Emerging Asian Markets Targeted by French Winemakers

by Kathy Jones on  May 29, 2014 at 9:40 PM Lifestyle News   - G J E 4
Although they face many hurdles, French winemakers are working to attract a growing middle class in Asia away from spirits and beer.
 Emerging Asian Markets Targeted by French Winemakers
Emerging Asian Markets Targeted by French Winemakers

Chinese wine shipments and consumption fell for the first time in a decade in 2013. The drop comes as Beijing reins in luxury spending and extravagant banquets, against the backdrop of a slower economy, and an anti-graft campaign backed by President Xi Jinping to root out official corruption.

Winemakers and industry executives say that while the slowdown will not prevent people from drinking, the focus may now shift to mid-range wine and spirits.

In its 2014 outlook, trade body the Federation des Exportateurs de Vins and Spiritueux de France (FEVS) warned that the country's global 7.6 billion euro ($10.3 billion) wine export industry needed to gain market share in places where a new middle class was expanding.

"The growth of our exports depend on the opening of new markets: India, Vietnam, Thailand," it said.

While "China remains the main engine of growth, the perspectives of new consumers" in Asia are increasingly important, said Guillaume Deglise, CEO of Vinexpo, which this week staged Asia's largest annual gathering of global wine and spirit producers and merchants held in Hong Kong.

To capture new markets, winemakers need to navigate Asia's "great diversity of cultures, religions, climates and consumption patterns," said Gautier Salinier, sales manager in Asia for the Plaimont cooperative of wine producers based in Southwest France.

Vietnam is viewed as an ideal example of a market with room to grow. Its population of 90 million is increasing, while alcohol consumption is growing at 10 percent annually amid a booming tourism industry.

At roughly $90 million, Vietnam's wine import market is currently "very modest" according to Guillaume Crouzet, Director General of the French Chamber of Commerce and Industry (CCI) in Hanoi.

New world wines have arrived there in force in recent years, particularly since 2011 when Chilean varietals benefited from preferential tariffs.

- Taxing times -

But exporters face challenges, particularly in persuading drinkers to move away from beer and spirits and in dealing with complicated tax regimes.

India perhaps offers the greatest potential but also the biggest obstacles. Wine consumption among its 1.2 billion population is expected to grow 30 percent by 2016, according to export agency Ubifrance.

But access to alcohol and levels of excise duty differ between each of India's 28 states -- meaning exporters have to negotiate separately and pay taxes accordingly.

"It's a tough and complicated market," said Rajiv Singhal of trading group Ritu.

"Beyond the tax issue, traditions are hard to change. India's a former British colony with strong spirit consumption. People only really started to drink wine 15-20 years ago, helped by the arrival of Indian wines".

In Thailand a bottle of wine is subject to six separate taxes between its arrival on Thai territory and its sale to consumers, resulting in a levy of between 500-600 percent, according to the French Chamber of Commerce in Bangkok.

France is the largest wine exporter to Thailand, where French winemakers have a 35 percent share of a market dominated by spirits (73 percent) and beer (24 percent).

In Vietnam, customs and excise duties and VAT double the price of imported alcohol -- a scenario that is holding back the market, said the French Chamber's Crouzet.

The industry is carefully following negotiations between the European Union and Hanoi over the signing of a free trade agreement. The next round of talks is expected to take place in June.

Source: AFP

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