Steady changes in the global wine production and consumption, along with the deep impact of globalization in the wine industry are reshaping the way the industry behaves and the relation it has with clients and customers alike. In this process, China is getting an increased attention from producers and drinkers and setting the basis to be an essential player in the future.
Global wine trends: a review in figures
Surface under vine has been steadily decreasing from the 2000s until 2015, where figures seem to have stabilized, going from 7,9 million hectares to 7,5 million in 2015 (OIV figures). Five countries do represent 50% of the world vineyard: Spain (14%), China (11% - this number includes vineyards for dried grape and juice production, not only wine), France (10%), Italy (9%) and Turkey (7% - with again vineyard surfaces dedicated to production other than wine). As a general trend, area under vine is decreasing in Europe, in most part due to European pulling schemes, strongly increasing in China and stabilizing in the USA and the Southern Hemisphere. For instance, between 2000 and 2015, the weight of Spain in the total acreage went from 16% to 14%, that of France from 11% to 10% and that of Italy from 12% to 9%. On the other hand, China’s total vineyard surface climbed from 4% to 11% and that of the USA from 5% to 6%.
Global production of wine has been 259 million hectoliters (mhl) in 2016, which means a decrease of 15 mhl compared to 2015. This production level is among one of the lowest production level over the past 20 years. Italy was the leading producer, with 48,8 mhl produced, followed by France (41,9 mhl), Spain (37,8 mhl), the USA (22,5 mhl), Australia (12,5 mhl) and China (11,5 mhl).
Among the first twenty wine producing countries, some important countries have seen their production decrease: Argentina (-35%), Chile and Austria (both -21%), France (-12%) and South Africa (-7%). On the positive side, a couple of countries have registered a particularly high increase: Romania (+37%) and New Zealand (+34%).
On the consumption side, since a low figure of 224 mhl in 2000 and a high number of 250 mhl in 2008, beginning of the financial crisis, global consumption has stabilized at 240 mhl. The period 2000 – 2015 has been characterized by a shift in the wine consumption patterns. Today, 39% of the wine is consumed outside Europe, compared with 31% in 2000. America is now consuming 24% of all wine (versus 20% in 2000) and Asia 9% (versus 6% in 2000). Wine consumption is decreasing in the traditional wine countries of southern Europe (France and Italy) and increasing in countries like China, the UK and Australia, notably due to the fact that new consumers in those countries are coming into the wine scene as incomes grow and eating habits change.
As to know what is consumed, sparkling wine continues to increase in volume and value, representing in 2015 8% of the total wine consumed. As for bottled wines, they continue to decrease slightly in volume but increase in value. Sales of sparkling wines are driven by Prosecco for the most part. Bottled wine consumption is marked by a consistent interest in rose wines, confirmed in most consuming countries and the search for wines that reflect the raising consciousnesses of consumers. They are drinking more natural, sustainable, organic, and biodynamic wines from winemakers who have embraced these values in their winemaking philosophies. Running parallel to this quest, there is also a continued interest in ‘out of the box’ regions and varieties, like Georgian Saperavi or Turkish Bogazkere. There will be an increase in wines from lesser-known but traditional wine regions such as Hungary, Croatia, Bulgaria, and Georgia, just to name a few examples. Trend away from over-oaked, over-extracted wines with high alcohol and massive tannins will continue, with people turning to lighter, fresher wines from regions like Ribeira Sacra in Spain and lighter examples of countries like Chile, where Cinsault production is getting an increased interest.
Globalization: a curse or a true opportunity for the wine industry?
Considering the concept of wine industry globalization, the term can be defined as a movement involving the industry in active competition toward a worldwide marketplace environment, the integration of national markets, and leading rivals competing head to head in different countries for worldwide leadership. In a first high-level approach, it can be thought that globalization does benefit first of all big, international companies with worldwide presence. However, small wineries can be at the forefront of innovation and taking advantage of globalization.
Back in 2004, Jonathan Nossiter’s film, Mondovino, which set waves in the industry, was the first movie to openly explore the idea of globalization in the world of wine. Even if his point of view was pretty partisan in favor of local wines and terroir versus globalization and industrial wines, he definitely had a point opposing global brands (Yellow Tail, Robert Mondavi and the like) to small producers making a tiny production either in Italy, Argentina, France or Spain.
The truth is that many factors have contributed to the globalization of wine. First the size of producers in the New World, which is partly due to the fact that there is total freedom to plant anything, anywhere and make wine out of it. Provided the company you run is profitable, you can keep on selling your wine, whatever its quality might be. Due to economic constraints – that is enough capital to be able to make your wine, distribute it to retailers and have enough financial muscle to build a strong brand, the average size of a winery in the New World producing countries – which include Australia, New Zealand, South Africa, Argentina, Chile and the like – is way bigger than in the Old World – i.e Spain, Italy, France and Germany. Typical average size of a winery in the New World would be 70 ha versus 2 ha in an Old World producing country. Which means that a winery in the New World would have some assets that its counterpart in the Old World will not have, namely: a better control on the value chain – and therefore on margin, a consistent budget to build a brand – and a higher negotiating power in front of retail chains – which are the main distribution channel where wines produced in a large scale find their markets and overall a better consumer awareness. Brands like Penfold’s from Australia, Villa Maria from New Zealand and Gallo from California do resonate in the consumer’s mind. Another powerful reason for the success of global brands is the lower logistic costs that have been considerably and consistently decreasing from the 1990s onwards. Now, sending a 20 feet container of wine from Australia to London has the same cost as sending a lorry from Bordeaux to London.
As a result, good quality wine from New World countries are reaching the main markets – and even secondary ones – at unconceivable low prices. For instance, a bottle of red wine from Chile is reaching La Havana port in Cuba at a price as low as 2 USD FOB, which is an unbelievably competitive price. And the wine is good, even pretty good! I have taste it, and believe me, I want another sip of that glass!
It seems that there is no easy way to face these big brands and that there is no alternative to profitably compete against these giant producers. However, as we live in a semi-globalized world, as Pankaj Ghemawat – an Indian researcher on globalization - puts it, the world is semi-globalized and will stay that way for a long time. Communications and trade are mostly made in a local or regional basis, an idea which is also true for the world of wine. For instance, wines from the Savoie region in France, are seldom found outside the region and are mostly consumed by visitors and skiers during the winter season. The same thing happens with the wines of the Canary Islands, which are mostly locally consumed by tourists in their journey to the islands. And how about Greek wines or Swiss ones? Pretty much the same, just to name those few examples.
In parallel of this phenomenon, a new breed of customers is engaging differently with wine. Millenials – those consumers born in the early 1980s as starting birth years and the mid-1990s to early 2000s as ending birth years – are demanding a more personal relation with wine. They are looking to know the history behind the wine and understand the true motivations of the team making the wine. They want to share and enjoy experiences with their friends and family and will gravitate to brands and services that either provide those opportunities or make their life easier or simpler in some way. They want to relate to brands that matter, that make them feel influential by using or sharing them. Younger consumers are looking for products that have genuine cultural values. That are handmade. So, in drinks that means they are looking for small batch and craft products.
And this has changed the relation the winery has with its customers or potential customers. Not to mention the new role of social media in connecting wine producers with consumers and building a personal relation with them. Both – on the one side new Millenials’ expectations and on the other the new possibilities offered by social media – do come together, pushing wineries to rethink their relationship with consumers. And this is specifically true when small producers can find a sweet spot, away from big, global retail chains.
Take the example of London Cru, which sources and brings grapes from vineyards across Europe to a central London site to crush and make wine. It is a fresh approach to winemaking that resonates perfectly with what young consumers are looking for.
On the other hand, Fairtrade wineries potentially have a huge opportunity. Consumers are able to connect directly with the fact that the wine they are buying is having a strong, positive effect on local communities in deprived areas of the world, like in South Africa.
Also brands that have real conversations and a one-to-one connection through social media are the ones which are successful. One brand trying to do that is Most Wanted, the new UK varietal-led range from Off-Piste Wines. On the one hand, it wants to push the varietal-driven consumer up the price ladder to £8.00 to £10.00 ($11.50 to $14.40). On the other hand, it’s looking to build a community through an ‘Insiders’ section of its website. Here the brand can communicate, and most importantly listen to how their target consumers talk and engage about wine. Each month through the Insiders section of the website, consumers are asked to help and give their input about what the brand does, and plans to do. In return, consumers are treated like a bonafide wine VIP, with sneak previews, and exclusive rewards.
As a result, wineries with hand crafted wines and small production, which otherwise would not have had any visibility, are getting one and building a powerful and new kind of relationship with consumers. But, these players have to be aware that big companies are also doing the same, so that one key element they have to keep in mind is the fact that the wines they produce, not only have to be of superior quality, but also express a true sense of place and translate a unique terroir.
In this changing global market, China has an increasingly important role to play
After nearly three decades of rapid development, China’s wine industry has made significant progress. The total grape-growing are specifically functioning as vineyards for wine reached 214.000 ha in 2014. This accounts for an overall production of 11,5 M hl of wine, a figure which has been stable in 2015 and 2016. This stabilization comes after a period of continuous growth. Since the year 2000, the production of wine industry in China has registered an increase with an average growth rate of 17,7%.
Main red grapes varieties planted are Cabernet Sauvignon, with 82.000 ha, followed by Merlot (23.000 ha) and Pinot Noir (9000 ha). As far as white grape varieties are concerned, Chardonnay is the most planted grape variety with 22.000 ha, followed by Ugni Blanc (20.000 ha) and far behind Riesling with 10.000 ha.
When it comes to consumption, the major markets are Beijing, Shanghai, Hangzhou, Guangzhou, Shenzhen and other coastal cities in southeastern China. But these markets are increasingly getting saturated and it is predicted that second and third-tier cities as well as Midwestern cities will become the major markets for domestic wine consumption in China in the near future.
Along with the domestic situation and changes in the Chinese market, two key elements are deeply – and will deeply – impact on the relation Chinese have with wine. One is the Chinese investment in foreign vineyards and the other is the growing interest of Chinese tourists in wine destinations, mainly in the Old World.
While China was still only at the level of 1 liter per person in 2011 and 1,31 l in 2012, these figures were up from 0,3 l in 2003. This increased consumption in China has fueled growing investment in the sector, not only in China itself, but also of Chinese operators in other parts of the world, as it can be seen through the examples of Chinese Direct Investment in countries like France – Bordeaux region – and Western Australia.
In Bordeaux, it is estimated that 100 vineyards are in Chinese hands, out of a total of over 7000 in the region, suggesting that fewer than 1,5% of Bordeaux vineyards are Chinese owned. Due to the fact that Bordeaux properties are seldom above 100 ha, some Chinese groups have bought several vineyards in order to secure an adequate volume of production. For example, when Goldin group bought three chateaux in 2013, the combined size was only 15,4 ha. The You Brothers, whose main business is pharmaceuticals, own at least six chateaux, covering 250 ha, while the supermarket group Dashang owns at least two. The largest is Haichang group, a highly diversified multinational enterprise form Dalian. The company owns 23 chateaux in Bordeaux, covering 500 ha.
In Western Australia (WA), Chinese investors directly own an estimated 0,5% of the vineyard in the state. But considering also part-owned vineyards, this figure rises to 6% of the vineyard land in WA. This is significantly more than in Bordeaux, where most acquisitions tend to be small.
In both cases – Bordeaux and WA motivations for buying were to fulfill the increasing demand for wine in China. The reason to invest – rather than import – was security of supply and control of the supply chain, therefore avoiding any potential counterfeiting problem.
Added to this, and in line with the general trend of tourists becoming more and more demanding and looking to live authentic experiences and to understand the customs, traditions and daily life of the host population, Chinese tourists have shown an increasing interest in food and wine. As a recent study about the preferences of Chinese tourists for an Old World wine destination has demonstrated, about 10% of respondents are attracted by the sociocultural aspects of the destination, like knowing the lifestyle of the population, wine and food tasting and attending cultural events. Chinese tourists are attracted by typical wine and food tasting and they positively associate it with an elegant and fun atmosphere and experience.
The described elements combined – Chinese direct investment in foreign vineyards and an increasing curiosity of the Chinese tourist to wine and food tasting as a cultural activity representing the culture of the visited country are powerful growth engines for the domestic wine consumption. One increases diversity in the domestic offer and the other increases curiosity for new wines and pushes towards an enhanced open-mindedness when it comes to discovering them.
However, a few conditions have to be fulfilled to see the Chinese wine market keep on developing at a rapid pace. First, increase in average quality of the Chinese wines. An ongoing work of adapting variety, clone and rootstock to site is under way, but it has to continue. Second, China has to control counterfeiting and assure that every wine sold is true to its origins and has not been altered by any fraudulent manipulation. And last, but not least, China needs its own Judgement of Paris. Back in 1976, when Steven Spurrier organized a blind tasting to compare the best French Bordeaux and Burgundy wines against their California counterparts, nobody in the world of wine knew the deep impact a victory of California wines would have on the wine industry. From that day onwards, California wines came into the global map and were considered with respect. Well, something similar needs to happen to Chinese wines. Provided these three conditions come together, one day the Chinese wines will also be on the map and treated with due respect.
Published in ISSUE 102 on Fine Wine and Liquor
Fine Wine and Liquor
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作者简介：Diego Bonnel， 为多家酿酒厂担当葡萄酒顾问，在数个 国家的官方机构任职，超过 25 年。每年品尝数千款酒，特 别了解（以西班牙和葡萄牙为主的）伊比利亚半岛和法国 的葡萄酒。