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Rabobank Report: A new wine frontier

Supplier News
A new report by agribusiness banking specialist Rabobank on the international wine industry identifies several emerging markets that are attracting the interest of major wine companies around the world.

With maturing or declining sales in many traditional markets, wine companies across the globe are increasingly searching for new growth markets. While China and South Korea count among the most attractive emerging wine markets, Rabobank has identified Mexico, Brazil, Poland and Nigeria as four countries (or hidden gems) that have the potential to become important growth markets.

Companies that enter these markets early and build brand awareness hold an advantage for long-term growth.

Though not currently the largest or the most attractive wine markets in the world, these hidden gem markets offer good prospects for long term growth, but being in the early stages of development, also carry more risk. However, investing early in these markets will be worth the risk for some companies in terms of the rewards. Each of Rabobank’s four hidden gems - Mexico, Brazil, Poland and Nigeria - offers good prospects of medium to longer term growth for ambitious wine exporters willing to make early investments in building their brands in these markets.

Mexico

The Mexican market is proving lucrative for many suppliers, thanks to a strong economy that has led to the growth of the middle class segment, resulting in improved wine consumption trends. Consequently, wine imports have grown at a 20% CAGR between 2006 and 2011.

Brazil

Imported wine volumes in Brazil grew by nearly 30% in the four years from 2007 and 2011 due to growing interest in wine and limitations of domestic producers to match the quality of imports.

Poland

Poland has seen strong growth in demand for imported wine, and although pricing remains constrained, the relatively low levels of corruption in the country may make it an attractive option for foreign investors.

Nigeria

Though Nigeria is far less transparent than Poland and requires a much higher tolerance for risk, wine imports have been growing at a 16% CAGR in recent years with the government making progress in modernising the economy and reducing social conflict. With a population of approximately 170 million and large strategic petroleum reserves, Nigeria has a strong foundation for continued economic growth and increased demand for wine.

According to Stephen Rannekleiv, Rabobank Food & Agribusiness Research analyst, while the four hidden gems present opportunities for wine companies, each has a very different market with much uncertainty for traditional branded wine companies. The risk factor in these emerging markets gives rise to the possibility that the opportunity may not be realised.

On the other hand, early exposure to nascent markets gives a company a head start on the competition that will likely emerge as the markets develop. Wine companies that manage these opportunities correctly have a chance at securing long-term profitable growth.

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