NEW WORLD POWER GIVES WINE A NEW FACE
It’s just a matter of time before wine companies wear a global face like McDonalds or Wal-Mart, right? Well, perhaps that’s shooting a little high, but it would be almost impossible to argue that the industry as a whole isn’t shifting to a more global front. While we certainly see signs of that among larger companies, the wine industry will always remain fractionalized because there will always be small, independent wineries and vineyards. Nonetheless, Kevin Barry put forth an informative article in the latest Impact that takes a closer look at some of the key points shaping our industry today.
To simplify things a bit, the article’s thesis (as we see it) is this: the increasing influence of the New World is spearheading global changes.
Kevin points out that Old World countries like France, Italy and Spain are tossing some of their century old customs in favor of New World (U.S., Australian, Chilean) innovations and efficiencies. A majority of the wine industry’s most notable trends can be traced back to New World countries. Those trends include worldwide trading-up, premium global brands, and the long-term potential of established markets (like the US and UK) and emerging markets (like Eastern Europe and Asia). In addition, as wine consumption tapers off in the Old World (especially France), the New World helps to offset those declines. In fact, as most of us know, the U.S. will soon become the world’s largest wine market by volume.
IN WITH THE OLD AND OUT WITH THE NEW. Impact says that things like consolidation, international joint-ventures and increased wine consumption in new and emerging export markets like the UK, US, Russia and China has dramatically changed the industry. As the new order gains a stronger foothold in the global marketplace, Old World wine markets have felt the burn.
The wine industry is a famously fractionalized business but the article claims it is quickly becoming more of a marketing-driven entity. A desire for better routes to market and improved brand development has led companies like Constellation to purchase companies like Vincor, for example. That acquisition gave Constellation a much better foothold in the growing Canadian market, along with eliminating one of its former competitors. Nevertheless, Impact points out that the world’s five largest wine companies command only 11.2% of market share, while the top five beer companies control 50%.
Driven by restaurants and retailers, trading up is especially apparent in the Western world, including the US and Canadian markets with opportunities in the UK, New Zealand and Australia. Bigwigs from Constellation, E&J Gallo, Foster’s, Pernod and Diageo all seem to agree that trading up is one of the most important – if not the most important – trend today.
IT STARTS WITH THE U.S. The U.S. market in particular is the largest driver of trends, says Kevin. The desire for expensive wine, foreign wine and more wine in the U.S. has spread like a cold in other countries, such as Japan.
To satisfy consumer urges, U.S. and foreign wine companies are offering more imports and increasing their premium offerings (which includes jacking up prices to established brands). In a market where imports hold 30% share, U.S. wine companies are taking on more imported wine brands – particularly from New World countries – to satisfy the consumers’ growing interest in the exotic. E&J Gallo recently added three new imported wines to its portfolio that hail from South Africa, Argentina and Spain.
At the same time, exporters to the U.S. benefit because consumers here are more willing to spend money. The $12-14.99 per bottle price tier grew 16.3% in the U.S. in the 52 weeks to January 13, according to Nielsen data. Meanwhile, the average bottle of wine in France costs $2.70-$3.37, while in the U.K. and Germany the average bottle is in the $7.90 and $2.70 price range. With the U.S. looking so profitable, importers have to be willing to swallow excess costs as a result of a weakening U.S. dollar.
As wine consumption rises in the U.S., so will its importance in the wine world and the proliferation of trends on a global basis.
To simplify things a bit, the article’s thesis (as we see it) is this: the increasing influence of the New World is spearheading global changes.
Kevin points out that Old World countries like France, Italy and Spain are tossing some of their century old customs in favor of New World (U.S., Australian, Chilean) innovations and efficiencies. A majority of the wine industry’s most notable trends can be traced back to New World countries. Those trends include worldwide trading-up, premium global brands, and the long-term potential of established markets (like the US and UK) and emerging markets (like Eastern Europe and Asia). In addition, as wine consumption tapers off in the Old World (especially France), the New World helps to offset those declines. In fact, as most of us know, the U.S. will soon become the world’s largest wine market by volume.
IN WITH THE OLD AND OUT WITH THE NEW. Impact says that things like consolidation, international joint-ventures and increased wine consumption in new and emerging export markets like the UK, US, Russia and China has dramatically changed the industry. As the new order gains a stronger foothold in the global marketplace, Old World wine markets have felt the burn.
The wine industry is a famously fractionalized business but the article claims it is quickly becoming more of a marketing-driven entity. A desire for better routes to market and improved brand development has led companies like Constellation to purchase companies like Vincor, for example. That acquisition gave Constellation a much better foothold in the growing Canadian market, along with eliminating one of its former competitors. Nevertheless, Impact points out that the world’s five largest wine companies command only 11.2% of market share, while the top five beer companies control 50%.
Driven by restaurants and retailers, trading up is especially apparent in the Western world, including the US and Canadian markets with opportunities in the UK, New Zealand and Australia. Bigwigs from Constellation, E&J Gallo, Foster’s, Pernod and Diageo all seem to agree that trading up is one of the most important – if not the most important – trend today.
IT STARTS WITH THE U.S. The U.S. market in particular is the largest driver of trends, says Kevin. The desire for expensive wine, foreign wine and more wine in the U.S. has spread like a cold in other countries, such as Japan.
To satisfy consumer urges, U.S. and foreign wine companies are offering more imports and increasing their premium offerings (which includes jacking up prices to established brands). In a market where imports hold 30% share, U.S. wine companies are taking on more imported wine brands – particularly from New World countries – to satisfy the consumers’ growing interest in the exotic. E&J Gallo recently added three new imported wines to its portfolio that hail from South Africa, Argentina and Spain.
At the same time, exporters to the U.S. benefit because consumers here are more willing to spend money. The $12-14.99 per bottle price tier grew 16.3% in the U.S. in the 52 weeks to January 13, according to Nielsen data. Meanwhile, the average bottle of wine in France costs $2.70-$3.37, while in the U.K. and Germany the average bottle is in the $7.90 and $2.70 price range. With the U.S. looking so profitable, importers have to be willing to swallow excess costs as a result of a weakening U.S. dollar.
As wine consumption rises in the U.S., so will its importance in the wine world and the proliferation of trends on a global basis.
posted at 1:24 PM
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