What the annual Compass World Wine Market Attractiveness Model 2019 tells us about the future for our category
Wine Intelligence’s Global Compass 2019 report is the 7th edition of our long-running effort to create a consistent, measurable and comparable rating of the top 50 markets for wine around the world. At its heart lies a statistical model that combines generic measures as past economic performance, market openness and development, with wine market measures such as sales volume, value, wine drinking population, into a carefully proportioned data cocktail that yields an overall attractiveness rating for a given market.
Its validity rests on the assumption – fairly common in forecasting circles – that observed trends from historic data can be used as a guide to the future. Since its inception in 2013, this philosophy has proven to be reasonable, and has allowed wine producers that use the standard model, or some tailored hybrid of it, to make sensible business decisions about which markets they should focus on.
Capturing the uncertainty surrounding the politics of international trade, as well as more broader social and economic changes, has been a particular challenge for the researchers compiling the 2019 edition. Compass 2019 shows that the world wine market is seeing a small but broadly-based increase in overall attractiveness.
This rather modest and balanced outcome arises from an underlying turmoil of countervailing trends: on one side of the scales, recent economic growth in developing wine markets, liberalisation of retail regulation in places like Canada, the US, and Brazil, lowering tariffs on wine resulting from the implementation of major free trade agreements; on the other side, the growing threat of trade wars between the US and China (and with any other country or trading bloc, for that matter), plus whatever form Brexit takes (if it takes any at all), and the profound and multi-national trend for people to moderate their alcohol consumption for health or lifestyle reasons.
The US again tops the list as the most attractive wine market in the world, though the sustained volume growth of the past decade has largely subsided. The US’s continued Compass attractiveness rating rests largely on the willingness of American consumers to trade up in terms of the price they pay for the wine they do buy, while other categories such as craft beer and spirits compete more strongly for share of personal alcoholic beverage consumption.
The top five is rounded out by Canada, France, Germany and The Netherlands, which has moved up this year from 9th place in 2018. South Korea has also seen a significant increase in attractiveness, making it into the top 10 for the first time.
Among the other stories of note in Global Compass 2019:
- China has fallen to 6th place in the Compass ranking, mainly the result of the first sustained decline in imported wines in five years and slowing economic growth
- Australia has been reclassified from ‘Established’ to ‘Mature’ as volume and value growth turn negative
- Positive economic performance and a broadening market for imported wines have boosted the Compass rating of Eastern European countries such as Poland, Romania, Hungary and Slovenia
- Brazil has transitioned from ‘Emerging’ to ‘Growth’, with the benefits of a more established (and mainly e-commerce driven) supply chain offset by continuing economic underperformance
- India has entered the top 40 for the first time, based largely on growing import volumes (though still from a relatively low base)
- Russia tumbled down the rankings, mainly on the back of major volume and value declines in the wine market
Positives for the global wine market include the impact of free trade agreements, which have seen tariff levels fall and have reduced retail wine prices to enable more consumers to participate in the category. Several retail alcohol monopolies around the world are also undergoing periods of reform that are liberalizing the trading environment for wine and allowing consumers more freedom and choice in what they can purchase. The variables with strongest influence in market attractiveness appear to be better overall economic performance in some markets and steeper declines in still wine volume in others.
This sounds like an encouraging picture. However the positives need to be set in the context of political and economic uncertainty from a possible disorderly Brexit, global trade disputes generally, and the Twitter dialogue of President Trump.
Global Compass 2019 is designed to help wine businesses compare the opportunities offered by different wine consumption markets. This report includes a reference guidebook and interactive data tool, which together show the top 50 most attractive wine markets globally. This ranking is based on economic factors and wine market factors, all detailed in the report, that are combined to deliver the weighted attractiveness model, providing a snapshot of the global wine market at this moment.
For more information, please see the report here or view this video to see more about what Global Compass 2019 entails and how it can be used.