The wine market in 2020 - best†of times or worst of times?

05 September, 2008

Perspective is a wonderful thing - but it has a nasty habit of going missing when things get a bit lively.

A mere 18 months ago you could have lined up a raft of pundits to tell you that the future was looking rosy.

Now we learn from our televisions and newspapers that the world in general - and the UK in particular - faces turbulent economic times ahead.

So is it the best of times, or the worst of times? Which view should we believe? And how on earth can we plan our businesses, when we seem to change our tune so quickly about the present?

Because we spend most of our time talking to wine consumers, we think we can make a stab at sketching out the future of the UK wine market, in the context of some seismic global changes.

Let's start with some positive thinking. The UK has been drinking more wine year on year for the past 30 years, mainly at the expense of beer, lager and spirits, and we see strong reasons why this net growth trend should continue, though the pace of growth will perhaps slacken.

There are not many consumer categories that can be as confident about future demand .

Incidentally, this wine growth trend is being replicated in nearly 200 countries, and for broadly similar reasons: availability of quality wines, declining interest in traditional alcoholic beverages, and a desire among consumers to align what they drink to a more sophisticated, health-conscious image.

So what makes wine different? Arguably it is the only truly social beverage. The ubiquitous 75cl bottle fits many consuming occasions - two or three people each wanting two or three enjoyable drinks.

Wine works with food better than most other drinks and, uniquely, provides a near-infinite variety of styles to match consumers' views of what best suits their food choices.

Wine is still the only alcoholic beverage of modern times in which moderate consumption is linked to positive health outcomes. Within reasonable parameters, consumers feel wine is safe alcohol - socially acceptable; unlikely to harm the consumer or anyone else. There is enough evidence in the public domain for many consumers to feel they're doing themselves good with a glass or so.

Wine is accessible - easy to find and buy and generally affordable. While pricing trends may not be music to your ears, the fact that you can still get decent quality for under £5 a bottle ensures that wine is affordable for nearly everyone, and increasingly on consumers' agenda.

Some basic numbers put this into perspective. In 2006, an everyday bottle of wine equated to about four or five loaves of bread. Today that ratio is down to two or three loaves per bottle.

Amid serious belt-tightening in other categories, our regular Vinitrac consumer surveys and other data indicate that wine remains on the shopping list even as other discretionary purchases suffer.

It's clear there are problems in our industry: an increasingly hostile tax environment, a continuing erosion of supplier margins, spiralling costs of doing business, to name but three. Some major wine companies are wondering why they should continue to focus on the UK when there seem to be easier pickings in other markets.

But we must resist the temptation to wallow in doom and gloom. In the emerging picture of the 21st -century wine industry, it's important to realise that exporting to the UK is not the only game in town any more . There are still great opportunities for broadening and deepening consumer appeal - and making money at the same time.

Above all, remember that wine is one of those few products that manages to be both culturally interesting and yet a dynamic consumer good; that combines the pleasure of an alcoholic beverage with - if some studies are to be believed - essential ingredients for our future health; and that has become a must-have consumer product without undergoing the commercial Darwinism that leads to a choice of two flavours of cola, three types of credit card, four brands of car, or five brands of mobile phone.

As one mentor of mine once told me, things are never as bad as they seem, nor as good. The important thing is to get up in the morning and do business.




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