Entering 2024
The markets of various countries around the world are preparing for 'difficulties' for wine,
If you want to complete the challenge and seize the opportunity in the trough,
Where are the key points?
As an insider in the industry, I feel that the vagaries of the wine market are more unpredictable than the stock market, and the emerging markets that grew at the speed of light before the epidemic have also returned to the pre-liberation period, the structural consumption of mature markets is declining, and the climate change in many production areas has caused problems, and middle-aged and elderly drinkers have reduced their desire to consume, and young people are difficult to grasp...... It looks like there is no dawn of sunrise.
But just like the stock market, it won't go up forever, it won't go down forever, and the wine market will definitely not have tomorrow, but the sunrise will have to be a little later. Some hidden phenomena in the market are gradually becoming mainstream trends, such as quality-price ratio, low alcohol content, e-commerce, ...... Only owes an east wind?
Traditional mature markets are facing a prolonged structural recession, which seems unsurprising that some countries or regions are presenting emerging market opportunities. In the first half of 2023, still wine sales fell by 4% in the world's 20 major markets compared to the first half of 2022, while sparkling wine sales increased by 1%.
Several major wine markets, including France and Italy, have been in structural decline for decades. The United States, China, and so on, which had value potential, seem to be in a long-term economic downturn.
Despite this, sparkling wine is a presence that cannot be ignored in all markets, according to IWSR, a global beverage data research agency, which expects sparkling wine sales in 20 major markets to grow at a CAGR of 1% between 2022 and 2027, while still wine sales will grow at a CAGR of 1% over the same period. During the 2019-2023 period, 14 of the top 20 markets saw an increase in sparkling wine sales.
The Chinese wine market has performed similarly to forecasts after the pandemic, with sales of premium or better wines moving steadily. Developing Asian economies such as Thailand, Malaysia, Vietnam, the Philippines and Indonesia have reduced or eliminated tariffs, making them increasingly attractive to global wines.
Countries with ageing populations have some overlap with the 20 major wine-consuming markets, particularly in regions such as Europe and North Asia, where vintners are more likely to rely on older drinkers than to attract hard-to-attract LDA+ consumers (above the legal drinking age). Similarly, without this fascination with wine, hiring in the wine industry would be much more difficult than it was a decade ago.
Today's LDA+ consumers may not need to consume alcohol to be happy than their predecessors did when they were younger, and their rebellious spirit makes them more willing to rush into unconventional territory, such as fancy cocktails, fruity craft wines, or sparkling wines with bright packaging. In individual markets, the approach to millennial consumers is to ignore the user, not to dwell on the need to improve brand or origin loyalty, and more importantly, to find a way that is easier to spread or generate an impulse to spend.
Younger consumers entering the wine industry are now more engaged with wine than in previous years, and once they fall in love, they are willing to delve into all aspects of wine.
Data shows that Gen Z and millennials are significantly more open to new wine products than those over 55 years old. "Young people tend to be more experimental," says IWSR, revealing a long-term track showing that younger LDA+ consumers are more confident in wine than their peers in the previous generation, and the range of alcoholic beverages available has expanded significantly, meaning that the wine market is becoming crowded.
In Australia, the proportion of LDA+ consumers who express confidence in their wine knowledge has increased from 19% in 2010 to 50% in 2023, in Germany from 15% to 44% and in the UK from 21% to 47%. The exception was the United States, which fell from 38 percent to 33 percent.
The growing confidence in their own wine knowledge also seems to influence young consumers' attitudes towards wine participation in their lives. In 2010, 31% of LDA+ consumers in Australia expressed a strong interest in wine, and in 2023, this has risen to 60%. The figure rose from 36% to 60% in Germany, from 22% to 49% in the United Kingdom, and slightly from 61% to 60% in the United States.
Contrary to this self-confidence, the level of knowledge of wine consumers in various countries has been objectively evaluated, and during the same period, many countries have shown varying levels of decline, especially in the United States, Australia, China, the United Kingdom, Sweden, Germany, Brazil and France. Perhaps it is because the 'new organ of mankind' mobile phones have become more erudite, and young consumers are no longer willing to memorize the cumbersome knowledge points of production area and variety, and they are more dependent on wine merchants instead of thinking, which means that good marketing planning can make products more attractive.
Under the consumption habits of LDA+ drinkers, wine is still moving towards fine and premium, but it has shown signs of slowing down, and the sales of lower-end wines are declining faster than Champagne and high-quality sparkling wines and still wines, which means that the share of fine wines is increasing. Growth was evident in India and China.
The weakening trend of "less but better" is caused by a variety of factors, including an aging population that has reduced the proportion of young drinkers, but at the same time, young consumers find themselves facing a crisis in the cost of living and spending power after experiencing the epidemic, so "quality-price ratio" has also become a more sought-after word than "cost-effective".
In the pursuit of health, low-alcohol beverages are becoming the first choice for more consumers, and this expansion is strong due to the small initial base, while wine dominates the low-alcohol segment. In 10 major markets, low-alcohol consumption grew by 8% in 2023, with low alcohol becoming an important health attribute for wine, with lower alcohol, fewer calories and carbohydrates, and even zero residual sugar.
The consumption of non-alcoholic wines is also growing, with the top 10 consumer markets growing by 7% in 2023, but this category is still constrained by negative market evaluations of quality and taste. Wine alone still lacks high-quality non-alcoholic products, so many consumers are turning to other no-alcohol/low-alcohol categories, such as beer and ready-to-drink drinks.
Wine continues to grow in the e-commerce space, but at a slower pace, and will be captured by new categories such as spirits, beer or ready-to-drink categories. Among the major markets, wine accounted for 38% of total e-commerce in the alcohol category in terms of value in 2020, but this figure fell to 33% in 2022 and is expected to fall further to 28% by 2027.
IWSR forecasts a CAGR of 1% for wine in the e-commerce sector from 2022 to 2027. As the pandemic fades away, the accelerated growth of alcohol among e-commerce platforms during the pandemic is fading. Still wines fell the most. However, there is still investment value in the channel, and in the long run, the digital journey will not stop there, and the continued development of the channel will allow for more seamless interaction with drinkers who prefer digital consumption.
The changing climate will continue to affect wine production, with regions around the world facing rising temperatures and extreme weather events such as frosts, hail and forest fires doubling in frequency, affecting harvest times, crop yields and grape quality. This makes it more difficult to cope with the growing demand for simple, natural, soft and light wines.
This has led wine producers to focus on sustainable cultivation and other practices, including organic, biodynamic and regenerative viticulture, as well as to adapt to change, such as planting alternative grape varieties and exploring high-altitude or coastal areas. The perception of sustainability is becoming increasingly important to consumers, with two-thirds of regular wine drinkers in key markets believing sustainability is important, up to 70% in the US and 94% in China.
Each of the different wine regions and markets has its own distinct "local factors", but there are still some universal reasons that can be used together. A global epidemic has changed too much, the topic of health has become a popular topic for everyone, and the economic form of the dog has to scold two sentences when passing by, 'money must be spent on the blade' has become the premise of all consumption, the consumption of alcoholic beverages has generally declined, especially young consumers, in their minds can choose more alcoholic beverages are dazzling, wine wants to compete for the top, "please tell your advantages".