It’s a long way to the top

 In its recent report titled 'Premium wine – It's a long way to the top', Rabobank highlights that in recent years, wine suppliers and retailers alike have seen a growing appetite for wines beyond the mainstream. This has lead to global wine companies investing more in premium wine strategies.

However, report author Rabobank senior analyst Marc Soccio says that the industry is still seeing many premium wine producers struggling as their capacity to reach out to consumers has become more limited.

"As the high-volume grocery retail channel in particular is becoming the realm of bigger brands and suppliers, smaller brands have little choice but to seek new ways to connect with the pockets of consumers looking to head upmarket," Soccio says.

Increasingly, Rabobank notes, it is newer generations of consumers who are shaping global wine consumption. These consumers have a higher level of awareness of wine and wine quality than any generation before them.

Soccio says this fact, mixed with an increase in alcohol regulations, has many younger consumers choosing to drink less, but higher-quality wine than their parents' generation.

"More consumers are becoming increasingly adventurous, and they are less likely to blindly follow the norms of the past when forming their preferences and purchasing decisions," he says.

According to Soccio, this is also true in emerging markets where higher education and income levels, are leading younger consumers to engage more deeply and differently with the wine category.

"The rise of some premium-focused emerging markets, such as China, has played a key role in stimulating global demand for more premium – mostly red – wines."

Soccio adds that while in China this interest has began to wane recently, the market for these wines still accounts for a significant proportion of global demand, which hardly existed only a decade ago.

While demand for more premium wines may be rising in pockets of the world market, the fact remains that there's relatively less volume demanded at higher price points, and relatively more brands and producers looking to supply it.

Soccio says that what makes this even more challenging, is that the high volume off-premise channel – particularly the major grocery retail chains – is growing more and more influential in determining which products find their way to consumers.

"On a producer level, those with the necessary scale and brand recognition to be effective in the grocery retail channel are often best placed to capitalise on the pockets of 'premiumisation' appearing in world markets," he says.

However, Soccio notes, this might not always be the case as new online retail and on-premise formats continue to emerge and explore the common ground they have with independent premium wine suppliers.

"And while the major chains will eventually grow to dominate mainstream online wine volumes – as they have done along the main streets of our cities and towns – independent operators can still offer consumers great value at the premium and clearance ends of the market."