prepared by Nino Arveladze
At the beginning of December an international conference on wine products and vine growing in general was held on the initiative of the Georgian Chamber of Commerce and Industry.
The leading world scientists and experts in this sphere were among the participants of the conference. The purpose of the conference was to familiarize the Georgian business and society with the problems and trends of the world wine business and show the path Georgia will have to go along in order to occupy a significant segment on this market. The conference has shown once more that this path will not be an easy one and serious work is in store for us till we take a place among major wine exporters. A detailed knowledge of these issues and a discussion on a full utilization of this potential is very important for us. So, what is happening in the world wine business – the leading world experts are the guests of our discussion forum.
Ian Juber – the world wine market
A brief information about O.I.V. It is International Organization of Vine and Wine that cooperates with 40 countries, including Georgia. The organization’s goal is:
1. Giving of information to the member-countries concerning producers, consumers and other current events;
2. Rendering assistance to governmental and nongovernmental international organizations, especially the ones working in the sphere of standardization;
3. Contribution to harmonization of the existing practice and standards, which is necessary for preparation of new international standards and improving of marketing and production conditions of vine and wine, as well as for taking into account consumers’ interests.
According to the statistical data, about 60% of the world’s vineyards are located in Europe, 22% – in Asia and 19% – on other continents. The trend existing during the past 5years shows us that the volume of European vineyards is diminishing, but their volume is considerably increasing in other territories, which has an effect on the growth of vineyards’ volume in the world. In this respect, the trend of increasing of vineyards’ number on the Asian continent, particularly in China, is particularly significant. Noteworthy are the lands developed by Turkey, China and Iran. Today the number of vineyards in China exceeds that of in the US.
The total indicator of the world’s vineyards
According to the forecasts and latest trends, we can draw a conclusion that in 2010 the volume of the world’s vineyards will reach 8 million hectares.
World wine production
The figures given below are based on the yield indicators in the northern hemisphere in autumn 2005 and in the southern hemisphere in the spring of the same year. In 2005 the yield made up about 277 million hectoliters.
World wine production according to the continents (2005)
Europe has the main share in the world wine production – 67.1%. In 2005 the EU produced 59% of wine, then goes America – 19%, and the other continents produced from 3.6% to 5.4% of wine.
The leading 12 wine producing countries
China’s 7th place in the mentioned list is a remarkable phenomenon, in 2005 the country produced 11 million hectoliters of the product. Proceeding from the trend we can draw a conclusion that by 2010 the world wine production will reach 300 million hectares.
Wine consumption in the world
Wine consumption in the world reached its climax in 1970s and made up 286 hectoliters. In 1980 the world wine consumption dropped sharply and made up 224 million hectoliters. Since 1996 a slight positive trend has been observed and in 2005 the world wine consumption made up 236 million hectoliters.
Wine consumption in the world according to the continents
As for wine consumption, Europe has the leading position among the continents. In 2005 the continent consumed 67.4% of wine. Then comes America – 20.5%, and Asia – 7%, the total indicator of other continents is 2-3%.
The leading 12 wine consuming countries
In 2005 the leading 8 countries consumed 155.9 million hectoliters of wine, which makes up 2/3 of the world demand.
World wine consumption trends
Proceeding from the trends and changes we can say that by 2010 the indicator of the world wine consumption will reach 239-255 million hectoliters, which exceeds the current indicator by 9-10 million hectoliters.
World wine consumption per head in the 12 leading countries (according to the data of 2003)
Proceeding from the data on wine consumption in the countries (except for Luxemburg, where individual consumption is calculated taking into account the volume of wine purchased by non-citizens), the level of individual consumption is high in the wine producing countries, which is in line with logic. However, in the long-term forecasts these indicators have the tendency of decreasing.
We should also point out that in Spain the amount of consumed wine per head is rather low, and in Denmark, on the contrary, the amount of consumed wine per head is quite high, while Denmark is not a wine producing country. During the period of one year the Georgians consume 6 liters of wine.
The quality of the world wine market’s balance
It does not matter how necessary it is, but it is a fact that carrying out of such survey has not taken place. Along with information on production and consumption, we have information on shares and commercial utilization of wine consumption.
The difference between wine consumption and utilization in the world
We can use two methods for determination of the difference between consumed and produced wine in the world:
1. Direct appraisal of the difference between consumption and production – in this case we shall establish that by 2008 the difference will make up 48 million hectoliters.
2. The second method establishes the difference between production and consumption on the basis of the forecast for 2008, according to which we get 38-65 million hectoliters.
In any case this difference is appraised taking into account the constant reserves.
The difference between wine consumption and production in the leading 12 countries
If we consider each country in the period of the past five years, we shall clearly see that the difference between wine production and consumption brings to the forefront the necessity of trade between wine producing countries.
We can single out 4 groups of countries:
Ï% Export oriented countries (where the difference is the equivalent of domestic consumption): Australia, Chile, South Africa and Spain;
Ï% Exporting countries that have a strong domestic market: France, Italy and Portugal;
Ï% The countries in which consumption and production balance is close to each other: the US, Argentina and China.
Ï% Importing countries: Germany, Russia.
I think that we should start talking about the international trade with import. There is a growth trend in each country that is symmetrical to the world market. The world market is measured by the volume of export of all countries of the world.
It should be pointed out that the volume of the world export should exceed that of import.
World wine import according to continents
Europe has the leading position in the world import, then comes America – 15.4%, Asia – 3.9% and Africa – 3.1%. The Oceanian countries play a modest role in the world import (0.9%).
World wine import in the 12 leading countries
According to the data of 2005, Germany passes ahead of Great Britain and it is the main wine importing country, the US holds the third place being followed by France. Growth of the Russian import is not worth mentioning.
World wine export
Volume of wine export is increasing in all countries of the world, which means that the world wine market is growing.
World wine export according to continents
Europe is the leader on the world wine market and in 2005 73.1% of wine export fell on it. America’s share in the world wine export makes up 112.6%, then comes Oceania – 9.6%, Africa 4.4% and Asia.
Trends of the world wine market
In 2005 the volume of export of all countries of the world reached 78.7 million hectoliters. However, the last year’s growth was twice as less in comparison with 2003-2004. This time trade makes up 33.4% of the world consumption, at the beginning of 1980s it made up only 18%, while in 2004 – 32.5%.
Wine export according to 6 leading countries
Italy is the country that has an important effect on the European wine market. Improving of production in Italy started from 2004, while in 2005 the country recovered its share on the market, particularly on the American market, the import of which this time makes up 7 m hectoliters.
France will continue to lose its share on the market, but the opposite trend is observed in Spain. In 2005 Italy, France and Spain were the leaders among wine exporting countries.
Wine export according to other traditionally exporting countries
Except northern Africa, the trend in other exporting countries is a declining one.
Redistribution of the world market
Speaking about this issue we should take into account the progress in the southern hemisphere (in particular, Oceania and Argentina in 2005). In spite of decreasing of the US’s share on the world market, the 6 exporting countries will continue their domination on the world market; the total trade reaches 25.5%, but we should take into account that in 1990s this indicator made up only 14.8%.
Teo Janssen: the example of success of South African company “Golden Kaan”:
“The Racle Compay” is a German company, it was founded in 1855. The company has created many well-known brands, for example Blanchet, which is No. 1 brand in Germany.
I would like to tell all companies that sometimes a longstanding experience is necessary in order to achieve success.
“The Racle Compay” created the famous brand together with “Golden Kaan”. As for “Golden Kaan” company, its main key to the development of new brands of wine is a good study of consumers’ demand, which is not limited to demography only. The company knows well their traditions, attitude and requirements that are taken into account in creation of new brands and have to do with consumers’ interests. Consumers’ analyses are used for establishing their groups and characteristics. Let me draw several examples: there brand oriented consumers that consume only high class wines, there are both men and women among them, their average age is 20-30 years. There is a type of consumers whom we conditionally called “an ambitious young person” and most of them are men, there are also “experts” who are wine connoisseurs. Their knowledge about it is above the average and they consume only original wines.
We should offer wine of definite class to each type of consumers, which is a precondition for a successful marketing.
Each company should do its best to gain a foothold on a new market, but that is not an easy task.
In creation of the new brand the two companies thought a lot, first of all about their orientation. They had to choose one strategy out of two. According to the first one, they ought to limit the amount of output and the quality of wine ought to be very high. Here one should not forget about distribution – high class restaurants, special counters allocated for high class wines and expensive shops. In short, the price of wine would have been very high, but the profit would not have corresponded to it. There was another way as well – a large amount of the product and its low price. It goes without saying that the companies chose the second path and success was not long in coming, since their choice was acceptable for the market. Even at first sight it can be seen that Georgia has problems in this aspect, since its wine is rather expensive. In my opinion, Georgian wine-makers should make wine cheaper, which will bring large profits to the country. Georgia will have to enter many countries’ markets of, and low prices will help in achieving of this goal.
I repeat once more that correct choosing of the strategy and studying of consumers’ style is necessary for creation of a brand.
Before starting to make a brand’s label, you should take a look at the results of market research and try to find a partner on the main market chosen by you. Then you have to think of creation of a label that will be acceptable for the market. A label should be easily perceptible for a customer and a special one. In case of “Golden Kaan” they though a lot what symbol should be placed on the label, which would characterize South Africa in the best way. In the end they chose a contour of the African Continent. Of course, one cannot achieve success by means of a label only and on the international market much attention is paid to the image, that is why they have made a big stock of wine and wine-makers and have not forgot about experts either.
The new brand has justified itself – it has won the world recognition and several awards. “Golden Kaan” has taken its niche in Japan and on the Eurpean market, two distributors work in 14 of the US states and we also have two distributors in Canada. We can say that it is a rather big success and that we are satisfied with the results.
Charles Catine – Regional Director of JF Hillebrand company:
Global logistics of drinks
I am for the first time in Tbilisi and I like Georgian wine very much. It has made a great impression on me. Let me introduce our company to you. We are the group that has been operating on the market for several decades and possesses much information about wine and drinks, but we are not only engaged in their transportation, we also transport computers, various machinery and products. We have partners in many countries of the world. We are actively working in South Africa, Milan as well as in Argentina, Singapore, Japan and the US, particularly in New York, where French wines are especially popular. We also have a partner in Georgia – “Katoni” company, cooperation with which we started three years ago.
I would like to give you some advice concerning wine export. First of all, you should be careful about the people with whom you will have to work on wine export. Each company should try to develop logistics at a high level. Logistics helps companies very much, since rendering of stable services to companies is necessary, which implies having of complete information about the supplying and receiving countries. This information will have to avoid problems in future. Communication in online regime and exchange of information concerning possible changes is necessary. Study of potential clients is also very important.
If we speak about our company, I shall tell you once more that we have partners in many countries, e.g. we have a big group in Turkey. In other words we are actively cooperating with Asia. It should be pointed out that Japan is also a very interesting country, that is why works for entering the Japanese market can be carried out. They have much information about wine and it is clear that 120 million people is a good market.
China and wine export was a comparatively difficult issue. 20 years ago a French company made investments there, but the matter was progressing at such low rates that they wanted to leave this market. However, now large amounts of cargoes are supplied from China to Europe. It is also difficult to develop Dubai and Indian markets. It is true that rich people live in Arabic countries, but there are no importers there.
Ron Cline – wine expert
The issues of entering the western market
You should always remember the two main questions – only production of good products for sale is not enough. If you wish to export your produce to new countries, you are sure to make investments from the viewpoint of time and money. I shall try to briefly and clearly speak about the actions Georgian wine-makers should take for implementation of wine export. Ladies and gentlemen, there are no legal standards of reaction, when meeting western businessmen you will be surprised with endless reasons they cite in order not to do business with you. There will be a lot of reasons, including unexpected ones: your samples were not received, there is no demand for your wine, we have enough wine already, we cooperate only with France, very high transport taxes, expensive and uninteresting! our company is being closed down, the responsible officer is absent at the moment, the decision has not been taken yet, call tomorrow, I have no clients for your wine, I do not like the label, we are specialists in Greek wine, we have already fulfilled this year’s program, do not worry any more – we shall call you back, I do not hear you as the connection is bad… or answering machine!
This time we have to think of entering the western market, but I warn everyone that it is not easy to achieve this goal. You will encounter a lot of obstacles, you will have to solve the problems related to logistics, high import taxes since you are not a member of the EU, various legislative issues and the countries that have been on the European market for a long time will also impede you. In Western Europe you will meet people, even wine purchasers, that know nothing about your wine and cannot pronounce your name correctly, but it is a regrettable fact that a stranger will never be welcomed.
Importers do not like to do business with the companies whose countries they know badly. This particularly applies to the countries situated on Europe’s eastern border. In the past they had problems with quality and logistics, and the state intervened with their matters (as it was the case with Moldova: foreign investors were ousted from the country). From late 1990s importers lost interest to wines from Bulgaria, Moldova, Romania, Hungary and, correspondingly, the rate of their selling dropped extremely. Currently there is almost no demand for north-western wines. Reviving of interest to Georgian wine depends on you. Purchasers from the Netherlands, Denmark or Britain are interested in new markets and products and are ready to accept new ideas.
If we take a look at the Netherlands’ wine market we shall see that is filled by wines from the EU countries. However, the new exporters achieve certain success there. Wines from South Africa, South America, California and Australia have won popularity there. There you will be able to buy even Chinese, Mexican, Moroccan and Lebanese wines. In the Netherlands we have approximately a thousand of registered wine importers. The main thing is finding a corresponding partner. You will find very small companies in the importers’ list that make supplies only to a small number of friends and restaurants.
Now as for 880 so-called wine importers. Out of 120 companies there are the ones that work only with Spanish, Bordeaux and Australian wines. Contacting with them is just a waste of time. Out of the second hundred, about 50 are responsible for 80% of the sales’ volume.
If large companies are not interested in your wine, you can orientate for smaller companies. They want to stand out from large importers and always invent something new to attract clients. In most cases the purchaser is a company’s owner or its president. Good importers have a lot of goodwill and their clients are ready to give a new chance to a new product.
A contact with a purchaser is a different issue. You can send him a beautiful brochure or an e-mail, but he may not answer you. Why? Because he is a very busy person… If you try to get in touch with him on the phone he may be at some place inaccessible for meeting or may be in a round-the-world voyage, or he will be having lunch or a day-off. You will understand that this company is fraying your nerves, but be patient and try to make friends with the assistant.
In they end you will be required a price-list and several samples. Try to be in constant contact with them, find out whether your samples have reached the destination without damage and ask when they are going to examine them.
Examining of the samples may take some time, even a month. It has no priority since there is no demand for your wine there.
Do not forget that the prices can also make problems to you. We like deals very much, but we are very glad when wine having low price turns out to be the bestseller in the country. If you cannot reduce the price, do not be upset in case of refusal.
However, if everything goes well, the moment is sure to come when wine will be tasted. In this case you will be able to hear the following phrases:
Ï% Good wine but it is not what we have been looking for;
Ï% Impressive quality, we are sure to think about it;
Ï% Purchasers are full of enthusiasm and the price and marketing should be talked over.
Probably the importer is full of enthusiasm, but can face the sellers’ resistance, they sell well-known and cheap French or South African wines in large quantities, and convincing of clients of purchasing unknown Georgian wine requires spending of time.
Representatives of the marketing service will have other problems. They have to produce small-size samples for advertising, which entails large losses. Proceeding from the mentioned problems, there is a big chance that they would prefer stopping of the project.
You are sure to create the image acceptable for the west European consumers, get in touch with the necessary companies and ask your state for assistance in order to be able to gain a foothold on the new market and compensate for your expenses.
Export to the west: the experience of Georgian wine export
For several years I have been trying to advertise Georgian wine in Holland. This wine is sold in Holland, Belgium, Germany and Switzerland. Your wine took part in the exhibitions in Germany and England. I am not speaking about the quality and prices, I want to speak about your internal organization. First of all you should clear up whether you are ready to sell your produce, how much and to whom. You should also determine your wine’s quality and correctly appraise it.
Good communication is the first step to success. It is necessary to find a good contact person for your clients who will help to find out how many persons are interested in your wine. Representatives of wine producing countries get in touch with me every day. My advice to you is to make use of all possibilities.
Now let us speak about export management companies. What are they? If you need a rapid reaction, you should find an export manager with whom will form your strategy, in other words you should find out what you and your partner will receive. He should help you in relations with the importer and, at the same time, he should act quickly. You should not be sparing of advertising booklets, brochures and small-size posters, in short you should actively use advertising that spread important information about your product. It is necessary to carry out certification of your wines and analysis of the risk. Unfortunately, the problems of your sanitary service are not settled. In other cases they will often say that they want to buy your wine, but will not close their eyes at these problems, i.e. it will turn out that you are wasting time and money. The second step is bringing order to documentation, otherwise nobody will deal with you. Every time when they start business, they must make sure that everything is all right.
In many countries expensive wines are not sold in super-markets. There prices range from 5 British pounds to 5 euro. However, bear in mind that distribution requires big expenses.
As for special counters intended for wine, they cannot give complete information to consumers as a small amount is sold there, but the profit is high. Wines that are more expensive than 10 euro are of course sold, but in small quantities. However, this kind of counters have positive aspects as well – samples of wines are represented on them and this contributes to advertisement of your wine, so at the initial stage they will help you in selling of wine.
You should attend exhibitions at which you represent the results of your efforts and can determine the type of a country and supply a corresponding wine to it. You should take into account that in different countries they like wines having different taste. Generally speaking, it is very difficult to sell unknown wine.
As for global wine and alcoholic drinks, represented here are 3500 wineries and you can present your wine to them. You should bear in mind that an importers always hope that your win has future, and long-term relations with them are necessary. You can successfully use for marketing purposes the fact that Georgia is a cradle of wine. As a result of it, there is a possibility that they will not buy your wine, but they will taste it for the sake of interest.
You should decide with what price you want to enter the open market. On the market there are wines having the price of 3 EUR, the quality of which is not high. Proceeding from the prices of your wine, you have good quality wines. As for the price segment, you should take into account that at the low price level you will need investments for high volume production in order to satisfy retail traders.
In this case you have to turn to retail traders, but they are not ready to pay either. It is a paradox, but there are consumers and no sellers. That is why in order to have a chance you need to have an exceptional product since there is a certain wine fashion and traditions, consumers prefer red wines.
Speaking about consumers it should be pointed out that there are no one-type consumers. Innovations and distribution are also important. If you wish to sell wine in large quantities you have to be orientated for large super-markets and take into account the fact that if you reduce the wine’s price even once, it will never become expensive. If we take a look at statistics we shall see that 3% of sales fall on wines that are more expensive than 5 EUR, but only a small amount of your wines can be sold at the price higher than 5 EUR. 65% of the German market falls on small shops and supermarkets.
According to the currency market research, 183 types of wine are sold in Dutch supermarkets, 53 of them are from the new countries of the world. As you can see, the choice is very rich and it is impossible for a consumer to know about all of them, that is why a brand is necessary. It is a sustainable and consecutive quality and it will never make any surprises to you. That is what is consumers require when they choose a new brand.
You should try in every possible way to familiarize distributors with your wine, show the good sides of it and gain a foothold on the market, and it will require hard work.