shutterstock 243804061 - Reasons to be cheerful

It’s tempting to think pessimistic thoughts in the current political climate. Instead, here’s a more positive outlook for 2017

Because bad news sells, it’s easy to forget (or not know in the first place) that, by most measures, the world is becoming a better place in which to live and work. At the most basic level, people are living longer, healthier, and wealthier lives. The 2016 World Health Organisation Annual Report notes that global life expectancy gains in the 15 years since 2000 outweigh the gains for the entire 20th Century, and expects this momentum to continue over the next 15 years. Related to this is the dramatic decline in severe poverty: over 1 billion people have been lifted out of poverty since 1990, according to the World Bank. Between 2010 and 2020 nearly 1 billion people globally will enter the “middle class”, defined as those earning more than US$ 6,000 per year, according to analysis by Goldman Sachs.

True, the changes in wealth and opportunity in much of the emerging world are contrasted with the tougher times in more developed world markets. Here, the effects of globalisation and the 2008 financial crisis have caused wages of the middle classes to stagnate in real terms over the past 20 years, giving rise, among other things, to the phenomena of Brexit and Trump. Despite the aggressive prognostications of both of these political movements, this reality is unlikely to change in 2017 – if ever.

If we zoom in from the macro to the specific, it’s clear that 2017 and beyond will see opportunities in the wine category opening up all over the world. China is the obvious focus for most international wine businesses already, particularly as, at the moment, gaining an effective route to market appears to be causing plenty of management headaches. However, wines chances are improving rapidly elsewhere – sub-Saharan Africa, Southeast Asia and Central and South America, among others.

In this context, I thought it would be useful to note three (mostly positive) themes that are going to affect our industry in 2017.

  1. Post-1980 generation starts to take control. I believe we are only starting to see the impact of these consumers on our industry, and 2017 will bring more spectacular changes. The influence of Millennials is most prominent right now in the USA, where they are starting to dominate in on-premise settings and grow in importance in the off-trade; and in China, where their sheer numbers and love of mobile commerce and WeChat is rapidly reshaping the wine supply chain. Wine Intelligence estimates that China will add 40 million imported wine drinkers in the next 4 years – nearly doubling the size of a market which is already double what it was 4 years ago – most of whom will be under 35. Similar shifts in behaviour are afoot in markets as diverse as the UK, Japan, Poland, Mexico and Germany.
  2. Traditional retail boundaries dissolve. In the retail world, the division between shops that exist in bricks-and-mortar and online is becoming less clear, and in many ways irrelevant. As a consumer, I don’t view a retailer in a different context whether I’m dealing with their online self or in person. Specific to the wine category, we have seen the erosion of the boundaries between the “wine shop” and the “wine bar”, as well as the migration (in both directions) of on and off-line retailing. There is plenty of room for more integration; in 2017 we will see some more of it.
  3.  Sweet becomes legit. When I joined the wine industry, some 15 years ago, I was let in on the secret well known to many industry veterans: sweet sells, but only if you don’t call it by its real name. Finally, in the second decade of the 21st Century, sweet will come out from behind its veil, wines (both still and sparkling) will parade their credentials without shame, and the post-1980 generation will buy these wines without guilt.

How can the wine industry benefit in this world? A good place to start would be to understand more deeply the kind of problems and opportunities your customers in the supply chain are facing, in whatever market they operate. What problems are keeping hoteliers, restauranteurs, bar owners and retailers awake at night? How can you help? By listening to your customers’ feedback, observing the behaviours of their customers, and adapting your products and services to support their efforts, perhaps both you and your supply chain can benefit from the fascinating, and frightening, changes that are occurring in our markets. Best wishes for 2017.

Author: Richard Halstead

Email: richard@wineintelligence.com