(Wine-Searcher) - John Gillsepie of Wine Opinions says that generational change and economic factors remind him of 1993, the last time wine sales dropped.

After 20 years of rapid growth, the U.S. wine industry might be at a turning point, and not for the better, according to the Wine Market Council.

The annual report delivered last week in Yountville was the first in many years with a less-than-rosy outlook. Wine Opinions CEO John Gillespie, who based his report on surveys and market research, emphasized that he's not sure what the immediate future brings, and more growth might be on the horizon. But he says generational change and economic factors remind him of 1993, the last year that overall wine sales dropped in the U.S.

"It depressed me to write it," Gillespie told Wine Searcher about the report. "If you look at a lot of the empirical facts about where we are now, it looks like, here we go again."

The clouds Gillespie sees forming over the industry include:

• A much slower growth rate than a decade ago. Between 1994 and 2007, U.S. wine consumption grew by 2.5 percent annually every year but one. From 2008 on, the annual growth rate has been 2 percent or less in every year but one.
• A big dropoff in wine consumption by occasional wine drinkers. The Wine Market Council has focused on high-frequency buyers for the last few years because they account for 81 percent of wine sales. However, Gillespie says that in the past, occasional buyers were a "farm team," with many becoming regular wine drinkers over time. Because of more craft beer and spirits choices, "that may no longer be true," Gillespie said.
•  A large difference in income and alcohol consumption habits between young millennials, age 21-30, and older millennials, ages 31-38.

The last point is key in thinking about the future of American wine, as the total millennial generation is 70 million, almost as large as the baby boomers (77 million). Baby boomers still buy more wine and more expensive wine, but the oldest boomers are now retired and reaching an age where people historically cut back on wine consumption, while the youngest millennials have just become legally able to drink.

But young millennial males are not drinking wine with the frequency of either young millennial females, or older people of every generation. One of wine's strengths in the market for decades has been its gender-neutrality, Gillespie said. For people in their 20s, that isn't true.

Craft beer is a major reason. Danny Brager, senior vice president of Nielsen's beverage alcohol division, showed numbers that indicate that, while craft beer is mostly taking sales away from industrial beer, among men in their 20s it is also a growing alternative to wine in restaurants.

"Where we're losing out is young male millennials," Brager said.

Gillespie said the change of the U.S. economy after the recession of 2008 has greatly affected young millennials. In 2006, people in their 20s spent 16 percent more in restaurants than older folks. Last year, they spent 22 percent less, Gillespie reported.

The reason this reminds Gillespie of 1993 is that looming behind the millennials is what has been dubbed "iGeneration," people currently ages six to 20. They are 61 million strong, and next year they will begin to hit legal drinking age at a time when the economy is not in their favor.

Moreover, the buzz in the wine market is over relatively expensive wine. Silicon Valley Bank recently predicted a rise of about 15 percent of wines over $20 in 2015, but young consumers can't afford many wines over $20.

Nielsen statistics from food and drug stores show the fastest growth rate in sales of wine is in the category above $12, while wines below $9 are dropping in sales. The iGeneration will enter liquor stores at a time when the most exciting beverages under $9 will be craft beers and ciders.

In 1993, Generation X was reaching drinking age at a time when wine producers were beginning to create small-lot reserve wines that cost more than people on their first job could afford. While 19 percent of high-frequency wine drinkers today belong to Generation X, that generation has always lagged behind both its elders and its juniors in the wine consumption stakes.