With the European Union going into recession, possibly, with the US growing, but not enough, with China booming, or crashing, and with Japan languishing, the worldwide economic picture is confusing. Debt crises have been swept under the rug by voluminous money-printing, directly or indirectly, sterilized or not, at all major central banks so that sovereign bonds, and even California municipal bonds, don’t get hung out to dry. But there is one economic indicator that is particularly … tasty and, if consumed in sufficient quantity, even more vertigo-inducing than all of the Eurozone bailout mechanisms combined: wine.
“It seems the worst is behind us,” said Federico Castellucci, CEO of the Organization of Vine and Wine (OIV). “The worldwide wine sector can once again grow, though significant positive results will not be immediate,” he added as he presented OIV’s report in Paris on March 22.
Despite the well-known medicinal uses of wine when things turn sour—as they did during the financial crisis and the Eurozone debt crisis—consumption actually tanked worldwide starting in 2007. It reached a low point in 2010, and then edged up a tiny 0.7% in 2011—enough to infuse a sense of vague hope into the battered industry.
Well, battered in Europe. The most assiduous wine-consuming continent will continue to cut back, given the economic issues, Castellucci predicted. In Italy, wine consumption declined 6.3%, the worst within the EU. In Germany, where the economy was white hot last year, wine consumption stagnated, and in other countries it was slightly up or down, for an overall decline of 1 million hectoliters. 2012 doesn’t look good either.
Wine sales in the US, however, were up 5.3% and reached an estimated retail value of $32 billion. Number one in the world. $20 billion came from wineries in California, a 61% market share! The 18th consecutive year of volume growth. Despite California’s economic and budget problems, there was no recession in the wine industry.
But on a per-capita basis, the French drank more than anyone else, 54.1 liters (14.3 gallons) per year, followed by the Italians with 53 liters (14 gallons). Americans drank a measly 12.1 liters (3.2 gallons) per year—less than a quarter of what the French guzzled.
“The potential for development is enormous,” said Robert Beynat about the US market. As director of Vinexpo, which will hold the next wine fair in Hong Kong, he must have felt a joyful frisson as he was extrapolating Franco-Italian drinking habits to the US population.
US wine exports, of which 90% were from California, jumped 21.7% to $1.4 billion in winery revenues. Volume increased by 5.8%. It’s the pricier stuff that’s hot. The EU bought over a third. Other countries took their share. The most explosive growth came from … China, up 42% to reach $62 million—a mere rounding error in the $273 billion trade deficit that the US has with China. Nevertheless, it made China the fifth largest export market for US wines by value.
Consumption in China exceeded 1 liter (34 oz) per capita, up from about zero not long ago. Following Hong Kong, where wine consumption hit 4.6 liters per capita, China’s should double by 2015. Once consumption reaches 2.7 liters per capita, given the size of the population, China will dethrone the US as the world’s largest wine market. And it has been happening. Even in unexpected sectors, the juggernaut has taken over, including art.
In the eighties, the French ventured into China with a load of vines and started some joint ventures. Today China is in tenth place in wine production. And they’re apparently making some good stuff.