My prognostication for the alcoholic beverages market in 2016 began last week with my post on the overarching view for the coming year. In the final three posts of this series, I will provide my unvarnished impressions of the key trends affecting, respectively, the wine, spirits and craft beer markets in 2016. I will include trends affecting consumers, suppliers and distributors. Today my friends, I present you with my Frank Talk On Wine “Six Undeniable Trends That Will Re-Shape The Wine Industry in 2016”:
#1. The rise, fall and rise of China —Nearly 10,000 years ago, China was the birthplace of wine (though what was produced then would be almost unrecognizable to modern wine drinkers—it was essentially a blend of honey wine, grain alcohol and a beer-like substance). In recent years, local wine consumption helped catapult China onto the global Top 10 list. But it’s likely that much of those sales could be attributed coincidental “conspicuous consumption” of premium brands, a trend tied to the surge in China’s economic development and the understandable urge for newly-created high net worth individuals to display their wealth. But given the presence of three factors I see unfolding, expect to see local consumption of wine in China take a shave in 2016:
- A precipitous plummet in the value of China’s stock market (it’s already bypassed the bear market threshold of down 20% versus its December 2015 high) will be a sobering shock to the portfolio values of high net worth Chinese.
- The government’s austerity programs aimed to tamp down on luxury goods spending, e.g. on premium imported wines, will underscore reductions in high ticket price spending. Many Chinese may instead return to drinking the omnipresent alcoholic beverage in China, Baijiu, which is a high alcohol, grain-style of wine (especially when there are many low-cost producers, some bottles running as low as $1.50 USD per bottle).
- And it’s my view (and yes, it’s a sweeping generalization) that the historical and cultural significance of wine is not buried as deeply into the consciousness of Chinese consumers, as it is for their Western counterparts. I do see the recent high water marks of premium wine consumption in China tied closely with displays of wealth and the ripple effect of conspicuous consumption that followed. I am not fully convinced that the flavor profile of wine has a natural fit with the Chinese paletteI observed similar palette discrepancies while consulting in Japan in the 1990’s for the world’s leading cola company and the challenge we had in positioning that foreign flavor profile versus other local beverage products, such as tea and coffee. Here again, today in China, this may present a medium-term consulting opportunity (including for somms and wine educators) to help cultivate the appeal for wine as an equally-enjoyable everyday option.
HOWEVER, I see the supply side of the Chinese wine equation very differently. There have been major investments in the emerging Chinese wine industry over recent years, including through numerous acquisitions of French Bordeaux wineries, winemaking talent and knowledge. Much of this investment has occurred in the regions of Xinjiang and Ningxia, particularly the Mount Helan appellation, where Bordeaux-style blends are being produced with increasing acclaim and recognition by wine experts around the world. While I see Chinese wine production continue to make strides in the coming year, access to these wines is still almost nonexistent in the U.S. But if you’re traveling through mainland China or Hong Kong, you may be able to snag a bottle or two.
#2. Old world markets awaken—as the American wine palate continues to evolve and wine drinkers seek out a broader array of wine options, I feel that the biggest beneficiaries will be a contingent of “Old World” wine producers—order of opportunity as I see it—Spain, Portugal, Croatia (and possibly other Eastern Europe countries, e.g. Slovenia), Greece and possibly South Africa.
I feel Spain will lead the pack—not only due to some of the newer additions of amazing dry red wines coming out regions such as Bierzo (Mencía is one of the new Spanish “it” wines—a light red, with a refreshing lift on the palette and meant to be consumed young) and Duoro (Once known mainly for its sweet port wines, but is now also making some terrific Bordeaux- and Burgundy-style dry red wines)—but also because Americans have shown a healthy appetite for Spanish cuisine, namely tapas. This combination of food & wine trends should help lift Spanish wine sales in the coming year.
Croatian and other Eastern European winemakers are finally digging themselves out of an extended “dark period” under Soviet rule and post-Soviet market turbulence and their investments in vineyards and viniculture technology are beginning to “bear fruit.”
Greece has had a few tough years and is trying hard to right its economic ship. It’s still true that 80% of Greeks only drink Greek wine—partly because of their proud and historically insular traditions, and partly because many simply can’t afford the price tags of the imported stuff. But exports will likely be a different story, again, as America wine drinkers—particularly those doubling as “foodies”—seek out a bigger sack of wines to enjoy this coming year. Retsina wines—the modern varieties which aromatized with pine scents, not the ones from yesteryear when pine sap was actually used as a preservative (and are “nas-tee”)—will continue not only to thrive in hipster enclaves but will likely gain greater mainstream wine market traction. Retsina wines make a great pairing for a mezze table of tasty Greek nibbles. But I also predict more mainstream wines taking off. For reds, try a glass of agiorgitiko, a fragrant and light yet full-bodied wine. With its best expressions, it’s well-balanced and terrific—while other expressions, especially when the grapes are sourced from vineyards located at lower altitudes, can be a little “flabby,” i.e., kind of just sits in your mouth without any “oompf.” Ask your somm about the acid profile. For whites, especially if you like high-mineral wines like those from Chablis, then try a glass of my favorite greek wine, assyrtiko. This grape is indigenous to Santorini and other Aegean islands in Greece and a perfect accompaniment to grilled seafood. If you’re looking for something a little sweet after dinner, try a glass of mavrodaphne (from the Patras region), a rich and dark sweet wine, akin to port.
What wine drinkers of all stripes will particularly enjoy about Greek wine are the reasonable price points. The Greeks are producing some great wines at great values.
And South Africa? The land of “steen,” better known as chenin blanc elsewhere, always seems to hover over a breakout year. Chris Bates, master sommelier and owner of Element Winery in the Finger Lakes in upstate New York, says that the planets seem to be aligning this year for South African winemakers and expect to see an uptick in sales to the U.S. for a variety of factors. I’m always willing to put a few chips on the same side of the roulette table as Chris. And if you have a chance, try a bottle of wine from Element Winery. Great small production wines. I particularly really enjoy Element’s cabernet franc.
#3. Bifurcation of retail wine market—while I see wine retailers continuing to feel the headwinds of wholesaler consolidation, omnipresent wine purchasing technology and increasing consumer savvy, the pain isn’t being felt equally across wine categories and segments. This year will see increased bulk wine shipments, both domestic and imported, continue to put downward pressure on the <$10 per bottle wine category, which largely showed negative growth in 2015. On the other hand, I expect to see the $10+ bottle category sales continue to grow at a double digit clip in 2016—though not as high as last year’s market growth—as “premiumization” takes a strong toehold on the wine market and consumers continue to “trade up.”
I also reiterate my call for bold innovation by brick-and-mortar retailers with their sales and marketing programs, particularly in the lower price, and increasingly lower margin, categories. I’m not saying that they should be “tone deaf” to the need for consumer-facing innovation in the premium wine segments. Clever innovation there too can help re-define retailer business models, attract needed new customers, deepen relationships with existing ones, and provide needed margin relief.
#4. Grower Champagnes—few wine trends of late have create more buzz, or fizz, than the “Grower Champagne” movement. These sparkling wines are made in the Champagne region of France and are produced by the same estate that owns the vineyards where the grapes come from. While large Champagne houses—such as Bollinger, Krug and Pol Roger—may use grapes sourced from as many as 80 different vineyards, Grower Champagnes tend to be more “terroir focused” (a wine geek reference to grapes grown in a very specific and distinguishable plot of land), sourced from single or closely-located vineyards around a village.
There are nearly 20,000 independent growers today in the Champagne region, accounting for nearly 90% of all vineyard land in the region. Around 5,000 of these growers—or about one-quarter of all independent grape growers—produce wine from their own grapes (i.e., the remaining 75% just grow and sell their grapes to wine producers). Wine consumers in the U.S. thirsty for something new will continue to gravitate in 2016 to these bubbly producers. But don’t cry for the large Champagne houses. I have a feeling that they’ll be j-u-u-u-st fine.
#5. Keep calm and sparkle on—sparkling wine represents about two-thirds of wine production in England (which makes sense, given the cooler temps of its northerly location) and exports are on the rise. Couple that with steady growth of sparkling wine consumption in the U.S., driven largely by millennials, expect to see sparkling imports from “across the pond” continue to tick up.
#6. Other wine “oddities” passing through—another bubbly is a wine called pétillant naturel, or pét-nat (to learn more, read my blog post, Pétillant Naturel: An Old Wine Puts New Fizz In Sparkling Wines. It’s essentially a re-creation/re-introduction of the Méthode Ancestrale style of sparking wine first produced in France in 1531. Given its unusual and slightly funky look and taste, it’s no wonder that it jumped to the top of the hipster wine drinker list —and given its modest price points, I see pét-nat finding an even broader audience in 2016.
Wine oddity #2 having its 15 minutes of fame this year (IMHO) is “orange wine.” Though there are varieties of this wine made around the world—where different infusion methods using oranges are used, namely in South Africa and Spain—“orange wine” is most typically an ancient style of white winemaking where the grape skins remain in contact with the fermenting juice (a.k.a “maceration”), giving it a slightly cloudy or “orange” color. It’s akin to the process employed for producing rosé wines, except with white grapes, not red ones.