Understanding the level of maturity of markets and the trends in each is essential when preparing a business plan. But sometimes trends are not the only reasons behind positive sales results and, in many cases, markets that might have once shown potential can be greatly affected by macroeconomic shocks, political instability and changes to legislative policy. Therefore, continued monitoring of markets is essential to remain competitive.
Euromonitor International recently reported that the global alcoholic beverage industry experienced 1 per cent growth to US$ 1576 billion in 2017. At first glance this may not appear to be a significant increase, but when you consider the alcoholic beverage sector’s performance over the last five years, it is notable. The Alcoholic Drinks Global Industry Overview, released on 2 August 2018, shows that this growth came from all major alcoholic beverage categories (including wine) and was primarily driven by Asian markets.
Figure 1: Euromonitor alcoholic drinks: The evolution of the global industry
Source: Euromonitor International
Consumer trends
Euromonitor identified a number of trends underlying the growth in 2017, the trends relevant to wine include:
- health and wellbeing leading to lower volumes but increased value (premiumisation)
- advances in digital technology’s integration in marketing that is making it easier for consumers to connect
- cross-pollination hybrids and blurring of category lines (such as combining yeast strains, radical barrel ageing amalgamations, wines and gins infused with herbs, and fusion whiskies), and
- corporate responsibility by showing stories of authenticity and craftmanship.
In Market Bulletin issue 100 we explored some of these trends in more detail.
Classifying export markets based on wine consumption maturity
Interestingly, when it comes to how much these trends have an impact on sales, this appears to depend on where the market sits in its level of maturity. After ranking 50 key markets by their relative wine market attractiveness, the Wine Intelligence Global Compass model provides classification through five stages: ‘mature’, ‘established’, ‘growth’, ‘emerging’ and ‘new emerging’.
Figure 2: Wine Intelligence Global Compass market classifications
Source: Wine Intelligence
There is a consistent theme throughout each of the ‘mature’ wine markets in that there has been success where there has been innovation and diversification to attract new customers, especially females and younger consumers. An example of this is in Germany where despite a fall in overall sales volume in 2017, value has increased in line with premiumisation and increased sales of drinks considered as on-trend by Millennials looking to experience new and exciting products.
The same could also be said for the ‘established’ and ‘growth’ markets but finding the right balance with building awareness and reputation is still very important. We can see the connection between trends and market classification through a regional overview.
Alcoholic drinks: region, size and growth by category
Source: Euromonitor International
Asia Pacific
While China has made a big impact on the results, markets such as Vietnam and the Philippines are also performing strongly in alcoholic drinks, including wine. Wine Intelligence classified these markets as ‘new emerging’, demonstrating that these markets are showing potential off a small base, even though wine is currently a niche product and largely unknown except in small and involved market segments.
Despite being Australia’s largest export market by value, China itself is categorised as an ‘emerging’ market as it continues to experience growth thanks to a growing middle class, as well as awareness and per capita consumption increasing. While marginal, Wine Intelligence has observed increasing interest in organic, lower-alcohol wine and smaller packaging formats.
For Japan, the alcoholic drinks sector has been flat while still wine volume has declined. According to Euromonitor, this is in part due to an in-market trend towards drinking at home. In an effort to stimulate growth, some manufacturers have been developing new products that are sweeter and lower in alcohol to reach new customers. Where once it was considered a ‘growth’ market, its market attractiveness has now shifted to ‘established’ as consumption has plateaued.
Western Europe
Western Europe is host to the majority of ‘mature’ markets, which according to Wine Intelligence are markets where wine appears to have reached its potential with stable or declining volumes.
From a total alcoholic drinks perspective, the only markets that showed signs of improvement were Italy, Spain and Portugal. For Italy in particular, consumption of still wine has risen over the last three years, which has led to it moving out of the ‘mature’ classification and into ‘growth’.
Markets such as the United Kingdom and Germany have remained as ‘mature’ after experiencing another year of reduced growth due to continued economic uncertainty in the region and a growing health and wellness trend leading to reduced consumption of alcohol, including wine.
The Americas
Alcoholic drinks sales in the United States of America (USA) and Canada have seen positive growth, with wine contributing to this increase. Both are classified as ‘growth’ markets by Wine Intelligence and the Global Compass model further suggests that both nations represent two of the five most attractive wine markets in the world.
The USA tops the list with consistent growth each year, but it appears that this may be slowing down. Trends in the USA are mostly centred on premiumisation according to Euromonitor, while in Canada it is not only premiumisation but also experimentation, convenience, lower alcohol options and uniqueness.
Brazil’s market attractiveness score increased and is now the 26th most attractive wine market. Wine Intelligence attributed this to a better economic outlook and impressive short-term growth, although wine is still struggling to resume growth in this market. The premiumisation trend is also evident in Brazil.
Eastern Europe
In Russia, the alcoholic drinks market has fallen to its lowest point over the past 15 years. Despite this, there was growth in the wine category as a ban on the sales of beer in plastic bottles and alcoholic energy drinks resulted in heavy declines. Russia is categorised by Wine Intelligence as an ‘emerging’ market.
Australasia
Deemed as ‘established’ wine markets, Australia and New Zealand have been strongly influenced by the premiumisation trend. Wine sales have increased in both markets in the last year, strongly influenced by products targeting the premium purchaser and attracting the youth market with diversified product offerings and lower alcohol.