The IWSR’s numbers show that consumers around the world drank 700m fewer bottles of wine (still, sparkling, fortified, light aperitifs and other wines) last year, but the industry will be lifted by the ongoing process of premiumisation. This -1.6% consumption drop was the biggest fall for quarter of a century, but an increasing trend for drinkers to trade up pushed the value of the market up by more than 1.2%.
To an extent, the drop in consumption was amplified by the notably bad harvest in 2017 in the key winegrowing markets of France, Germany, Italy, Spain and South Africa. However, the year provided further evidence of consumers opting for better wine but less of it.
The trend is captured in the IWSR’s wine price bands, which show that low-priced and value both lost share last year, while premium-and-above wines expanded by 1.2% to reach a tenth of the market for the first time. The global average price of a 75cl bottle of wine has now increased by 10% in five years to reach over $5.00.
Premium-and-above wines expanded by 1.2% to reach a tenth of the market for the first time.
The IWSR’s researchers on the ground across the world are anticipating that premiumisation is part of a long-term trend. They predict that while the global market for wine is set to contract -1% in volume between 2018 and 2023 the market will be worth 4% more in value. Although, super-premium, ultra-premium, prestige and prestige-plus will all register good growth, it is premium wine that will drive the market as consumers increasingly shun lower-end offerings.
Growth levels may vary, but the expansion of the premium-and-above segments will be universal across all major regions. The Americas, Africa/Middle East and Asia-Pacific are set to enjoy the lion’s share of growth, but the CIS and Europe, where volume losses are more pronounced, are all set to see relatively bullish growth of 4% in the premium-and-above segments.
In developed markets, wine, like other alcoholic drinks, is vulnerable to shifting consumer attitudes to alcohol. The IWSR’s recent consumer survey uncovered tendencies for older consumers to be looking to reduce their alcoholic intake and younger Millennial consumers to be showing an increasing apathy to alcohol. This is encouraging people to levitate to higher-end wine when then they do drink.
In countries with a rich wine heritage and even those with a less-established wine tradition there is a transition away from daily to more occasional wine drinking. Wine is seen less and less as a staple accompaniment for meals and as part of a daily routine. Wine is becoming more of a treat and less of a habit and that is dictating consumption choices.
This is demonstrated in the world’s most valuable wine market, the US. Here, the momentum has been taken out of the wine market by Baby Boomers with shrinking disposable incomes and younger Millennial drinkers with a growing indifference to alcohol. Consumption grew by just 0.4% in 2018, but the premium-and-above wine segment increased by more than 5%. By the end of 2023, premium-plus wines will have increased by a further quarter to make up nearly three in every 10 litres of wine consumed in the US. That will represent a share gain of 10% in 10 years.
In developing countries, the rising middle classes and growing affluence is facilitating the rise of more expensive wine segments.
In developing countries, the rising middle classes and growing affluence is facilitating the rise of more expensive wine segments. This is exemplified in the biggest global market for wine, China, which is expected to see a 55% rise in its premium-and-above priced wines to 2023. Wine is seen by many Chinese as a means of expressing wealth and assuming the country continues to make economic headway, this will help to underpin the migration to better wine segments.
In China and afar, wine has proved to be well suited to ecommerce. The digital environment has played an important role in educating and building up consumer knowledge, cultivating an interest in drinking higher-quality wine. It has widened availability and made the category more accessible to drinkers. Ecommerce is expected to contribute to the continuing premiumisation of the category in the future.
The industry will need to harness all tools at its disposal to maintain the premiumisation process in the years ahead. With downward pressures on consumption the future prosperity of the wine category will be tied to the category’s ability to encourage consumers to continue to upgrade to higher-priced wine segments. The added value will compensate for the expected contraction in volume.
Not only will the enlargement of the premium-priced wine segments ensure the future viability of the category, but it will also raise its status and profile in the eyes of consumers. The reputation of wine will be enhanced the more quality wine is drunk.
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