The eighth annual Vinexpo report on the global wine and spirits market forecasts growth in mid-priced wines but no end to the over-capacity in the market as a whole, with the expected rise in consumption matched by higher production. Chris Losh reviews the predictions.

In four years time, the US market will be spending almost as much money on wine as France, Italy and the UK combined, while mid-price wines will be growing at five times the rate of their cheaper counterparts. These are among the most eyebrow-raising predictions from research conducted by the International Wine & Spirit Record (IWSR) on behalf of the French company Vinexpo, in its eighth annual report on the state of the global wine and spirits market.

This year's annual forecast paints a broadly optimistic picture for the next four years with production and consumption of both wine and spirits continuing to grow.

But some countries can expect to do considerably better than others. While New World wine producers and 'non-traditional' wine markets and vodka can expect to see strong growth, the news is patchier for wine giants such as France and traditional spirits like scotch and bourbon.

Wine consumption and production to rise

While global production was broadly steady from 1999 to 2004, principally due to smaller than expected vintages in 2002 and 2003, the report predicts that production will climb from 258m hl in 2004 to 274m hl by 2008 (up 6%). With production falling in France, Italy and Germany, the increases will almost entirely be the result of enlarged production in Spain and the New World. With a slowdown in new plantings in the New World, the rate of growth will be significantly slower than over the last five years, and Italy, France and Spain will still account for over half of the world's production.

Fortunately, given the global oversupply, Vinexpo predicts that wine consumption is expected to grow at almost exactly the same rate as production over the next four years. Nonetheless, its prediction of 6% growth is a bold one given a market that has grown only 4% over the previous four years. And while such increased consumption might prevent a worsening of the global wine glut, it does nothing to improve it either.

Vinexpo estimates that the oversupply is currently around 30m hl a year (or 11% of the total), but one senior figure in the French wine trade felt that such a statistic was decidedly optimistic. 'It's closer to 20% of the production,' he said, 'around 50m hl.'

'There's a surplus everywhere,' admitted Robert Beynat, chief executive of Vinexpo. 'The solutions are different all over the world, but the problem is the same.'

Biggest market movers over the next four years are expected to be the US (+28%), UK (+15%) and South Africa (+21%). Though Italy, unusually for a mature European wine market, will also record a slight growth and Germany, will see growth of around 2.5% a year. France's consumption, hit by tough drink driving laws and the Loi Evin is expected to continue to fall, and by 2008 will only be the third biggest wine market, behind the US and Italy.

In value terms, the importance of the US is even more marked. By 2008, Vinexpo predicts that the country will be spending an amazing $24bn on wine, some 20% of the world's total, and nearly as much as France, the UK and Italy combined.

The spend on wine in the US is expected to have almost doubled in the nine years since 1999, and with growth at over 10% a year, Vinexpo clearly sees this continuing. 'Even though the US is a producing country itself, it's also one of the world's biggest importers,' said Beynat.

Incredibly, if Vinexpo's predictions are true, in four years time, the UK will be the second highest-spending wine market in the world. Though some of this can doubtless be explained by that country's high duties, value growth over the next four years is nonetheless predicted at 19%.

With global growth being driven by big-value markets rather than traditional, big volume ones, it's perhaps no surprise that Vinexpo predicts that the biggest growth will come in the $5-10 and $10+ categories. It claims both will rise by 17% over the next four years, against growth of just 3% for wines below $5.

Spirits winners and losers

The growth in spirits over the next four years is predicted to be around 12%, or twice the rate of growth of the previous four years. Value growth is expected to be even higher, at 15%.

Key to this success is Asia, which, though a volatile region, is predicted to see growth of 20% and already accounts for nearly 60% of the world's spirits consumption. The Americas are expected to see steady if unspectacular growth, while Western Europe is in decline. In category terms, winners are expected to be vodka, rum and (perhaps surprisingly) brandy (all forecast to rise by between 11% and 15%), with scotch, gin and bourbon all facing a tough few years.