RESEARCH: Global wine market up 2%
The global wine industry is showing solid growth, with volume sales up nearly 2% in 2003, according to the latest research.
A report from consumer goods analyst Euromonitor reveals that still red wine provided much of the impetus for volume growth in the world wine market, with sales rising nearly 12%. This growth was driven in the large part by increasing consumer interest in its potential health benefits.
The red wine sector is being further boosted by a growing awareness of its compatibility with food and the increasingly sophisticated nature of consumer demand.
Increased volume sales in emerging markets, such as China and Russia, is another key factor helping to drive growth in the global wine market.
Natasha Cazin, global wine industry analyst at Euromonitor said: "This growth is due to a combination of factors, such as improving living standards, rising disposable incomes and the gradual 'Westernisation of the lifestyles of young consumers. At Euromonitor we have noticed that changing patterns of consumption, with wine fitting increasingly easily into developing lifestyles also led to increased sales, including Australia and some Scandinavian countries."
The story was very different for the Western European markets of Italy, France, Portugal and Spain, however, where younger consumers are moving away from traditional everyday wine drinking to more occasional consumption. Combined volume sales of these countries fell for six consecutive years, down by a further 2.5% in 2003. This compares with an overall 0.3% decline in the total Western Europe region.
The trend towards better quality products served to offset the decline in volume consumption witnessed in Western Europe towards the end of the 1998-2003 period. Indeed, total current value sales in the region increased by 19.4% in 2003.
Euromonitor found that growing consumer demand for more expensive, high quality variants of wine was most clearly visible in the markets of Scandinavia, the UK and Ireland, where sales grew both in volume and value in 2003. However, the improving scenario in Western Europe as a whole was also largely due to exchange rate factors and when considered in fixed rates, wine registered value growth of 2.5% over the period.
New World supply imbalance has been the most important development affecting the wine industry between 1998 and 2003, as the producing markets of Australia and the US recently joined the EU countries in creating surpluses.
"Much of this can be traced back to strong economic growth during the 1990s, which helped to accelerate the intense New World plantings throughout the latter half of the decade," said Cazin. As a corollary of the global grape and wine oversupply trend, Euromonitor found that several markets, including the US, the UK and Germany, have witnessed deep discounting as wineries look to clear out excess inventory in their tanks to make room for the new vintage and in turn constraining value growth.
While discounting was prominent in several countries over the 1998-2003 period, the growing demand for more expensive, premium wines was also an underlying trend across a number of markets. Such activity was particularly pronounced in the developed markets of Western Europe, North America and Australasia, driven by consumers tendency to become more sophisticated, in addition to the rise in disposable incomes and increasing wealth in several of these markets.
While Old World wines remained popular due to their image of quality and sophistication, the increasing importance of markets without strong traditions of wine consumption meant that New World wines played a significant role in fuelling global wine's expansion during the 1998-2003 period. Euromonitor's latest research found New World producers' aggressive approach to entering new markets, and their branding strategies, which appealed to consumers who were unfamiliar with wine products, became increasingly influential.
Consolidation has been a growing trend in the fragmented wine industry in recent years, as more and more regional and national players have looked to position themselves as global wine producers and capitalise on growing demand for wine in developed and emerging markets.
The most recent shake-up occurred in March 2003 when Constellation Brands of the US announced that it had agreed to acquire Australian wine producer, BRL Hardy. The combined entity will be the largest wine company in the world in 2004 by value, displacing E&J Gallo, although Euromonitor still expects Gallo to be the world's largest wine producer in terms of volume.
As well as giving Constellation Brands a significant presence in Australia, Euromonitor believes the deal has also added to its already strong positions in the UK and US, while increasing its business opportunities in other key markets. Given the extreme fragmentation in the market, it is expected that acquisitions will be an increasing feature of this market in the foreseeable future.
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