Europe’s wine consumption falls while Asia’s surges

China, which is expected to become the world’s second most valuable market by 2020, will represent 72% of worldwide wine imports growth, Vinexpo CEO said at a press conference in Hong Kong last week.

Guillaume Deglise, Vinexpo CEO, presenting the latest findings from a study conducted by the trade organisation with IWSR for the global market review from 2016 to 2020.

By 2020, China is expected to surpass the UK to become the world’s second most valuable wine market after the US. This will make China a main driver for the global wine market shift as consumption growth in the next few years will be mainly coming from China-led Asia pacific countries and the US, Guillaume Deglise, CEO of Vinexpo said, citing findings from a study conducted by Vinexpo with IWSR for the global wine and spirits market overview from 2016 to 2020.

“Clearly there are two countries that are really driving the wine consumption, which are USA and China,” stated Deglise. Wine consumption in the US is expected to reach US$38.6 billion by 2020, up from US$34.5 billion in 2016. While in China, wine consumption will climb by 39.8% to US$21.7 billion compared with US $15.5 billion worth of wines drunk in 2016.

“But growth is on very different profile. So we need to go a little deeper. We expect China to actually consume 94 million cases in 2020, up from 52.7 million cases, which is 79% growth, representing 72% of worldwide wine growth,” he continued, noting that China is not yet a strong wine producing country, which means imported wines will play an increasing role in domestic market.“USA is different, because US is also a very strong producing country, but basically that won’t be enough for the whole market. They need to import more wines to meet the demand, so we expect an additional 3.8 million cases for the next few years,” Deglise added.

The quality of China’s domestic wine is gradually improving, spearheaded by some small boutique wineries mainly located in Ningxia, Xinjiang and Shanxi in northwestern China. For the first time, this year’s Vinexpo will have a Chinese pavilion featuring 15 wineries from the country’s premium wine producing region Ningxia, Deglise told dbHK.

In addition to the two countries, Canada and Japan are identified by the trade organisation as two “exciting markets”. Russia’s prospects, on the other hand, are unpredictable and challenging.

“Russia is less exciting because there are a lot of market uncertainties that are expected to persist in the next few years,” Deglise commented. The country is tightening up control on alcoholic beverages after a batch of counterfeit vodka made from bath oil killed nearly 80 people in late 2016.

New markets such as Nigeria, Ivory Coast and Namibia could unlock potentials for producers, especially for volume growth. “Why not get into Africa? I am not talking about some premium wines there but some potential volume sales,” commented Deglise.

Meanwhile, Europe will continue to slide in terms of wine consumption by volume though it still remains the largest wine consumer, accounting for about 60%, despite a projected contraction of 33.9 million cases by 2020.

“The reason for decline in Europe is not that we drink less but we drink better. You see clearly the premiumisation of wines in Europe. Because generations have changed, and driving laws in Europe have been stricter,” Deglise elaborated, adding that growing propositions such as cider and beer also squeeze out wine’s share in the market.

In terms of per capita consumption, Europe still leads the pack, while China will only averages at 1.53 litres by 2020, compared with France’s 43.63 litres. “We estimate that in China only 38 million people drink more than one bottle a year. It’s tiny compared to the entire population of China, so there’s still a lot to be done to make wine a popular drink in China instead of just Baijiu,” Deglise stressed.

Most of wines consumed in China are still dominated by domestic wines with around 60% market share. Imported wine is expected to grow to take up around 50% by 2020 in volume, Deglise estimated when asked by dbHK.

“The decrease in local wines will continue. Imported wines will continue to grow from 40% to 50% quite quickly, that’s what’s expected in terms of volume,” he said, citing consistency as a main challenge for domestic wine producers.

One growth sector highlighted by Vinexpo is sparkling wine. It’s expected to register more than 43% growth between 2016 and 2020, much higher than still wine’s 19% growth.

“You see people in China drinking Champagne at weddings. It will be the next player for Champagne,” said Deglise. By 2020, China’s sparkling wine import is expected to grow by 43.6% to 2.19 million cases compared with 1.53 million cases in 2015.

While in Hong Kong, its per capita consumption is forecast to grow to 6 litres by 2020 but consumption for super premium wine category will decline by 5.4%, mainly affected by mainland’s China’s continued anti-corruption drive, according to Deglise.

Hong Kong’s wine consumption by volume is projected to grow to 4.23 million cases by 2020, up from 3.28 million cases in 2011, but Deglise cautioned the figures given some wines in Hong Kong invariably ended up in mainland market through various channels.

“Of course when it comes to Hong Kong, it’s always difficult to analyse the figures cause we have to estimate how much of this is being exported. This is based on actual consumption but it’s difficult to analyse. I always remain cautious about Hong Kong figures,” he said.

In terms of colours, rosé wine consumption in Hong Kong is particularly low, only 2.2% in 2016. “Hong Kong is still very much committed to red wine,” said Deglise, which is mainly led by French Bordeaux and Burgundy.