The State and Development Prospects of the Global Wine MarketResearch by the Center for Investigations of Federal and Regional Alcohol Markets
Since 2005 I have often been writing about the extremely low efficiency of the global wine marketing (even though clearly it happens to solve its problems – primarily it ensures increasing prices for the best wines). The situation is illustrated by the following figures:
- the population of our planet has grown by almost 2.5 times over the past 60 years;
- in the meantime, consumption and production of beer increased by 4 times;
- hard liquor consumption increased by at least 1.5 times;
- consumption (and production) of wine has been fluctuating around the same volume throughout the past 60 years.
These processes, time-wise, fall on the period of creation of a developed consumer society in the West. The figures indicate that countries with European culture have become somewhat colder towards wine products.
Speaking of population growth in the world, obviously, one could state that the population is being born ‘in the wrong place’ – as in, the European population aged below 50 today is 35% lower than 50 years ago. A significant share of population growth in the world falls on Muslim (sober) countries. However, somehow beer consumption in the world did increase, and significantly so! That implies that wine consumption could have grown as well with the right approach to the population. Apparently such an approach had not been found.
Certainly, every category of alcoholic beverages underwent changes throughout these 60 years.
Strong alcohol tends to grow by approximately 5% annually. The figure I stated for the 60 years – the 1.5-fold increase – is minimal, and the real increase is likely closer to 2 times. This market did not avoid crises; the world’s strong alcohol had to popularize low-alcohol drinks to the greatest possible extent and to explode the ‘woman’ market with a cocktail culture.
The global beer market did not have particularly interesting marketing programs either – huge funds were simply invested in adverting. Money did its job in the end: just 30 years ago no decent restaurant had beer in its alcohol menu, and today it can be found everywhere.
What about wine and its marketers? They tried. And they did manage something, but mostly they were drowning in the stories about last year’s Bois du Boulogne foliage scents in wine.
When the wine market started fluctuating in the mid XX century, a project called the New World was created, which manifested itself in 20 years – by 1980. It was a brilliant move – new wine, a new territory, new fashion. However, sadly the idea caused no growth in the wine market – it only kept production and consumption at the same level of 2.6-2.8 billion decaliters and has been keeping it that way for the last 60 years. If an idea gives no boost to the market despite the 2.5-fold growth in the world’s population and just helps maintain the existing level, I would not call such an idea globally effective. But at least it saved the market from a deep fall – the ‘Old World’ wines were partially replaced by New World wines.
Wine progressed in Northern Europe, where its consumption increased by 3-4-5 times, whereas in Southern Europe per capita consumption plummeted by 2-4 times. Asia became more accustomed to wine, but this reserve was already exhausted 5 years ago.
The American experience is interesting – wine consumption there increased from 3-4 liters per capita to 10 liters during the past 25-30 years. However, high-level policy was involved there – information on how healthy wine is could be heard all across America (which is what wine consumption in Asia is based on nowadays – red wine is considered healthy by Asians), and afterwards for the following 10 ‘gastronomic’ years one could hear about how delicious wine is with food.
What else did wine accomplish? In Europe the mass market of wine became virtually free – a bottle of decent wine for 2-4 euros in a European store is pretty much free for the local consumer. However, this still did not save the market.
And then, without much hesitation, the global wine marketing rushed after super profits from wines of the premium segment, which account for not more than 10% of the wine market in the world. Bordeaux wines have grown 10-fold in price over the past 5 years – it is easy to imagine the benefits of this approach.
There were no results in volumes, however. In 2002, for the first time I wrote that basically no reason exists for an increase in wine consumption in the world. I still cannot see any. At the same time the OIV (International Organisation of Vine and Wine) stated in its reports that the wine market grows by 1-2% annually. Around 2005 I requested a report from the OIV – where is that 10% increase in the wine consumption market over the past 10 years? There was none, but it was acknowledged much later.
Around 2005, without much thinking, the world’s wine marketers decided to step into the same river – a legend of the creation of the ‘New New World’ (Eastern European countries and post-Soviet countries) appeared. Apparently, they were awaiting an effect similar to that of the New World, but somehow it did not work. In each of those countries, production volumes plummeted during the post-Soviet period, even though several new wineries did emerge. The New World opening resulted in its wines occupying 30% of the global wine market. The ‘New New World’ project did not manage to bloom and drowned in the global economic crisis in 2007–2008. The new wines did not draw significant interest on the whole, even though some recognition took place eventually.
At the same time the mid-2000s gave a start to the wine self-suggestion that the most densely populated countries of the world – China and India – will save the long stagnating wine market. I was and am convinced that this is a conscious corporate fraud. In 2016 the OIV acknowledged that wine consumption in China had been declining for 5 years, and India did not, does not and will not drink wine at all.
The collapse of the Soviet system and Eastern Europe 27 years ago dealt great damage to the global wine market (wine consumption in the USSR started declining in 1985 with the ‘semi-dry law’). Around 1992–1993 wine consumption there plummeted 3-5-fold, and this group had over 400 million people in it! What could marketing do here?
In the early and mid-2000s Europe went through a crisis of wine overproduction – winemakers were paid to uproot vineyards. Excess European wine was used to make cognac spirits that were intentionally used instead of ethanol. During the same period subsidies for production of 1 liter of wine in the EU were reaching 1 euro!
As a result of all these events, the global wine marketing focused on peopleñ who can afford paying high prices and continued to admire the aromas. With this approach of the wine marketing in the world, wine has no future against beer and strong alcohol. In the best case scenario global consumption with the increasing population will remain at the average level of 2.7 billion decaliters per year. Growth in the financial volume of the market, on the other hand, will continue due to production and price increase in the premium wine segment – the same way it has been during the past 60 years (the wine business has been satisfied with the financial results even with the overall physical volume remaining unchanged).
Who else could have stolen volumes of potential growth from wine? Anti-alcohol campaigns could not have done so. Low-alcohol tricks of strong alcohol producers definitely did. Propaganda of a healthy lifestyle did not (this is only a myth). The decreased population in countries with European culture did – however, Northern Europe and Asia helped wine in this regard. Drugs likely did; they are used quite a lot both in marginalized groups and in a more cultural environment, and soft drugs certainly take the market away from wine to some extent.
My views on the global wine market are very skeptical – I see no future there, which could allow one to hope for wine production and consumption growth in the world with the current approach. A system is needed, and right now there is none. International wine organizations are no more than pawns in the process.
I have said for many years that growth in wine consumption is only possible in countries of Eastern Europe and the former USSR. Growth in the quality of life is necessary with state propaganda of healthiness and benefits of wine. Even modern Russia ruined the male consumption segment in the wine sector along with the proletariat – the well-known Russian ‘port wine’ instead of vodka (the former was mainly consumed by the proletariat in Soviet times; in the USSR per capita production was reaching 5-6 liters per year, whereas today it is lower than 0.5 liters); in the wine sector we get 3.5 liters per capita per year plus around 1.3-1.5 liters of products perceived as wine by the consumer (alcohol-free wine drinks), which results in around 5 liters per capita per year. During the Soviet period we were drinking 15 liters of table grape wine on average! The 3-fold decline remains.
There certainly is potential. The state should re-educate the consumer instead of wasting its time with anti-alcohol PR campaigns. A proper state policy convincing the consumer and competent marketing in the wine business are essential.
Obviously, the state is having more fun chasing industrial and homemade alcohol surrogates than it would popularizing wine. Therefore it is no surprise that the Russian wine consumer patriotism is fading, and imports keep growing. Patriotism in this regard has to be fed with an information war for the product at the state level.
Center for Investigations of Federal and Regional Alcohol Markets (CIFFRA)