BORDEAUX, France — Japan is firmly back on the agenda for many wine exporters despite its continued economic slump, and value for money at the lower end should improve further. However, futures prices already indicate the prestige 2000 Bordeaux vintages won’t be cheap.
That was the message that came out of the 11th Vinexpo, which recently took place here. The conference is the largest annual get-together of wine-makers, retailers and distributors, and this year 55,000 visitors from 43 countries perused the wares of 2,400 exhibitors.
The event, which was held in Hong Kong in 1998, will head for Tokyo’s Big Sight arena next June. Among 300 exhibitors recently surveyed by Vinexpo, Tokyo is the best and most logical location to host the event outside of Bordeaux. For most producers, Asia is again becoming the key growth market after a small supply-related downturn during the Asian economic crisis.
A burgeoning market
According to a recent study by wine market consultant Vertumne, consumption in Asia increased by 67 percent over the last five years, led by Japan and China. The Japanese financial crisis affected the value of wine imports, but volume rose despite weaker purchasing power. Indeed, the fall in the value of the yen over the period had little affect on Japanese wine consumption, the report says.
Japan remains at the forefront of producers’ attention because of the sophistication of its consumers, and some of the big players are starting to focus on single females with high disposable incomes.
Setsuo Fukushima, managing director of the wine division at the Nagoya-based Sakaz Corporation, notes that New World exporters made good inroads despite building up large inventories, France held its position well, and Spain became a more important exporter.
Now, the market is showing its first signs of maturing following the expansion of distribution outlets, meaning exporters in the lower and mid-market segments will have to focus on improving quality while maintaining competitive prices despite relatively high overhead and tight profit margins in the country.
Eric Dulong, president of the Dulong brand and the main Bordeaux wine association — the Conseil Interprofessionel du Vin de Bordeaux — acknowledges that his region lost some market share to the New World in Japan during the late 1990s at the height of the economic crisis. But he says Bordeaux producers have learned their lesson — they are now more sensitive to the demands of each market, particularly Japan.
And they’re bouncing back. In the first quarter of this year, Bordeaux export volume to Japan rose 9 percent and value was up 15 percent. The figures were good given that 1998 and 1999 were not seen as the strongest of recent collectors’ vintages. In 2000, exports were also strong, with volume up 37 percent and value 10 percent higher.
“To respond to the New World in places like Japan, we are opening up the perception of Bordeaux, highlighting the richness of our product, but also the diversity,” he says. “Of course, collectors and speculators are still important — and the 2000 vintage will bring plenty of those customers — but we have another market which represents 95 percent of volume, and that’s what we must work on.”
In Japan, that means looking more at selling to single female consumers and trying to get a bottle of wine on the table at dinner time, he says.
Meanwhile, at the higher end, collectors in Japan are becoming more discerning all the time, Dulong believes.
Best vintage in 20 years
The barrel tastings at the end of March in Bordeaux were a roaring success, and many tasters are talking about the best vintage in 20 years. Accordingly, early indications are that “en primeur,” or futures, prices are up from 10 percent to 90 percent on a year earlier, and some by more.
Premier Bordeaux names Latour, Margaux, Haut-Brion and Mouton-Rothschild have just offered a third release of their year 2000 wines at around $215 a bottle wholesale for delivery in 2003. At the same time, key producers in St. Emilion, Ausone and Cheval-Blanc, released their 2000 wines at record-high prices of $168 and $138 respectively.
Those prices, which could translate to prices of $3000-$4000 a case, would put 2000’s wines on par or above the first-growth’s top rated vintages now on the market — 1996, 1995, 1990 and 1989.
To many merchants at Vinexpo, that represents vast overpricing of a vintage that is good but cannot compare to 1989 and 1990.
Reaching the consumer
While some producers complain that the Japanese market is relatively closed to those without a good, established distributor, Dulong says that is not a problem for Bordeaux.
“There are some regulations that could be more flexible, but that is the same in any market,” he says. “We’ll continue to invest in and develop the Japanese market. We’re still sure it has great potential — the Japanese will increasingly look for more complex wines.”
German producers have also been revisiting the Japanese market. They are hoping a new, simpler classification system for their wines will make things easier for the Japanese consumer. From the 2000 vintage, German wines will be described using simply the region, producer and grape variety. The wines are split into the categories of Classic and Selection: the former is a dry, quality regional wine, the latter is premium and from a selected vineyard.
Meanwhile, the Italians have also been making efforts in Japan and reaping the rewards. In 2000, exports rose by 7 percent on a year earlier, when they fell by a massive 46 percent, according to the Italian statistics agency Istat. Japan is now Italy’s seventh-best customer.
The major players in New World wine producing are also keeping an eye on Japan, hoping to boost sales in a tightening market.
Robert Mondavi, the second largest producer in the U.S. and a Nasdaq-listed firm, has been in Japan for over 20 years. Michael Mondavi, chairman of the board of directors and son of the founder, believes the firm can expand in Japan by adapting and innovating.
He sees flavors improving dramatically over the next two decades as technology improves. The company has been working with NASA, several California universities and even its main competitors to improve knowledge about the effects of soil and climate on vines.
Mondavi says he is now seeing a repeat of what has happened in the U.S. in the last three decades: in 1965, only 18 percent of wine sold in the U.S. was table wine; now over 60 percent is above $5 a bottle. A similar improvement in quality is happening in Japan.
There is also great opportunity for the Japanese to experiment in marrying different wines with their own unique cuisine, he believes.
Most analysts agree that Chile probably oversold to the Japan from 1995 to 1997 and may still be working off its glut. It seems to be consolidating itself as the fourth- or fifth-ranked regional player after the tremendous growth surge of the mid-1990s.
Su Birch, CEO of Wines of South Africa, says her country’s sales to Japan started to rise after the Tokyo Vinexpo of 2000. Export volume to Japan in 2000 grew by about 20 percent, but from a small base, she says, adding that her regional efforts are now most focused on high-end trade to Japan.
She says her producers have experienced problems with pricing structure and distribution, limiting margins. “We’re not moving huge volumes. It will take much more time,” she says.
In 2000, Australian exports of wine to Japan rose 21.3 percent to 30.4 million Australian dollars (about 1.9 billion yen), according to recent data from the Australian Bureau of Statistics.
Consolidation of estates into the hands of four or five corporations and a limited domestic market mean even better-honed East Asian export strategies from major Australian players such as Beringer Blass, the wine division of Foster’s, and BRL Hardy, which opened a representative office in Tokyo at the start of the year.
Foster’s began selling wine in Japan on the Internet a year ago and says it has already attracted 8,000 customers.
New Zealand is still seeing good export growth for its Sauvignon Blancs in Japan and the region, and will now probably look at marketing the last few years’ vintages in reds, especially Pinot Noirs, according to Ian Clark, the export manager at one of the country’s premier producers, New Villa Maria Estate Limited.
But low vintages still restrict volume: last year New Zealand yielded 65,000 tons of grapes, compared with 1.3 million tons in Australia.
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