Red not dead

Sales of still red wine are set to outpace all other wine varieties over the next five years, with both volume and value expected to rise significantly by 2007.

A new report from market analysts Euromonitor​ shows that red wine is forecast to record global value sales of $82 billion (€75.5bn) in 2007, a rise of 31 per cent from 2002. Global volume sales, meanwhile, are expected to see an increase of 22 per cent to 13 billion litres over the same period.

The sector's performance will continue to be driven by rising consumer health-consciousness and red wine's cultured image, which is set to grow in significance as consumers become increasingly knowledgeable about wine and its compatibility with a range of food, Euromonitor said. Even in markets as developed as Germany, for example, sales are being boosted by the fact that red wine complements the increasingly popular southern European cuisine.

In contrast, however, still red wine in Argentina is set to be the sector which records the fastest rate of decline as its historic popularity means that it comes close to representing an essential product in a market where harsh macroeconomic conditions have severely limited consumer purchasing power.

Largely as a result of the continued rise of the still red sector, white and rosé wines will experience sluggish global volume sales over the period. However, increasing consumer sophistication is expected to lead to a rise in demand for higher value products in the still white and rosé sectors, the report said.

Champagne shows signs of recovery​

Champagne and sparkling wine sales showed signs of recovery in 2002 after two years of decline following the strong growth preceding the Millennium. Both registered US dollar value decline over the period 1997 to 2002, due to a variety of factors including price-cutting, the greater availability of products through off-trade channels, and, in the case of other sparkling wine, growing sales of domestic products in developing markets.

However, the clearance of Millennium stocks dampened the pressure on prices at the end of the period and combined with the growing popularity of sparkling wine as a social drink amongst younger consumers in significant markets like France and Italy, it enabled both Champagne and other sparkling wine to post value growth in US dollar terms in 2002, the report showed.

Manufacturers and retailers of Champagne will seek to further stimulate sales of higher quality products by focusing on appellation and introducing gifts such as ice buckets, champagne glasses and gift boxes, Euromonitor suggested. Sparkling wine could see sales rise as much as 17.5 per cent in the next four years as a result of such marketing initiatives, reaching a total of $25,044 million in 2007. The launch of small, single serving bottles in some markets, including France, Germany and Belgium will also help unit prices to recover.

Europe sees volume share erode​

Despite the positive prognosis for the red wine and Champagne and sparkling wine sectors, opportunities in some regional markets are less clear. Western Europe saw its volume share erode during the period 1997 to 2002, constrained by declining volume sales in major markets like France and Italy, in which younger consumers shifted away from traditional patterns of regular consumption.

Eastern Europe also registered a below average rate of volume growth due to a certain level of maturity based on strong traditions of local production, and the prevalence of self- and counterfeit production in the region.

Forecast Global Sales of Wine: % Growth 2002-2007​

However, not all is negative on the regional front. The survey reveals strong growth by Asia Pacific, with volume sales up 25 per cent during the period 1997 to 2002. This was fuelled by the increasing demand for grape wine products, which are not traditionally produced and consumed in the region.

Going forward, the developing regions of Asia Pacific, eastern Europe, Africa and the Middle East are expected to lead growth in both volume and value terms. While volume sales in Africa and the Middle East are set to rise 25 per cent over the period to 2007, Asia Pacific and eastern Europe are forecast to show substantially stronger growth at 37 per cent and 40 per cent respectively.

According to Euromonitor, ongoing urbanisation will be an important factor in wine sales growth as it creates significant concentrations of consumers for emerging large-scale retail formats and leads to expansion of wine's core consumer base, the urban middle class.

Latin America is the only region expected to show a volume decline, as economic difficulties persist in major markets, notably Argentina, and consumers shy away from non-essential purchases until conditions improve.

Climatic considerations​

The global wine market remains positive and the future is bright, the report suggests, although the unpredictable vagaries of the weather will always make forecasting the outlook for the wine industry difficult. Changes in production are usually directly linked with unfavourable climatic conditions, and production fluctuations directly influence prices. A shortage implies price hikes, whereas excess supply is synonymous with lower prices, which can be harmful to producers' revenues.

This is particularly pertinent at the moment. Both Australia and the US are currently faced with an oversupply, which stand to have a significant effect on pricing in the short term. The surplus is likely to exacerbate the ongoing problem of retailer discounting which has afflicted Australian producers and played no small part in undermining the profits of companies such as Peter Lehmann and Southcorp in the first quarter of 2003.

For details of Euromonitor's range of research reports, click here​.​