Australian wines gain pricing advantage in emerging markets
New figures in the January 2011 Wine Quarterly reveal that Australia, Argentina, Chile and Spain reported double digit growth in wine exports to China, Russia, Brazil and Mexico last year.
Wine producers have turned their attention to these new wine drinking countries to make up for lost value in established markets.
Rabobank estimates, for example, that the return on a bottle of wine retailing at £4 in the UK fell by 46 per cent from 2002 to 2010 due to increases in excise taxes.
Pricing challenge
The strategy of targeting countries like China and Russia has delivered some great looking growth rates but they are unlikely to fully compensate for declines in developed markets. Firstly, the volumes have some way to go before they match those in traditional markets and secondly, the margins on offer are not comparable.
“In many cases, the prices suppliers receive in emerging markets, especially Russia, are far below their traditional markets,” said Rabobank analyst Stephen Rannekleiv.
However, Rannekleiv said Australia has proved to be something of an exception.
Australian exception
The analyst said Australian wine now commands much higher prices in emerging markets than wines from Spain, Chile, Argentina and France.
Part of the reason for this is that many wine producers see emerging markets as places to offload excess supply at low prices. According to Rannekleiv, this may prove to be a mistake in the long run.
“In new markets where consumers have no preconceived ideas about wine-producing regions, it pays to invest in educating your customers. Suppliers who take the trouble to promote their region and build their brand will be able to improve pricing in the long run.”
Please click here to read an article, published today, that takes a more detailed look at the fast-growing Chinese wine market.
