Research - Wine sales set for strong growth in Russia and China

By | 1 February 2008

Growth for wine in emerging markets, the possibility that European wine producers will regain some ground on the New World, and continued consumer interest in healthier drinks are among the many forecasts for the coming year in the Euromonitor International 2008 industry review from just-drinks. Ben Cooper highlights some of the briefing's key predictions.

Much has been made of the growth potential in emerging markets for beer and international spirits brands, but the coming years are also set to see significant progress for wine in emerging markets, according to the Euromonitor International 2008 industry review from just-drinks. In fact, according to Euromonitor China and Russia are expected to be the fastest growing markets for still light grape wine in absolute volume terms over the next five years.

"With growing prosperity and low market penetration the race is on among multinational wine producers to establish a foothold in these dynamic markets either by swallowing smaller, local companies or buying a stake in local wineries, particularly those with high-value brands," Euromonitor International states in the briefing. "Crucially, companies will be looking to secure distribution networks and/or bottling plants which would incur lower taxes compared to those imposed on bottled wine imports."

Meanwhile, in major established wine markets, New World wine producers are likely to face sterner competition from the Old World, as a result of the EU wine reforms which will come into effect on 1 August 2008. "Following last month's agreement by EU agriculture ministers to overhaul the European wine industry, New World imports will face a more potent threat from EU countries, which will have a greater budget to step up the promotion of wine," according to the briefing.

The beneficial structural changes are coupled with a growing realisation among producers of the need to update their approach to marketing. "New World wines have been successful in appealing to novice wine drinkers through clear marketing and consumer education," Euromonitor states. "Old World countries are now recognising the need for marketing to be more consumer-oriented."

Another notable trend predicted for the coming year and beyond in the wine market is the increasing influence health concerns are likely to have over wine-buying habits. "The issue of healthy lifestyles will be one of the most significant marketing tools at the wine industry's disposal in 2008," the briefing states."Low-alcohol wine, organic/biodynamic wines and those containing extra antioxidants are expected to continue to add interest and potentially create new consumer bases this year."

Greater consumer concern about health issues will also continue to be a key driver in the soft drinks market during the coming year, Euromonitor International predicts, along with continued growth for non-carbonated drinks and bottled water.

With more and more information reaching the consumer about health and diet, coupled with more government health initiatives, it will become increasingly important for companies to improve the health credentials of their offerings. "This trend will continue to detrimentally impact upon high-sugar carbonates and fruit juices and benefit water and functional drinks in mature markets over 2008," the briefing forecasts. Functional drinks, it adds, "will continue their meteoric rise in volume sales over 2008".

As a result, the coming year is expected to see further diversification into these sectors by major soft drinks giants such as Coca-Cola and PepsiCo.

Interestingly, it is expected that in the short to medium term the trend towards healthier soft drinks choices will increasingly be seen in emerging markets, having previously been primarily a feature of developed countries with relatively affluent consumers.

The launch of healthier variants and functional offerings is seen as a prime means of trading consumers up, as premiumisation continues to be a notable feature across all drinks segments. Indeed, moving consumers towards premium offerings is seen as a key priority for soft drinks producers in mature and saturated developed markets over the coming year and beyond.

At the other end of the price spectrum, branded soft drinks suppliers will have to grapple with intensified price competition spurred by further growth in supermarket own brands. "The expansion of large retail outlets across the globe will be a contributing factor," the report forecasts, "but the phenomenon will primarily be concentrated in mature markets where established brands find themselves under strong price competition."

For more predictions and forecasts for the coming year, download The Euromonitor International 2008 industry review from just-drinks, which includes analysis and forecasts of both market trends and corporate developments for the wine, beer, spirits and soft drinks sectors. For more information, go to http://www.just-drinks.com/briefings/

Sectors: Beer & cider, Soft drinks, Spirits, Water, Wine

Companies: PepsiCo

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