The latest figures on the world wine market confirm that the industry is undergoing considerable change, with European countries finding their positions and strategies challenged by the new world.
Recent figures in the annual report of the International Organisation of Wine and Vine (OIV) confirm that the world wine industry is undergoing considerable change. Long-dominant European nations are finding being challenged by the emergence of countries, such as China, both as producers and consumers.
Globally, demand has risen slightly, to 242 million hectolitres (mhl) down from its peak of 250mhl in 2008, but up from the low of 240mhl in 2014. And there are signs of long-term growth.
Per-capita consumption is stable or slightly falling among the French, Spanish and Portuguese – once upon a time daily wine drinkers. But what’s more than filled up the gap is the global market, with occasional consumers around the world drinking wine one to three times per week.
Another encouraging sign for the industry is that wine is finding new customers in countries with large populations. In the early 1990s, the US market was ranked sixth in the world, but by 2016 it had climbed to the number one spot (31.8mhl). It was followed by France (27mhl), Italy (22.5mhl) and Germany (20.2mhl).
A substantial market has already been established in Brazil in spite of negative 2017 economic trends, and there are great expectations for India.
With these new markets often being driven by emerging local production, the number of wine-producing countries is also increasing. The example of Australia is most familiar, but few know the experience of countries such as Canada.
Consumption in Canada has been rising steadily for some years. And the government is making efforts to stimulate national production with the hope of being able to export Canadian wine.
Local production is also emerging in Ethiopia, where the highlands are well-suited to grape cultivation and there is a substantial non-Muslim population (approximately 66% out of a total of 100 million).
China on the rise
But it’s China that’s leading the industry shake-up, by virtue both of its size and determination. Wine enjoys great symbolic value there, linked to the fact that it’s a product of the land and has strong historical roots. It also functions as a “high class” social marker.
Either way, China is now the sixth leading consumer of wine in the world (17.3mhl), just behind Germany. And with a population of 1.4 billion in 2017, the potential for the Chinese market is considerable.
With a new market and a government working to build the foundations for a national wine industry, China has now the second-largest area under cultivation in the world, 847kha up 17% over 2015. In fact, it was in 2015 that the country overtook France (now with 785kha) and it’s now second only to Spain (975kha).
China is expected to overtake Spain in the next five years. Vines are grown in dozens of provinces, including Shandong, Hebei, and Tianjin, as well as the autonomous regions of Xinjiang, Ningxia and Inner Mongolia.
Whatever the country, where there is local production consumers tend to favour it. As they become more familiar with wine, they begin to try those from other countries, and this represents an important growth lever for international trade. That’s why 40% of the wines produced globally are currently exported, compared to just 20% in the early 1990s.
Although how we consume wine is shaped to a large extent by cultural context, knowledge of the world of wine and techniques for analysing its sensory qualities, trends set by certain internationally known experts also play a part.
Countries with newer wine industries must therefore, introduce their wines to other nations while steadily building recognition and a kind of wine-making pedigree. This too has the effect of stimulating international trade.
France continues to lead by value
For the French wine industry, while the landscape has shifted the foundations remain solid. France continues to challenge Spain and Italy for the title of the world’s number-one producer by volume, and it continues to lead the world in terms of value.
France produced 43.5mhl of wine in 2016 compared to 50.9mhl for Italy, but the value of France’s exports was €8.2 billion compared to Italy’s €2.6 billion. That’s over three times more, and 28.5% of the total value of the global wine market.
The figures confirm that French wines are perceived and purchased as high added-value products, and France continues to excel at capitalising on the quality of its wines. While Spain is the leading exporter by volume, the price of Spanish per unit remains low on international markets, with a total value of just €2.6 billion.
One immediately thinks of champagnes, revered and undisputed as the sparkling wine par excellence, as well as great bordeaux and burgundies, and more recently, the Provence rosés.
French wines are also exported to more countries than wines of any other nationality and, generally speaking, any new importer starts by “listing” French wines before looking at any other foreign producers. This is a reflection of what the French industry has been able to convey to wine lovers the world over in terms of image, quality and diversity.
In the coming years, as wine-producing countries continue to seek to maintain and expand their domestic and international market shares, they’ll also need to adapt to ongoing climate change.
Brazilian production dropped 55% between 2015 and 2016, for instance, because of a strong El Niño, while production also fell in drought-stricken South Africa. To deal with this, an increasingly strategic approach is being developed, including specialised research schools.
At all levels around the world, stakeholders are engaging with governments and decision-makers to increase the industry’s competitiveness and better tackle new international challenges.
Jacques-Olivier Pesme is director of the Wine & Spirits Academy at Kedge Business School.