The Global Wine Market
School of Wine and Spirits Business
MSc Wine Business Programme
A presentation for our distinguishe...
2
THE WINE SECTOR'S CHALLENGE
The Wine Market – Lecture 1
6
OVERSUPPLY
The Wine Sector's challenge
12 juin 2014
Can't we just focus our passion
on educating a love of better
quality, higher priced wines?
Let's look at some figures…
Courtesy of the OIV (2012) 7,5 million ha
9
This is the telling factor…
Just look at the changes
What do you see?
 The different trend is
striking
 What's most re...
10
PRODUCTION FOCUS
Oversupply because of a…
12 juin 2014
11
And here's wine production 25 Billion L (OIV 2013)
In 2000
And 2012
The total volume hasn't
changed much over
that time...
12
IT'S ALL ABOUT THE WINE…
Oversupply because…
12
13
Wine
• An alcohol made from the
fermentation of grape juice
• Agricultural Product that is
made in commercial
quantitie...
14
What do we know about the French Wine Sector?
France produces the best
wine!
French wine consumers
are the most
knowled...
15
Wine Prices
The sad truth… In $US- World - Year on
Year
World - Current
Value
1998 7,2 11,1
2003 7,9 11,3
2007 10 11,2
...
It's not all bad… (Euromonitor 2013)
Real fall of -0,6%
in 14 years
17
Why this topic?
Wine consumption has fallen
from 30 Billion litres to 23
Billion per annum since
1980 (OIV 2011).
But m...
Let's look at wine market size trends (Euromonitor 2013)
18
USA +52%
Aus +39%
NZ +33%
Let's look at wine market size trends (Euromonitor 2013)
19
In real terms, EU prices are worse today than 98
0.0
5 000.0
10 000.0
15 000.0
20 000.0
25 000.0
30 000.0
35 000.0
40 000....
What about Chile's Market in Wine?
2112
What about Chile's Market in Wine?
2212
The main culprits (Image Source: Wittwer et al. 2010)
The diminishing value of quality (Image Source: France
Agrimer 2008)
The Challenge is…
That wine's offer is overly complex
The consumer is presented with more than 200 options in
almost every...
26
The Implications?
We're drinking less wine
in general
But the figures vary
dramatically
 The death of Eurocentricity?
...
27
FRAGMENTATION
The Wine Sector's challenge
12 juin 2014
28
PRODUCTION SECTOR
Fragmentation in the…
28
Graph on sector concentration wine v beer
29
An absent concentration in Industry Structure…
30
31
OFFER
Fragmentation in the…
31
That's a respectable level of diversity…
32
That's not…
33
Isn't diversity a good thing?
1. Yes. Within reason
2. Balance choice with being overwhelmed
1. Consumers are intimidated ...
35
CONSUMER'S BEHAVIOUR
Fragmentation in the…
35
More people
drinking less
alcohol
Source: Selvanathan² 2009
Australian per capita alcohol consumption
Source: Selvanathan² 2009
Looking at Chile's example…
38
Graph on wine consumption in Chile
0.0
50,000.0
100,000.0
150,000.0
200,000.0
250,000.0
300...
39
OPPORTUNITIES
The Global Wine Market
Export Markets were forced due to declining domestic consumption
(Wittwer 2010)
40
Chile is looking to move with the wine consumption trends (Wittwer
2010)
41
Value is growing…. Albeit slowly… (Euromonitor 2012)
42
Should be focusing on US, UK, China and Germany (Wittwer 2010)
43
44
ON-PREMISE OPPORTUNITIES
The Global Wine Market
44
Global, On v. Off-premise wine trends (Euromonitor 2013)
70,000.0
80,000.0
90,000.0
100,000.0
110,000.0
120,000.0
130,000....
Let's look at wine market size trends (Euromonitor 2013)
46
0.0
20,000.0
40,000.0
60,000.0
80,000.0
100,000.0
120,000.0
14...
And off-premise… (Euromonitor 2013)
47
0.0
10,000.0
20,000.0
30,000.0
40,000.0
50,000.0
60,000.0
70,000.0
80,000.0
1998 19...
On-premise is very lucrative
The US is the only major market where off-premise sales exceed
on-premise by retail value
But...
49
Dining on-premise
• Ceremonial-based
consumption
• In conjunction with food
• Assisted sales process
• Limited cues to ...
The reality is that this is what we're facing…
50
Communicate in the consumer's way!
The wine sector is in crisis, and producers blame
retailers and consumers instead of t...
The consumer conundrum…
• Wine producers sell wine instead of attracting consumers
• Most modern wine businesses started w...
53
To Conclude
The Wine Market is
difficult because of
1. Its production focus
2. Increase in competition
3. Commercial, a...
54
REFERENCES
The Global Wine Market
References
Charters, S., & Pettigrew, S. (2008). Why Do People Drink Wine? A Consumer-Focused
Exploration. Journal of Food...
References
Lockshin, L., Jarvis, W., d’ Hauteville, F., & Perrouty, J. (2006). Using simulations from
discrete choice expe...
References
Wilson, D., & Quinton, S. (2012). Let’s talk about wine: Does Twitter have value?
International Journal of Wine...
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The global wine market

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An illustration of the statistics and practices that make up the current wine market

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  • Evolution of Wine production and consumption in Australia
    English colonial influences
    Refrigeration in the 70s
    80s and Driving laws
    Mid-80s – European regulations and consolidation for wine
    90s coincided with rampant increases in supply – 260 wine producers in mid-80s. 2600 today. From 30,000 ha in the early 80s to 150,000 today. With supply increases came innovation – the fruit bomb, of many flavours!
  • The global wine market

    1. 1. The Global Wine Market School of Wine and Spirits Business MSc Wine Business Programme A presentation for our distinguished visitors from Universidad de Concepcion
    2. 2. 2 THE WINE SECTOR'S CHALLENGE The Wine Market – Lecture 1
    3. 3. 6 OVERSUPPLY The Wine Sector's challenge 12 juin 2014
    4. 4. Can't we just focus our passion on educating a love of better quality, higher priced wines? Let's look at some figures…
    5. 5. Courtesy of the OIV (2012) 7,5 million ha
    6. 6. 9 This is the telling factor… Just look at the changes What do you see?  The different trend is striking  What's most revealing is why these figures exist Keep your thoughts in mind for the time being… 12 juin 2014
    7. 7. 10 PRODUCTION FOCUS Oversupply because of a… 12 juin 2014
    8. 8. 11 And here's wine production 25 Billion L (OIV 2013) In 2000 And 2012 The total volume hasn't changed much over that time The wine is just coming from different sources  Why do you think?  How did this happen? Implications on the wine sector? Why can't we just focus on producing quality? 12 juin 2014
    9. 9. 12 IT'S ALL ABOUT THE WINE… Oversupply because… 12
    10. 10. 13 Wine • An alcohol made from the fermentation of grape juice • Agricultural Product that is made in commercial quantities • Packaged and distributed globally • Sensory qualities from undrinkable, to sublime • Prices range for the attraction of itinerants, to monarchs 13
    11. 11. 14 What do we know about the French Wine Sector? France produces the best wine! French wine consumers are the most knowledgeable about wine! People today are drinking less, but more expensive wines Yes – Whether it's true or not, it's what everyone thinks (Ma 2008) False – French are most familiar with their own region only (Wilson et al. 2007, 2009a,b) False – Less, but better? Yes. But less valuable as well (Euromonitor 2013) 12 14
    12. 12. 15 Wine Prices The sad truth… In $US- World - Year on Year World - Current Value 1998 7,2 11,1 2003 7,9 11,3 2007 10 11,2 2014 11,5 11,1 15
    13. 13. It's not all bad… (Euromonitor 2013) Real fall of -0,6% in 14 years
    14. 14. 17 Why this topic? Wine consumption has fallen from 30 Billion litres to 23 Billion per annum since 1980 (OIV 2011). But more people are drinking wine than ever before (CBA, OIV 2011) And there are more products, producers and outlets selling wine than ever before in history (Euromonitor 2013) Wine producers need to know how to appeal to them Because discounting is rife
    15. 15. Let's look at wine market size trends (Euromonitor 2013) 18 USA +52% Aus +39% NZ +33%
    16. 16. Let's look at wine market size trends (Euromonitor 2013) 19
    17. 17. In real terms, EU prices are worse today than 98 0.0 5 000.0 10 000.0 15 000.0 20 000.0 25 000.0 30 000.0 35 000.0 40 000.0 45 000.0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2 0 0 8 2009 2010 2011 2012 RETAIL SALES VALUE IN 2012 CURRENCY Australia New Zealand USA France Italy Spain NZ+33% Aus +7% Italy -21% Spain -36% France -13% USA +51%
    18. 18. What about Chile's Market in Wine? 2112
    19. 19. What about Chile's Market in Wine? 2212
    20. 20. The main culprits (Image Source: Wittwer et al. 2010)
    21. 21. The diminishing value of quality (Image Source: France Agrimer 2008)
    22. 22. The Challenge is… That wine's offer is overly complex The consumer is presented with more than 200 options in almost every format in which wine is sought after as a purchase And that doesn't consider  Sales formats  Geographical restrictions, or…. Vintage changes So how can a consumer find any wine they like?
    23. 23. 26 The Implications? We're drinking less wine in general But the figures vary dramatically  The death of Eurocentricity?  What about other regions? What are the reasons behind these trends?
    24. 24. 27 FRAGMENTATION The Wine Sector's challenge 12 juin 2014
    25. 25. 28 PRODUCTION SECTOR Fragmentation in the… 28
    26. 26. Graph on sector concentration wine v beer 29
    27. 27. An absent concentration in Industry Structure… 30
    28. 28. 31 OFFER Fragmentation in the… 31
    29. 29. That's a respectable level of diversity… 32
    30. 30. That's not… 33
    31. 31. Isn't diversity a good thing? 1. Yes. Within reason 2. Balance choice with being overwhelmed 1. Consumers are intimidated by choice 2. Is it just that the offer is not clear to the consumer? 3. Wine producers not developing products in an area of latent need? 3. Sales media and buying formats 4. Communications media and mobility 5. Cultural creep 12 juin 2014
    32. 32. 35 CONSUMER'S BEHAVIOUR Fragmentation in the… 35
    33. 33. More people drinking less alcohol Source: Selvanathan² 2009
    34. 34. Australian per capita alcohol consumption Source: Selvanathan² 2009
    35. 35. Looking at Chile's example… 38 Graph on wine consumption in Chile 0.0 50,000.0 100,000.0 150,000.0 200,000.0 250,000.0 300,000.0 350,000.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 295 783,3
    36. 36. 39 OPPORTUNITIES The Global Wine Market
    37. 37. Export Markets were forced due to declining domestic consumption (Wittwer 2010) 40
    38. 38. Chile is looking to move with the wine consumption trends (Wittwer 2010) 41
    39. 39. Value is growing…. Albeit slowly… (Euromonitor 2012) 42
    40. 40. Should be focusing on US, UK, China and Germany (Wittwer 2010) 43
    41. 41. 44 ON-PREMISE OPPORTUNITIES The Global Wine Market 44
    42. 42. Global, On v. Off-premise wine trends (Euromonitor 2013) 70,000.0 80,000.0 90,000.0 100,000.0 110,000.0 120,000.0 130,000.0 140,000.0 150,000.0 160,000.0 170,000.0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 On vs. Off-premise sales trends World - Off-trade Value RSP Wine World - On-trade Value RSP Wine
    43. 43. Let's look at wine market size trends (Euromonitor 2013) 46 0.0 20,000.0 40,000.0 60,000.0 80,000.0 100,000.0 120,000.0 140,000.0 160,000.0 180,000.0 200,000.0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 On-premise retail price sales trends by country in home currency Wine - On-trade Value RSP - RMB mn China Wine - On-trade Value RSP - A$ mn Australia Wine - On-trade Value RSP - R$ mn Brazil Wine - On-trade Value RSP - US$ mn USA Wine - On-trade Value RSP - € mn France Wine - On-trade Value RSP - € mn Germany Wine - On-trade Value RSP - € mn Italy Wine - On-trade Value RSP - £ mn United Kingdom
    44. 44. And off-premise… (Euromonitor 2013) 47 0.0 10,000.0 20,000.0 30,000.0 40,000.0 50,000.0 60,000.0 70,000.0 80,000.0 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Off-premise retail wine sales by year Wine - Off-trade Value RSP - RMB mn China Wine - Off-trade Value RSP - A$ mn Australia Wine - Off-trade Value RSP - R$ mn Brazil Wine - Off-trade Value RSP - US$ mn USA Wine - Off-trade Value RSP - € mn France Wine - Off-trade Value RSP - € mn Germany Wine - Off-trade Value RSP - € mn Italy Wine - Off-trade Value RSP - £ mn United Kingdom
    45. 45. On-premise is very lucrative The US is the only major market where off-premise sales exceed on-premise by retail value But managing that channel is problematic Wineries have to rely on their position in the mind of the trade, and their consumers The consumer now drinks wine in various outlets for various reasons Traditional consumption was with a meal How many of those on-premise sales in China are matched to food? Wine needs to be priced by consumption motivation and service!
    46. 46. 49 Dining on-premise • Ceremonial-based consumption • In conjunction with food • Assisted sales process • Limited cues to buy • Need to have faith in the person selling the wine Non-dining on-premise • Product-based consumption • Independent of the ceremony • Feature-based purchasing • Buying cues based on familiarity • Need to know what you like and how it's expressed Usage variations in on-premise consumption 49 Which is difficult because this is the reality …
    47. 47. The reality is that this is what we're facing… 50
    48. 48. Communicate in the consumer's way! The wine sector is in crisis, and producers blame retailers and consumers instead of themselves Off-premise requires volume, or producer-driven value to be profitable Consumers look for advice, recommendations, and responses to help them buy wine These are easily obtained through friends in the real, and/or virtual world 51
    49. 49. The consumer conundrum… • Wine producers sell wine instead of attracting consumers • Most modern wine businesses started with the wine, then looked for a market • Quality is now a sunk cost of doing wine business • Alcohol consumption trends are heterogeneous, globally • New media present an opportunity to escape the retail discounting trap • Change is inevitable, and must be embraced • Adapt to the needs of each market, at the level where economies of service can be made 52
    50. 50. 53 To Conclude The Wine Market is difficult because of 1. Its production focus 2. Increase in competition 3. Commercial, and media fragmentation 4. Yet increase in # of new consumers, drinking less wine Most of this problem is the fault of the wine sector A lack of wine consumer knowledge is the root of the problem 1. Growing numbers of consumers mean market potential 2. Comprehending the life- cycle of wine consumption would help 3. Emerging media and distribution methods present extensive opportunities A desire to adapt is required 53
    51. 51. 54 REFERENCES The Global Wine Market
    52. 52. References Charters, S., & Pettigrew, S. (2008). Why Do People Drink Wine? A Consumer-Focused Exploration. Journal of Food Products Marketing, 14(3), 13–32. doi:10.1080/10454440801985894 Euromonitor. (2013). Euromonitor International - Statistics. Market sizes and historic/forecasts. Retrieved February 17, 2013, from http://www.portal.euromonitor.com/Portal/Pages/Statistics/Statistics.aspx Gioacchino, P., Giuseppe, D. V., & Mario, D. (2012). Profitability of Wine Grape Growing in the European Union: An Empirical Analysis. China-USA Business Review, 11(6), 729–738. Groves, R., Charters, S., & Reynolds, C. (2000). Imbibing, Inscribing, Integrating and Imparting: A Taxonomy of Wine Consumption Practices. Journal of Wine Research, 11(3), 209–222. doi:10.1080/09571260020018676 Holbrook, M. B. (1996). Customer Value -- A Framework For Analysis and Research. Advances in Consumer Research, 23(1), 138–142
    53. 53. References Lockshin, L., Jarvis, W., d’ Hauteville, F., & Perrouty, J. (2006). Using simulations from discrete choice experiments to measure consumer sensitivity to brand, region, price, and awards in wine choice. Food Quality and Preference, 17(3-4), 166–178 Muñiz Jr., A. M., & Schau, H. J. (2011). How to inspire value-laden collaborative consumer-generated content. Business Horizons, 54(3), 209–217. doi:10.1016/j.bushor.2011.01.002 Piskorski, M. J. (2011). Social Strategies That Work. Harvard Business Review, 89(11), 116–122. Quester, P. G., & Smart, J. (1996). Product Involvement in Consumer Wine Purchases: Its Demographic Determinants and Influence on Consumer Choice. International Journal of Wine Marketing, 8, 37–53. Thach, L. (2009), “Wine 2.0—The Next Phase of Wine Marketing? Exploring US Winery Adoption of Wine 2.0 Components,” Journal of Wine Research, Vol. 20 No.2 , pp. 143-157.
    54. 54. References Wilson, D., & Quinton, S. (2012). Let’s talk about wine: Does Twitter have value? International Journal of Wine Business Research, 24(4), 271–286. doi:http://dx.doi.org/10.1108/17511061211280329 WineIntelligence. (2013a). Wine tourism – Australia’s model investment « Wine Intelligence. Wine tourism – Australia’s model investment. Retrieved June 13, 2013, from http://www.wineintelligence.com/2013/04/11/wine-tourism- %e2%80%93-australia%e2%80%99s-model-investment/ WineIntelligence. (2013b). What do Chinese wine consumers really think? « Wine Intelligence. What do Chinese wine consumers really think? Retrieved June 13, 2013, from http://www.wineintelligence.com/2013/05/02/what-do-chinese-wine- consumers-really-think/ Wittwer, G., 2010. The Global Wine Market in the decade to 2015 with a focus on Australia and Chile (No. General Working Paper G-166). Centre of Policy Studies, Monash University.
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