Buyers from China and all over Asia visiting the VinExpo wine fair in Hong Kong
(This posting is a brief summary of the presentation given for SwissCham Singapore on 6th June 2018)
Rising wine consumption in Asia
Things have changed in the Singaporean wine market since I first arrived here in 2002: then, wine was to be found mainly in fine dining establishment, and a few pioneering wine shops. Today, wine is ubiquitous. With 10.8 million liters imported in 2017, and a revenue of USD221 million, Singapore remains a smaller market, but with an increasingly sophisticated wine-drinking culture and a respectable yearly growth between 3 and 5%.
This is just one manifestation of a wider rise of Asia as an avid consumer of wine. Most markets in the region can be called emerging and have great potential in the longer term. Pro capita alcohol consumption remains in fact still very low – in Singapore, one of the most advanced markets in the region together with Japan, Singapore, Hong Kong and South Korea, at around 2 liters for example, against 30 liters in Australia.
As common when we look at Asia as one entity, we also observe significant differences between countries and territories in terms of economic development, cultural background and structure of the alcoholic beverages industry. However, in all markets growth comes mostly from demographics, rising affluence, internationalisation and policy changes favoring the growth of the industry.
And then of course there is China. Every wine producer and trader is looking at China today, but in wine too, China remains an elusive market.
The grape wine market is worth around USD20 billion and only a very small sub-segment of the overall market for alcoholic drinks, dominated by baijiu(USD80 billion) and beer, which are both also growing healthily. However, with a growth rate around 15%, driven by the expansion of a younger and more internationally exposed middle class, wine should gain in market share. If indeed as has been projected, the Chinese wine market will reach USD 23 billion in revenue by 2021, it would become the second largest in the world after the US (USD38 billion).
Is Asia becoming a significant producer of wine?
China is also rapidly becoming a significant wine producer, certainly in terms of volume, with 870 thousand hectares under vines, which is already the 2ndlargest surface worldwide (although a lot of it is for table grapes) and around 11 million hectoliters of produced wine (the 6thlargest amount worldwide).
And very possibly it will also become over time a leader in quality – looking at how much money has been poured into wine production across the country – from Shandong in the east to Ningxia in the far west –, domestic and international investors certainly seem to believe so, and the progress made in the last few years is indeed very encouraging. Investment and foreign expertise inputs will be essential, but even more so the discovery of specific terroirs, of areas with the highest potential for fine wine production, and the identification of the most suitable grape varieties. Something that in a country of the size of China will simply take some more time.
In Japan, winemaking has a tradition. It is a small industry, leaning on the economically relevant table grape and fruit industry, but it is gaining increasing critical appreciation, especially for its white wines based on the Koshu grape.
Some other countries are also experimenting with wine production, although they are naturally constrained by their hot and humid climates. India, like China, may be able over time to discover areas higher in altitude and with drier environments more suitable for winemaking. We will see where the efforts of pioneers in Thailand, Vietnam and even Myanmar will lead over time. It is in any case one of the great things about the wine world to see so many wines produced in so many different environment, whether they manage to score any Parker points or not.
We will return to the fascinating topic of wine production in Asia in later posts.