The wine and beverage industry is at a critical juncture as it enters Q2 of 2025. With shifting trade policies, declining alcohol consumption, and mounting economic pressures, the sector faces a series of intersecting challenges. Tariff disputes have disrupted international trade. Changing consumer preferences are forcing retailers and producers to adapt rapidly. On top of this, economic uncertainty looms large.
The Impact of Tariffs on the Wine Industry
For years, the global wine market thrived on cross-border trade. But recent tariff policies have strained these relationships, leaving producers and wholesalers scrambling to adjust. The most recent blow? The complete halt of U.S. wine exports to key markets like Canada, Asia, and Mexico.
Ongoing tariff disputes under Donald Trump’s leadership have reshaped the wine industry, both domestically and globally. In 2025, tariffs on U.S. wine exports further alienated major trading partners. Countries that once leaned heavily on U.S. wine imports—especially Canada and Mexico—are now sourcing from European and South American producers.
For wine exporters, the repercussions are immense. Foreign buyers are reluctant to absorb the additional costs imposed by tariffs, leading to dwindling trade volumes and exacerbating tensions on the international stage. Domestically, these policies have shifted wineries’ focus to further reductions in production and sourced fruit. Many wineries are also trying to sell bulk wine before it moves to finished goods.
“The bulk wine market is ‘upside down’ with pricing at 20% to 40% of cost – if there is a buyer,” says Jeff Menashe, Founder & CEO of Demeter Advisory who has amassed more than 30 years of M&A and corporate development experience in the Beverage industry.
Declining Alcohol Consumption and Evolving Retail Strategies
While tariffs have stifled international growth, shifting consumer behavior poses an even more existential threat. Alcohol consumption rates are declining, and consumers are rethinking how and why they drink.
You may have noticed more people passing on a second glass of wine—or skipping alcohol entirely. Millennials and Gen Z are increasingly drawn to wellness trends and lower-alcohol or non-alcoholic alternatives. Hard seltzers, alcohol-free spirits, and even zero-proof wines are capturing the attention once aimed at traditional wine labels.
Consumers want transparency too. Labels that highlight calorie counts, organic certifications, or sustainably sourced ingredients are driving purchasing decisions. For producers, meeting these demands often means revamping processes and marketing tactics, a costly but necessary adjustment.
Meanwhile, retailers are rapidly expanding their offerings of store brands to stay ahead. Why? Simple economics. Store brands deliver higher profit margins and align with consumer price sensitivity. Big chains like Trader Joe’s and Costco have already mastered private-label success in wine. Now, mainstream grocery and liquor retailers are following suit.
Store brands also let retailers respond more nimbly to changing trends. By partnering directly with producers, they can deliver exclusive products at competitive prices. For wineries struggling with oversupply, these partnerships can be a lifeline—albeit one that is short term and does not help build their brand.
Economic Pressures and Production Adjustments
As if tariffs and changing consumer habits weren’t enough, the wine sector also faces escalating financial pressures. Declining shipments and depletions, rising debt, and uncertainty about the broader economy are forcing businesses to make hard choices.
Interest rates remain high in early 2025, making it harder for wineries to manage increasing debt levels as revolvers are used to finance operating losses.
Economic uncertainty isn’t limited to the wine industry. Broader fears of a recession are making businesses and consumers alike wary. Investors are holding off on acquisitions, preferring instead to maintain liquidity while they wait for signs of a market turnaround. For wineries, access to capital is shrinking, leaving many to wonder how much longer they can weather the storm.
Outlook for 2025 and Beyond
Although the current outlook seems shaky, history has shown that the wine industry is resilient in the face of adversity. How the sector evolves will depend on its ability to adapt to today’s challenges and prepare for tomorrow’s opportunities.
One of the most significant signals of change in 2025 is the potential exit of Constellation Brands from the wine industry. Long a leader in consolidation, the company has reportedly shifted its focus to Beer, a higher-growth beverage segment. If Constellation does divest, it could trigger a wave of market consolidation, reshaping the competitive landscape yet again.
Hopes for Long-Term Stability
The wine and beverage industry faces an uphill battle in 2025. Tariff disputes, declining consumption, and financial pressures have created a perfect storm of challenges. Yet, amid the uncertainty, there are opportunities. By embracing evolving consumer preferences, cutting costs where needed, and strategically planning for the future, the industry has a chance to stabilize and eventually thrive. While the road ahead looks bumpy, history suggests this isn’t the first—or last—test of the industry’s ability to adapt and endure. For those willing to innovate, the next chapter might still hold promise.