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By Florian Cecil Torres Local wine consumption is growing, which is impressive for a nation of beer-dri nkers. Here's a quick look at the global wine market and how well we're imbibin g into it. Ninety-eight percent of alcoholic beverages in the Philippines are supplied by domestic producers. This figure includes the ubiquitous San Miguel beer product s and domestically produced liquors such as gin. The Philippines is in fact one of the cheapest sources of alcoholic beverages in the region due to powerful l ocal producers who are not subject to high import tariffs, thus their ability t o set alcoholic beverages at affordable prices; and is now operating in many lu minaries. But this accounts for beer and gin. Wine, on the other hand, is another matter altogether. Wine around the world In the last twenty years, the worldwide wine industry has become increasingly i nternationalized and sophisticated. At the same time, the market has also becom e more fragmented, multilingual, and information-intensive. The global wine industry therefore faces constant shake-up and consolidation. U nder these circumstances, the generation of mega wine companies has become inev itable as no single wine company, listed or private, currently has more than on e percent of the world wine market, in stark contrast to other beverages. Thus, the world's wine markets are also going through a fascinating period of struct ural adjustments. Global wine showed solid growth in terms of volume in recent years, reaching ne arly 25,066 million liters. The two countries that are leading in international wine production and consumption are France and Italy. In terms of the quality of exports as reflected in the average export price, France's strong position h as remained unchanged while emerging countries like Australia and New Zealand h ave improved their positions hugely over the past decade. More than three-quarters of the volume of world wine production, consumption, a nd trade involve Europe, and most of the rest involves just a handful of New Wo rld countries. In the late 1980s, Europe accounted in value terms for all but f ive percent of wine exports and three-quarters of wine imports globally. However, Europe's dominance is beginning to weaken. In the ten years to 1997, t he rest of the world's share of wine export dollars rose ten percentage points, virtually all from California and six Southern Hemisphere countries. When intr a-European Union trade is excluded, the decline in Europe's share of global exp orts is even greater over that decade: a fall from 88 percent to 70 percent. Here comes Asia The Asian market is also competing in the wine industry. Several growth foreca sts on the wine producers in China, Korea, Taiwan, Southeast Asia, and India ha ve been made, and are said to also possibly share a big part in the global wine market. The wine markets in Asia could be considered heterogeneous in nature. Each mark et is to a certain extent unique. This is due to the following reasons: 1) Very different tax and customs systems with regard to wine imports and c onsumption. One can be totally lost with the myriad of tax and customs systems that exist i n the different Asian countries. As a result of this non-uniformity, different wine consumption behaviors have emerged in these countries. For example, in som e countries like in Singapore, there is a higher demand for premium wines. 2) Different national perspectives in looking at wines Wine drinkers in Asia have different ways of looking at wines. Some view them a s a status symbol while others would consider them part of their new found life style. 3) Different industry structures Some Asian countries have an indigenous wine production industry. As such, fore ign wines will have to face competition from domestic producers. The Asian wine market can be segmented into the following: China, Korea, Taiwan , Southeast Asia, and India. China is the largest wine market in Asia in terms of volume. It is also the largest wine producer in the continent. China is taki ng a very aggressive approach in building up its indigenous wine production cap ability. It is working closely with foreign experts to produce wines and hopes to rival the best chteaux in France one day. Furthermore, it has already show n proven successes in the right direction. In Southeast Asia, the principle growth countries are Singapore, Indonesia, Mal aysia, Thailand, and the Philippines, with growth rates ranging from 10 to 20 p ercent for the next five years. Note however that all of these countries starte d with a very low wine consumption base. Singapore has the most straightforward tax system while the other countries imp ose multi-tier tax systems which are fairly complicated to understand. Principal drivers of growth in Asian wine consumption are lifestyle and health, making brandy, gin, and beer the major competitors of wine. The health conscio us, for instance, are switching from brandy to wines. Women are also an importa nt wine market as they find wine to be a more acceptable alcoholic beverage tha n beers. The Philippine Wine Industry On a domestic scale, the Philippines has a growing wine industry, wherein much of the growth is attributed to the comparative advantage of its fruit exports. Furthermore, the market potential is good, and technology is making wines out o f the fruits that the country produces is not a far reality. Hence, several ini tiatives from educational institutions such as UP Los Baos and other wine act ivists are already aimed at putting the Philippines on the wine map. While the country has traditionally been a beer and hard liquor-consuming count ry, wine appreciation and consumption has shown reasonable growth over the past years, at par with its immediate neighbors. Hence a number of wine corporation s are already in place. While the total wine market in the Philippines is small in comparison to other Asian countries, demand is continually growing. Budget to mid-range priced wines are the most popular, as price is an issue for the ma jority of consumers. Local manufacturers of wine and flavored alcoholic beverages are now expanding their market to women and young urban professionals as they increasingly have t he predisposition, the money, and the inclination to spend on alcoholic drinks. The rising number of young consumers and women joining the workforce makes the wine market, currently dominated by Australian brands, promising in the Philip pines. The market for wine in the country increased between 2000-2005, growing at an a verage annual rate of 13.4 percent. The leading company in the market in 2005 w as Brumms Quality Wines, Inc. The second-largest player was E. & J. Gallo Winer y with Robert Mondavi in third place. Wine production in the Philippines, however, is mostly confined to niche produc ers who specialize in wine production from domestic crops, such as mango wine a nd rice wine. Echoing the state of the global wine industry, there are no signi ficant wine producers in the country with double-digit market shares. At best, Philippine wines are considered as novelties. And when it comes to grape wines, the local market relies primarily on Australian and European vintners. Market growth So what's the outlook for the Philippine wine market? Most economic forecasts o n wine consumption point to two distinct growth areasNorth America and Asia. O n the average, North America is slated to grow on an average of five percent fo r the next five years, while Asia's growth is in the tune of 10 to 20 percent p er annum, with the greatest growths registered in China, India, Korea, Singapor e, Taiwan, the Philippines, and Malaysia. Bad news for Europe though: it seems to be in for a long-term gradual stagnatio n or even decline in wine consumption. While other areas will not see any signi ficant changes. In today's era of globalization, it is no longer possible to take a detached mi ndset in doing international business, and wine business itself is definitely n o exception. The new world players who are not burdened by any traditional prac tices seem to be making successful impacts in many markets dominated before by the Old World players. Published on SME Insight, July-August 2007 issue