry is expected to grow considerably over the next decade—but not as we know it.

Today’s infographic from Raconteur explores wine consumption by region, and looks at how changing tastes are driving a new era of the millennia-old staple.

Will the industry continue to get better with age, or will it join the countless other industries that have fallen victim to disruption?

The Wine Leaders of the World

To start, let’s take a look at the countries around the world that have the biggest economic footprints linked to the trade and consumption of wine:

Exports: Spain is the largest exporter of wine globally, producing 21 million hectoliters of volume in 2018, followed by Italy with 19.7 million hectoliters.

Imports: Germany leads on imports with 14.5 million hectoliters of volume in 2018, while the UK is the second-largest importer with 13.2 million hectoliters.

Consumption: The U.S. currently leads on wine consumption, with Americans drinking an average of 3.7 liters per person—generating almost $50 billion in revenue.

RankCountryRevenue
#1🇺🇸 United States$49.5B
#2🇫🇷 France$28B
#3🇨🇳 China$27B
#4🇮🇹 Italy$27B
#5🇬🇧 UK$24B
#6🇩🇪 Germany$17B
#7🇦🇷 Argentina$17B
#8🇨🇦 Canada$17B
#9🇮🇩 Indonesia$13B
#10🇷🇺 Russia$12B

Currently, 80% of all wine consumed within China is produced domestically, and with a growing middle class, there is a huge potential for the Chinese industry to gain ground in comparison to other leading wine markets.

Rapidly Changing Tastes

While older generations prefer wine to other alcoholic beverages, spirits are the drink of choice for those aged 18 to 27. In fact, only 27% of this age group prefers wine to spirits or beer, meaning wine companies will need to adapt to these younger audiences and their differing values.

Marketing could create an opportunity to connect with this audience in a more meaningful way, with packaging having the most potential to sway their decision making process by providing a number of unique benefits:

  • Sustainability
  • Smaller serving sizes
  • Portability

Interestingly, canned wine is already a $70 million industry in the United States — and by 2025, it could make up 10% of total sales.

New Threats to the Industry

Along with changing expectations for packaging, millennials also crave new experiences, with more alternative options appealing to this age group, such as cannabis-infused beverages, craft beer, and whiskey.

Dealcoholized cannabis-infused wine is a new product innovation that could also appeal to this audience and have direct implications for the industry—but while cannabis companies have shown an interest in the category, collaboration with the tech industry is proving to be the most transformative.

When Two Valleys Collide

Technology is squeezing every opportunity it can get out of the wine industry, impacting different parts of the supply chain.

Winemaking

Drones are making farms and vineyards across the globe more efficient, while new technologies used to improve harvesting, sorting, and filtration during the winemaking process are also cropping up and providing new solutions to antiquated problems.

Consumption

Traditionally, decanting wine has been a slow and delicate process. Smart wine decanters however, can expedite that process.

These decanters use air filtration systems to remove impurities and enhance the aroma in just a few minutes—streamlining the decanting process, which typically takes around three hours.

Impact on the Environment

Industry experts predict that packaging such as edible bottles made from sugar substitutes, and compostable, non-plastic glass will replace glass bottles.

Meanwhile, QR codes have the potential to replace paper labels on wine bottles entirely, and a growing number of wine brands are already using augmented reality to deliver more immersive experiences to end consumers.

For an industry steeped in history and tradition, the future holds exciting potential for new innovations that will transform the way we look at wine forever.

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Markets

What History Reveals About Interest Rate Cuts

How have previous cycles of interest rate cuts in the U.S. impacted the economy and financial markets?

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Line chart showing the depth and duration of previous cycles of interest rate cuts.

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The following content is sponsored by New York Life Investments

What History Reveals About Interest Rate Cuts

The Federal Reserve has overseen seven cycles of interest rate cuts, averaging 26 months and 6.35 percentage points (ppts) each.

We’ve partnered with New York Life Investments to examine the impact of interest rate cut cycles on the economy and on the performance of financial assets in the U.S. to help keep investors informed. 

A Brief History of Interest Rate Cuts

Interest rates are a powerful tool that the central bank can use to spur economic activity. 

Typically, when the economy experiences a slowdown or a recession, the Federal Reserve will respond by cutting interest rates. As a result, each of the previous seven rate cut cycles—shown in the table below—occurred during or around U.S. recessions, according to data from the Federal Reserve. 

Interest Rate Cut CycleMagnitude (ppts)
July 2019–April 2020-2.4
July 2007–December 2008-5.1
November 2000–July 2003-5.5
May 1989–December 1992-6.9
August 1984–October 1986-5.8
July 1981–February 1983-10.5
July 1974–January 1977-8.3
Average-6.4

Source: Federal Reserve 07/03/2024

Understanding past economic and financial impacts of interest rate cuts can help investors prepare for future monetary policy changes.

The Economic Response: Inflation

During past cycles, data from the Federal Reserve, shows that, on average, the inflation rate continued to decline throughout (-3.4 percentage points), largely due to the lagged effects of a slower economy that normally precedes interest rate declines. 

CycleStart to end change (ppts)End to one year later (ppts)
July 2019–April 2020-1.5+3.8
July 2007–December 2008-2.3+2.6
November 2000–July 2003-1.3+0.9
May 1989–December 1992-2.5-0.2
August 1984–October 1986-2.8+3.1
July 1981–February 1983-7.3+1.1
July 1974–January 1977-6.3+1.6
Average-3.4+1.9

Source: Federal Reserve 07/03/2024. Based on the effective federal funds rate. Calculations are based on the previous four rate cut cycles (2019-2020, 2007-2008, 2000-2003, 1989-1992, 1984-1986, 1981-1983, 1974-1977).

However, inflation played catch-up and rose by +1.9 percentage points one year after the final rate cut. With lower interest rates, consumers were incentivized to spend more and save less, which led to an uptick in the price of goods and services in six of the past seven cycles. 

The Economic Response: Real Consumer Spending Growth

Real consumer spending growth, as measured by the Bureau of Economic Analysis, typically reacted to rate cuts more quickly. 

On average, consumption growth rose slightly during the rate cut periods (+0.3 percentage points) and that increase accelerated one year later (+1.7 percentage points). 

CycleStart to end (ppts)End to one year later (ppts)
July 2019–April 2020-9.6+15.3
July 2007–December 2008-4.6+3.1
November 2000–July 2003+0.8-2.5
May 1989–December 1992+3.0-1.3
August 1984–October 1986+1.6-2.7
July 1981–February 1983+7.2-0.7
July 1974–January 1977+3.9+0.9
Average+0.3+1.7

Source: BEA 07/03/2024. Quarterly data. Consumer spending growth is based on the percent change from the preceding quarter in real personal consumption expenditures, seasonally adjusted at annual rates. Percent changes at annual rates were then used to calculate the change in growth over rate cut cycles. Data from the last full quarter before the date in question was used for calculations. Calculations are based on the previous four rate cut cycles (2019-2020, 2007-2008, 2000-2003, 1989-1992, 1984-1986, 1981-1983, 1974-1977).

The COVID-19 pandemic and the Global Financial Crisis were outliers. Spending continued to fall during the rate cut cycles but picked up one year later.

The Investment Response: Stocks, Bonds, and Real Estate

Historically, the trend in financial asset performance differed between stocks, bonds, and real estate both during and after interest rate declines.

Stocks and real estate posted negative returns during the cutting phases, with stocks taking the bigger hit. Conversely, bonds, a traditional safe haven, gained ground. 

AssetDuring (%)1 Quarter After (%)2 Quarters After (%)4 Quarters After (%)
Stocks-6.0+18.2+19.4+23.9
Bonds+6.3+15.3+15.1+10.9
Real Estate-4.8+25.5+15.6+25.5

Source: Yahoo Finance, Federal Reserve, NAREIT 09/04/2024. The S&P 500 total return index was used to track performance of stocks. The ICE Corporate Bonds total return index was used to track the performance of bonds. The NAREIT All Equity REITs total return index was used to track the performance of real estate. Calculations are based on the previous four rate cut cycles (2019-2020, 2007-2008, 2000-2003, 1989-1992). It is not possible to invest directly in an index. Past performance is not indicative of future results. Index definitions can be found at the end of this piece.

However, in the quarters preceding the last rate cut, all three assets increased in value. One year later, real estate had the highest average performance, followed closely by stocks, with bonds coming in third.

What’s Next for Interest Rates

In March 2024, the Federal Reserve released its Summary of Economic Projections outlining its expectation that U.S. interest rates will fall steadily in 2024 and beyond.

YearRange (%)Median (%)
Current5.25-5.505.375
20244.50-4.754.625
20253.75-4.03.875
20263.00-3.253.125
Longer run2.50-2.752.625

Source: Federal Reserve 20/03/2024

Though the timing of interest rate cuts is uncertain, being armed with the knowledge of their impact on the economy and financial markets can provide valuable insight to investors. 

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