This year marks 10 years of tracking the attractiveness of the IWSR wine market through our unique Compass model. Looking back over the past decade, a number of important, and sometimes surprising, patterns emerge.
The Compass model provides a snapshot of the relative attractiveness of the global still and sparkling wine markets, with a methodology based on a wide range of socio-economic and wine market measures.
Over the past decade, the wine industry has faced a changing market environment.
The lasting impact of recent high inflation: In recent years, rising inflation has been one of the key factors shaping the global alcoholic beverage and hospitality industry. The effects of inflation, a fundamental decline in household purchasing power, will continue to shape wine preferences, spending and demand around the world. The impact of the pandemic on trading will be long-lasting. The expected recovery has not materialized, especially in nightclubs, due to higher operating costs and higher transaction prices. However, the emergence of less formal, early evening drinking opportunities has given wine a chance. Changing drinking habits: Increasing health awareness and rising global costs of living encourage moderation, and wine consumption continues to decline, especially among younger consumers of legal drinking age. Moderate alcohol consumption is becoming increasingly socially acceptable, and the stigma against not drinking is starting to fade in many markets. Politically influenced trading environment: Changes in customs duties and alcohol tariffs have changed market dynamics. With the introduction of a new alcohol tax in the UK in August 2023, many brands are choosing to reduce the alcohol content of their wines or launch new ‘medium strength’ products. . Meanwhile, China’s tariffs on Australian wine will continue for more than three years and end in March 2024.
Against this backdrop, several important patterns emerge in IWSR’s still wine market attractiveness rankings.
U.S. Advantage: After decades of growth, the U.S. has seen a slight decline in the number of regular wine drinkers in the country and a decline in wine volumes, but still wine opportunities are growing. We continue to lead the way in this field. Mass production has made it the world’s largest wine market, and by 2023 more than a third of still wine in the United States will be sold at premium prices or above. Although sales volumes are expected to decline slightly, premium wine market share is expected to increase. Continues to grow as moderate drinkers seek better drinking with less.
Canada’s cyclical pattern: The pandemic has left a strong impact on Canada’s still wine market, which is now back in second place as population growth recovers from the pandemic. Premiumization has also returned to levels similar to the US, likely related to an improving economy and lower inflation compared to hikes during the pandemic.
Switzerland consistently maintains its third position. Consistently high GDP and GNI levels work in Switzerland’s favor, with inflation rates among the lowest among the European markets surveyed. The country has relatively high per capita still wine consumption and consistent demand for imported wines at premium and above price points.
Resilient Scandinavia: Norway (4th), Denmark (6th) and Sweden (9th) all moved up five or more places in the ranking. Still wine consumption rates in these markets are declining, but at a lower rate than in many of Europe’s more mature markets.
Western Europe continues to decline: High inflation and costs of living, although beginning to ease, continue to hinder the attractiveness of most European markets. The UK and Germany have both seen consecutive declines in their rankings. Relatively low levels of premiumization impact Germany’s ranking, while high inflation, higher excise duty and the economic impact of Brexit weigh on the UK.
Struggling APAC market: South Korea used to hold the second place in the still wine market’s attractiveness ranking, but this year it has fallen to eighth place. In many Asia-Pacific markets, rising costs of living, household budget constraints, economic downturns and regulatory changes are causing consumers to trade for lower prices and consume less beverage alcohol. In South Korea, the premium still wine sector is also in sharp decline. The penetration rate of RTDs is extremely high in Japan, and competition in the still wine market is expected to continue.
The United Arab Emirates makes a big jump and surprise entry into the top 10: The United Arab Emirates is one of the major countries in the top 10, although it remains a market dominated by beer and spirits. With the development of the tourism industry, wine consumption across the region is increasing. Growing up, trade drinking habits change. In trade, restaurants are stocking a wider range of fine wines, driving high value growth and premium product opportunities in the market. The continued influx of Western expatriates to the region is also contributing to the increase in per capita consumption.
It is important to note that the Compass valuation methodology for IWSR is based on a hypothetical neutral investor with no legacy assets. In reality, most companies already have some level of assets and relationships and therefore need to adjust their attractiveness internally to reflect their existing strategic position. For example, the attractiveness of a particular market is increased by regional proximity, existing presence, and established routes to market. Attractiveness models are therefore optimized by being tailored to the specific dynamics of individual businesses, regions or countries, allowing them to evaluate the greatest opportunities.
Looking to 2025, the still wine market is expected to have to address the following issues:
High costs of living and the continuing impact of inflation: While the rate of appreciation has begun to slow in many Western markets, the cost of living remains high and prices are beginning to rise in Japan and other major Asia-Pacific countries. New drinking habits take root as young drinkers mature: Moderate drinking continues to be socially acceptable. This could provide opportunities for higher quality non-/low-priced products, and fuel premiumization, as people seek cheaper but better options. Further disruption from international politics: This includes, for example, the UK alcohol tax on wine, which is due to rise in February 2025. Potential impact of the U.S. election. Conflicts continue in the Middle East and Ukraine.
IWSR’s Compass model is designed to answer the question: “What are the most attractive markets for wine today?” If you would like to learn more about the fundamentals of the model or would like to adapt the model to your specific business needs/situation, please contact your IWSR account manager or email enquiries@theiwsr.com.
