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Global wine suppliers must not neglect established markets, says Rabobank

Published:  16 January, 2014

Global wine suppliers must balance their ambitions for Bric markets with a focus on more established markets, says Rabobank.

While the Bric markets have "provided a most welcome countercyclical boost to consumer demand during a time when major developed markets faced severe headwinds", they are not a "panacea" for the industry.

According to Rabobank's latest Global Beverage Outlook, "Beyond the Yellow Bric Road: Finding growth in Global Beverages", there are still limited opportunities. "[Bric's] potential still justifies patient and measured investment behind a long-term distribution, branding and consumer education strategy".

While China created high expectations for wine, the slowdown in its economy and change in leadership which has led to a crackdown on ostentations consumption, has constrained growth in wine. "Growth rates have dipped steeply from stratospheric levels" of two years ago and competition has intensified as companies vie for fewer opportunities. The outlook for China looks positive in the longterm, but the report suggests that while consumption will increase, the inflated pricing will not, rather it will "begin to align more closely with global norms".

Meanwhile Brazil's weak growth is likely to continue to restrain demand, while exchange rates could also have a negative impact. However, wine brands with strong on-trade presence are touted to experience some uplift thanks to the World Cup.

As for Russia, wine consumption has been "lacklustre" in recent years, growing at 1 to 2%, which is set to continue in 2014. Tough government policies towards alcohol also make the market seem unattractive, the report states. But the market does offer opportunities for those "willing to assume certain levels of risk and investment in their brands".

"It may offer more attractive prospects than some wine marketers assume", the report states, highlighting that retail prices for wine have grown by over 8% annually.

The report omits India, given the regulatory barriers to market are set to continue there.

For the world of spirits, the report says that there are some interesting opportunities in the Bric markets, but most have lost "some of their previous lustre".

Overall, Rabobank's report states that while some opportunities do exist, "finding success in 2014 will mean 'stepping beyond the yellow-Bric road' to find the next world stage in global beverages".