The Changing Wine World(1)

A mere two decades ago the wine world was very different to today’s wine world. Over the next twenty years the changes to the industry will be even greater and it will be unrecognisable by today's standards.

If we go back twenty years, the French consumed more wine per head of population than any other country. The only people that really consumed wine in the US were a small band of wine enthusiasts, and wine consumption by the middle class was virtually nonexistent. Wine consumption in China and India, the world’s two most populous nations, was nonexistent.

 

The majority of wine produced by New World producers was consumed at home, and the UK was the target export market.

 

How things have changed!

 

The countries mentioned above were not mentioned by accident. Those countries will have the greatest impact in the changing wine world for the foreseeable future, but in order to understand the future, we have to look at the past, especially in France.

 

France has been the centre of the wine universe since not long after Moses played front row forward against the Egyptian first division. Today, they are the world's most prolific wine producing nation, export more wine than any other country and they still manage to consume more wine than any other country; but that does not tell the complete story. Wine consumption in France is falling. In 1997 they managed to consume 60.1 L of wine per head of population; that's not bad when you consider that figure includes every man, woman and child in the country. Between 1997 and 2000, wine consumption in France dropped by a total of 4.28%. That may not sound like much, but when it is over such a small period of time, and the trend in declining wine consumption is still continuing today, you can see why the French wine industry is in trouble.

 

Moving on to the US market, the population of the US is just over 300 million people, and whilst that is a pimple on a nose in comparison to the population of China and India, the population of the US is critical to the wine world because of its wealth.

 

At the top end of the market, there have always been wine connoisseurs interested in buying the best the French have to offer, but now demand at the top end has grown substantially due to two reasons. Firstly, there are those who are buying top end French wine (in particular) for investment purposes.

 

In reality, there is nothing new in this philosophy. In the early 70s, I remember reading something written by Len Evans, the father of the modern Australian wine industry. Len suggested that wine connoisseurs should, if at all possible, buy two dozen of their favourite top French wines. Naturally these wines would be cellared for some time. Once the wine reached its peak drinking window, the objective was to sell a dozen, and with luck, by then the price would have doubled, so the connoisseur would be drinking their dozen for nothing. The philosophy was fine, provided you had the financial wherewithal to be able to do it.

 

I dare say Len was not the first person to have this philosophy, and it was going on for decades before he put it into print. The most significant, modern-day changes in this philosophy are twofold. Firstly, it is not just a small handful of wine connoisseurs who are buying these wines, for enjoyment and possibly a little investment. There are some that have absolutely no interest in wine who are purchasing these rare drops for investment.

 

Today, the sheer number of affluent, new wine lovers around the world buying these top French wines has skyrocketed, but supply is limited, so it is easy to see why the prices of top French wines have become stratospheric. That may be great news for the top French wine producers, but is certainly not good news for the average wine lover.

 

The US wine-consuming population is no longer strictly made up of wine connoisseurs. As of 1997 the US consumed 7.38 L of wine per head of population. To put that into perspective, that means that the average Frenchman consumed eight times more wine than their American counterparts, and even in Australia, we consumed close to three times the amount of wine per head. Generally speaking, 20 years ago the US wine market was unsophisticated. Very few people drank wine with meals and it was seen as somewhat elitist. Over the last two decades, the US market has changed and grown, and it will continue to do so. More and more people are drinking wine, and between 1997 and 2000, wine consumption actually increased by 9.63%. That's an enormous increase in a short period, and the good news for wine producers is consumption is still on the increase. Why is it so?

 

There are a number of reasons. Part of it is the natural evolution in an affluent society. According to a survey by the Wine Market Council, between 2000 and 2005 the wine drinking population in the U.S. increased by 31% among adults in households with a household income greater than $35,000.  Wine is increasingly being chosen as an accompaniment to meals in 'casual chain' restaurants, and at home when all the family dine together.

 

Part of it is the demystifying of wine, and this has been aided by many agents. At the top end, you have the likes of Robert Parker and magazines such as Wine Spectator. At the low end, there has been an ever-increasing range of inexpensive wines becoming available. Many of the “critter label” wines, like the inexpensive Yellow Tail have made a major contribution by attracting new consumers. Yellow Tail has been the most successful imported wine in the history of the US.

 

But it is not just low-cost imported wine that has helped. Five years ago a new range of wines called Charles Shaw were released in California and sold for $1.99 a bottle. They were instantly nicknamed Two Buck Chuck. In that five-year period, they have now produced three hundred million bottles of wine. In much the same way as cask wine helped build the Australian wine industry, these inexpensive bottled wines are helping to increase US wine consumption.

 

As the affluence of the US continues to grow, so will wine consumption, and that is despite many of the State governments best endeavours to make the shipping of wine ludicrously difficult.

 

The majority of people who consume low cost wines will rarely, if ever, buy anything more expensive, but a percentage of them will experiment with more costly wines, and some will move up the price chain and eventually become consistent mid range buyers. Over time, the increasing consumption of inexpensive wines will lead to an increasing consumption of midrange, and top end wines too.