market analysis report - british columbia · interest in table wine began in china approximately...

MARKET ANALYSIS REPORT

“A GLOBAL EXPORT MARKET OVERVIEW FOR BRITISH COLUMBIA’S WINE INDUSTRY”

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TABLE OF CONTENTS

Contents EXECUTIVE SUMMARY ......................................................................................................................................................... 2

PURPOSE ................................................................................................................................................................................ 4

INTRODUCTION ..................................................................................................................................................................... 4

OVERVIEW OF THE B.C. AND CANADIAN WINE INDUSTRY ............................................................................................. 4

GLOBAL SUPPLY & DEMAND TRENDS ................................................................................................................................ 6

MARKET GROWTH POTENTIAL FOR WINE EXPORTERS .................................................................................................. 6

NORTH AMERICA .................................................................................................................................................................. 8

United States ....................................................................................................................................................................... 8

ASIA ........................................................................................................................................................................................ 9

China ................................................................................................................................................................................. 10

Hong Kong ......................................................................................................................................................................... 11

Japan ................................................................................................................................................................................. 13

EUROPE ................................................................................................................................................................................ 14

France ................................................................................................................................................................................ 15

Switzerland ........................................................................................................................................................................ 16

CONCLUSION ....................................................................................................................................................................... 17

APPENDIX A: CANADIAN WINE EXPORTS BY PROVINCE ............................................................................................... 19

APPENDIX B: WINE EXPORTS FROM B.C. ......................................................................................................................... 20

APEPNDIX C: SALES OF WINE BY CATEGORY, ALL COUNTRIES .................................................................................... 22

ENDNOTES ........................................................................................................................................................................... 25

Although every effort has been made to ensure that the information in this publication is

correct, the B.C. Ministry of Agriculture and Agriculture and Agri-Food Canada assume no

responsibility for the accuracy or reliability of the data or for any decisions arising from the

information contained within this report.

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EXECUTIVE SUMMARY The British Columbia (B.C.) wine industry began to thrive with the creation of the B.C. Wine Institute (BCWI) in 1991. This was accompanied by the Vintners Quality Alliance (VQA), which classifies wine as 100 per cent B.C. grown. B.C. is now home to approximately 214 licensed grape wineries and approximately 864 vineyards, which produced almost 15 million litres (L) of wine in 2011. The top wine varietals produced within B.C. include Pinot Gris, Chardonnay, Merlot and Pinot Noir. In 2011, B.C. exported 577,700 litres (L) of wine to 12 different countries.

Total wine exports from Canada reached nearly $40 million dollars in 2011, with Ontario ($23.2 million), B.C. ($5.8 million) and Quebec ($5.7 million) accounting for 94 per cent of the total export value. The top three importers of Canadian wine were the United States (U.S.), China and Hong Kong, with the majority of B.C. exports (80 per cent in 2011) going to China. The global wine market is forecasted to increase by 6.17 per cent between 2010 and 2015, increasing from 23.76 billion L to 25.60 billion L.

Canada is the world’s leading manufacturer of icewine, with the total volume produced in Canada being greater than the total amount produced in all other countries combined. Canada’s icewine production is led by Ontario, B.C., Quebec and Nova Scotia.

The U.S. was the largest consumer of wine in the world in 2011, with approximately 3.7 billion bottles of wine consumed across the country. The U.S. imported $4.8 billion in wine, with 69 per cent of imports being from Italy, France and Australia. Still light grape wine accounted for 86 per cent of the total U.S. wine sales in 2011, at $29.2 billion. The U.S. is the second largest export market for B.C. wine, receiving $338,400 (83 per cent) in grape wine, $58,400 (14 per cent) in icewine and $11,300 (three per cent) in sparkling wine in 2011. This was an increase of 112 per cent from 2010, which was the biggest increase in B.C. wine exports to the U.S. since 2006; between 2006 and 2010, total B.C. wine exports to the U.S. decreased by a compound annual growth rate of one per cent. It is anticipated that the U.S. will remain the main wine market worldwide over the coming years, in terms of value and volume. U.S. consumers drank the equivalent to 3.7 billion bottles of wine in 2011; this can be compared to consumption in China*, which was the equivalent to 1.9 billion bottles of wine. Many countries are shifting their focus to emerging Asian markets, as they are growing at exponential rates. Understanding the importance of culture and business etiquette is essential to successfully doing business in Asia. Grape wine has only become popular in Asia in recent years with Asian consumers traditionally preferring bold, red wine as red is a colour that represents good fortune and luck in Asian culture. Tastes are beginning to change, however, as Asian consumers start to realize that white wines pair well with the Asian diet, which is often based on seafood ingredients. Canadian icewine has also become very popular in Asia as it is frequently given as a luxurious gift. Interest in table wine began in China approximately 15 years ago, and has since grown at an average of 30 per cent annually. China was ranked seventh worldwide for wine consumption in 2012, as the nation’s rapidly growing middle-class population and income level are causing increasing demand for imported food and beverages. B.C.’s wine exports to China saw a five year compound annual growth rate of 152 per cent between 2006 and 2011, increasing from $69,441 to $4.63 million. Although 80 per cent of B.C.’s wine exports in 2011 were shipped to China, a mere one per cent of China’s total wine imports were from Canada, ranking 12th behind countries like France and Australia. China is currently witnessing strong growth in mid- to high-end wines, and Euromonitor predicts that the demand for international wines in China will continue to rise. This could present an opportunity for B.C.’s wine exporters to enter the wine market in China, or to strengthen existing successes and channels. The icewine market in China also continues to present an opportunity for B.C. exporters, as it is rapidly gaining popularity as both a beverage and as a gift for business partners, friends and family. Hong Kong is establishing itself as a prestigious wine-trading hub, and in 2009 Sotheby International Wine Department named Hong Kong as the world’s largest fine wine trading centre, surpassing London. As a major international tourism

* This statistic includes consumption within China and Hong Kong.

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and business hub Hong Kong consumers are aware of international products. In 2011, Hong Kong was host to 42 million international visitors, which increased by 16.4 per cent since 2010. This can be compared to Canada, which had 15.6 million international visitors, 74 per cent of which were from the U.S. Hong Kong is also known as the culinary capital of Asia. In volume terms, global wine imports to Hong Kong increased by 20 per cent in 2011, from 40 million L to 48 million L. Table and fortified wines accounted for 96 per cent of imports, with the majority of these imports being red wine. Euromonitor predicts that wine sales will grow by four per cent between 2012 and 2017. In 2011, B.C. wine exports to Hong Kong decreased by almost fifty percent to $210,000. Despite an expanding wine market, Hong Kong imports mainly Old World Wine from Europe. Japan is the 23rd largest wine market worldwide, importing wine from 54 countries in 2011. Total value sales decreased by two per cent in 2011, to $22.2 billion, but total volume sales increased one per cent to 862 million L. The Japanese wine market is comprised mainly of non-grape wine, with 63 per cent ($14 billion) of total wine sales in 2011 made from ingredients such as rice, plum and lychee. Sake, a type of rice wine, accounted for 95 per cent ($13.3 billion) of non-grape wine sales. Grape wine consumption is gaining in popularity due to its perceived health benefits, lower alcohol content and visual appeal. Though the Japanese population is ageing and shrinking, the younger generation is showing increasing enthusiasm for wine. Of B.C.’s total wine exports, three per cent went to Japan in 2011 at a value of $170,000, making Japan the fifth largest wine export market for B.C. Europe has a long history of growing grapes and producing top quality wines. Often referred to as the Old World wine countries, the wine making tradition is based on specifics of geography and wines are named for the regions in which they are produced. The top five countries for per capita wine consumption in 2010 were European, lead by Luxembourg (53 L), France (46 L) and Portugal (42L). Europe’s wine consumption currently accounts for over 60 per cent of global wine consumption. This figure is expected to increase between 2012 and 2017, even though Europe is expected to follow the global trend of decreasing wine consumption. In France, domestic wines are very dominant whereas foreign wines are continually witnessing declining sales. The greatest increase was in rosé wine which increased five per cent in 2011, with a variety of new flavours released, including the most popular grapefruit rosés. France has a long history of importing icewine from Canada, but the majority of these imports are from Ontario and Quebec. In 2004 and 2005, B.C. exported small amounts of wine to France, but exports ceased in the following years. It was not until 2011 that B.C. began to export wine to France again, in the form of icewine. Residents of Switzerland are known to be some of the biggest wine consumers in Europe. Switzerland was ranked eighth in the world for wine imports in 2010, receiving the majority of their wine imports from Italy, France and Spain. Seventy per cent of red wine consumed in 2010 was imported, and 60 per cent of white wine consumed was imported as these wines are less expensive than domestic, premium wines. Currently the consumption of Cupli (a type of sparkling wine) is gaining popularity in Switzerland. Sparkling wine accounted for 13 per cent of total wine sales in 2011, showing a two per cent increase from 2010, and increased consumption of sparkling wine is seen as a major trend in the Swiss market. All the wine exported to Switzerland from B.C. was wine from fresh grapes, with sparkling wine accounting for the majority at $67,000 (81 per cent). Most Swiss consumers prefer to buy wine for home consumption, as off-trade sales accounted for 85 per cent of volume sales and 58 per cent of value sales. Switzerland was B.C.’s sixth largest export market in 2011, with $82,000 in exports. This was an increase of 251 per cent from 2010. As the second largest wine exporter in Canada, with a deep history of expertise in producing high-quality sparkling wines, B.C. may find strong opportunities for further growth within the Swiss market.

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PURPOSE Building upon the market-information needs identified by the British Columbia Wine Institute (BCWI), the British Columbia (B.C.) Ministry of Agriculture, with support from Agriculture and Agri-Food Canada, conducted this study to help B.C.’s wine industry understand the global market for wine products.

The purpose of this report is to:

Identify key trends that are having an impact on the global market for wine products;

Provide insight into what types of wine products are available globally; and,

Identify which markets provide the strongest opportunity for growth for B.C.’s wine exports.

INTRODUCTION This report begins with an overview of B.C. and Canada’s wine industries, followed by a brief overview of the global supply and demand trends within the wine market and an explanation of the market growth potential for B.C. wine exporters. The report concludes with an analysis of potential markets for B.C.’s wine exports, including the United States (U.S.), China, Hong Kong, Japan, France and Switzerland. The majority of information presented in this report is from Euromonitor, an independent provider of market intelligence. All monetary mentions within this report are in current Canadian Dollar value, unless otherwise mentioned. This study was funded through the Trade and Market Development for the Canadian Agri-Food and Agri-based Products Sector Program, part of Growing Forward, a federal-provincial-territorial initiative. This program aims to facilitate industry success in global and domestic products. Through industry-led marketing strategies, a Canada branding strategy, market intelligence and service for exporters, and actions to maintain and improve market access, the program helps equip the sector to seize market opportunities and address emerging challenges.

OVERVIEW OF THE B.C. AND CANADIAN WINE INDUSTRY

The B.C. wine industry began to prosper with the formation of the B.C. Wine Institute (BCWI) in 1991. The Vintners Quality Alliance (VQA) standards were implemented and are still enforced by the BCWI, opening a path into the international wine market. The VQA standards classify wines that are guaranteed 100 per cent B.C. grown and are professionally tasted by a qualified panel for quality characteristics prior to labelling, giving consumers confidence in B.C. wines. B.C. wines were made mainly of fruits other than grapes until 1926, when planting grapes for wine began in Kelowna. In the beginning, grape growers planted Labrusca, a grape varietal native to North America, but this grape varietal could not produce the elegant taste of classic wine. As the Canada and U.S. Free Trade Agreement came into place in 1988, grape growers were subsidized to substitute all the Labrusca vines with Vinifera varieties.1 The wine industry in B.C. is known for many differentiated flavours and varietals produced by the diverse topography and environment of the province. There are approximately 214 licensed grape wineries and approximately 864 vineyards currently operating in B.C., which include independent growers and wineries. There are five main wine regions

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within the province, including: Okanagan Valley, Similkameen Valley, Fraser Valley, Vancouver Island, and the Gulf Islands. The top wine varietals produced within B.C. include Pinot Gris, Chardonnay, Merlot and Pinot Noir (see Figure 1: Top B.C. Wine Varietals by Acreage Planted).2

Figure 1: Top B.C. Wine Varietals by Acreage Planted

Top White Varietals Top Red Varietals

Pinot Gris Merlot

Chardonnay Pinot Noir

Gewürztraminer Cabernet Sauvignon

Riesling Syrah (Shiraz)

Sauvignon Blanc Cabernet Franc

Pinot Blanc Gamay Noir

Viognier Marechal Foch

Ortega Blattner Reds

Ehrenfelser Malbec

Blattner Whites Petit Verdot

B.C. exported 577,700 litres (L) of wine to 12 countries in 2011, generating $5.8 million. The majority of the total value, $3.2 million (56 per cent), was in fresh grape wine, including $2.2 million in grape wine and $1 million in icewine. 3 Sparkling wine* exports generated $1.8 million. B.C. wine production in 2011 was over 14 million L, which was a 28 per cent increase from 2010.4 In 2011, B.C. began exporting wine to France, the Philippines, and Nigeria; however, at the same time, B.C. also stopped exporting to the United Kingdom (U.K.), Singapore, Germany, Vietnam, and New Zealand.5

In Canada, the first commercial winemaking operation began in 1866 on Pelee Island in Ontario, with 30 acres of grapes planted.6 As of 1992 there were less than 30 wineries in all of Canada; currently there are almost 700 wineries

throughout the country.7 While wineries are located across the country, wines produced from locally-grown grapes are mainly produced within Ontario, B.C., Quebec and Nova Scotia.8 The top two wine-producing provinces are Ontario and B.C. with almost two-thirds of the country’s vineyard acreage currently located in Ontario.9 Canada has a national VQA standard for wine production and viticulture areas and each province has their own VQA regulations which are usually more refined and stringent, such as those in Ontario and B.C.10 In 2011, Canada exported a total of $36.9 million (21.6 million L) in wine to 40 countries. The top wine exporting provinces by value were Ontario ($23.2 million), B.C. ($5.8 million) and Quebec ($5.7 million). Ontario exported 8.7 million litres to 36 countries in 2011, whereas Quebec exported 10.8 million L. Of total Canadian wine exports, $23 million was in fresh grape wine (excluding sparkling wine), including $13.3 million (58 per cent) in icewine and the remaining $9.7 million in other grape wine.11 In 1991, Canada won its first significant wine award at an international festival where Inniskillin’s Vical Icewine

* The sparkling wine category includes champagne and other wines with carbonation.

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1989 claimed the Prix D’Honeur award at Vinexpo.* From then on, Canadian wine, mainly from Ontario and B.C., began to claim many more awards. 12 Canada is the leading manufacturer of icewine, with the top producing provinces being Ontario, B.C., Quebec and Nova Scotia. The total volume of icewine produced in Canada is greater than the total amount produced by all the other countries combined. Many countries around the world, especially in Asia, import icewine from Canada, and in 2001 Canada began exporting icewine to Europe. Icewine originated in Germany about two centuries ago, but the first Canadian icewine was a Riesling produced in the Okanagan in 1973. It was Ontario that fueled the flourish of the Canadian icewine industry in the 1990s with its ideal soil and climate. 13

GLOBAL SUPPLY & DEMAND TRENDS Between 2004 and 2010 there was a surplus of wine in the global market due to over production coupled with declining consumption in many parts of the world, especially in the major European markets. In 2011, wine production started to decline and the recovery of wine consumption was mainly driven by the demand from the U.S., China and some other emerging markets, offsetting the declining consumption in Europe. 2013 is expected to see a shift to a more balanced demand and supply. It is forecasted that wine imports and domestic wine production will suffer mainly in Western Europe and Russia, while output from the U.S. and some parts of the Southern Hemisphere such as Chile and South Africa will continue to see an increase.14 The global wine market is forecasted to increase by 6.17 per cent between 2010 and 2015, increasing from 23.76 billion L to 25.60 billion L.15

MARKET GROWTH POTENTIAL FOR WINE EXPORTERS In the last five years, Canada has exported wine to approximately 40 different countries. 16 Of the $124 million (over 59 million L) of wine exported out of Canada in the past five years, 68 per cent was exported from Ontario, 14 per cent from B.C., 12 per cent from Quebec and six per cent from Alberta (see Appendix A). The value of Canada’s total wine exports increased 88 per cent between 2007 and 2011, rising from almost $20 million to almost $37 million (see Figure 2: Canada’s Wine Exports to All Countries).17

Figure 2: Canada’s Wine Exports to All Countries (millions)

* Created in 1981, by the Bordeaux Chamber of Commerce and Industry, the Vinexpo is a professional and major international wine

and spirits trade show which promotes the growth in wine producing and trading industries. For more information, please see http://www.vinexpo.com/en/about-vinexpo/.

2.0 2.9 2.5 1.7 1.3 2.8

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The U.S., China and Hong Kong are currently the top export markets for Canadian wine, followed by South Korea and the U.K. Singapore was a very close sixth place with approximately $30,000 less than the U.K. being imported from Canada.18 Figure 3 below shows the value of Canada’s domestic wine exports to the top five markets over the past 10 years.

Figure 3: Canada’s Top Five Export Markets for Wine ($000)

Wine exports from B.C. saw a 73 per cent decrease between 2005 and 2008, decreasing in value from $5.2 million to $1.4 million (see Figure 4: B.C.’s Wine Exports to All Countries).

Figure 4: B.C.’s Wine Exports to All Countries (millions)

The majority of B.C. wine exports are sent to China, with 80 per cent of the province’s total value of wine exports going to China in 2011. The U.S. is a distant second, with seven per cent of the market, followed by Hong Kong with four per

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United States China Hong Kong Korea, South United Kingdom

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cent and Taiwan and Japan at three per cent each (see Appendix B). Figure 5 below shows the value of B.C.’s domestic wine exports to these five markets over the past 10 years.

Figure 5: B.C.’s Top Five Export Markets for Wine ($000)

NORTH AMERICA

United States

The U.S. had the highest wine consumption rate in the world in 2011, with approximately 3.7 billion bottles of wine consumed across the country.19 Despite the recent recession, the volume of wine sold in the U.S. continued to increase since 2009, demonstrating the trend of increased wine consumption that is especially apparent with the younger generation.20 The fine wine market is quite large in the U.S., with approximately 4.3 million people owning wine cellars, including 100,000 private cellars each holding at least 500 bottles.21 The U.S. imported $4.8 billion in wine from 75 countries in 2011, with the majority of imports (69 per cent) coming from Italy ($1.5 billion), France ($1.2 billion) and Australia ($551.5 million). Total wine imports into the U.S. increased by nine per cent in 2011. While Canada was ranked 12th among importing countries for 2011, and accounted for less than one per cent of total imports,22 it showed one of the biggest increases (64 per cent growth) to $15.3 million. The U.S. is the second largest export market for B.C. wines. In 2011, B.C. exported $408,010 worth of wine to the U.S., including $338,400 (83 per cent) in grape wine, $58,400 (14 per cent) in icewine and $11,300 (three per cent) in sparkling wine. This was an increase of 112 per cent from 2010, which was the biggest increase seen since 2006; between 2006 and 2010, total B.C. wine exports to the U.S. decreased by a compound annual growth rate of one per cent.23 Total wine sales in the U.S. experienced a two per cent increase in 2011, rising to $33.8 billion. This contributed to a compound annual growth rate of three per cent since 2006, increasing from $29.5 billion. Still light grape wine* accounted for 86 per cent of the total wine sales in 2011, at $29.2 billion. Still white and still red wine sales were fairly equal in the U.S., with still red wine sales accounting for 49 per cent ($14.4 billion), still white wine for 44 per cent ($12.8

* Still light grape wine is a total of red, white and rosé blends. This excludes fortified wine with a lighter alcohol content of eight to 14

per cent.

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China United States Hong Kong Taiwan Japan

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billion), and still rosé wine for seven per cent ($2 billion). Sparkling wine saw a five per cent increase from 2010 and represented eight per cent of total wine sales, with $2.8 billion in 2011. Non-grape wine* in 2011 only accounted for one per cent of total wine sales.24 The U.S. is expected to continue as the world’s main wine market in the coming years, in terms of volume and value. U.S. consumers drank the equivalent to 3.7 billion bottles of wine in 2011; this can be compared to consumption in China†, which was the equivalent to 1.9 billion bottles of wine. According to Vinexpo, between the years of 2011 and 2015 wine consumption in the U.S. will increase by 10 per cent,25 partially due to younger consumers shifting from consuming beer to consuming wine and the general increase in confidence in the economy. The recent recession caused on-trade value sales‡ to decrease in 2009, but the U.S. wine market has seen a three per cent increase in the past two years (see Figure 6: U.S. Off-Trade and On-Trade Statistics). Off-trade value sales were not affected to the same extent. The ratio of volume sales in off-trade and on-trade was approximately 4:1 in 2011, demonstrating that the average unit prices of wine sold at establishments are higher and that consumers are generally drinking premium wine when they dine out.26

Figure 6: U.S. Off-Trade and On-Trade Statistics

Units 2007 2008 2009 2010 2011

Off-Trade Volume Million L 1,977.50 2,040.50 2,096.00 2,146.80 2,173.60

On-Trade Volume Million L 599.50 567.20 534.90 541.10 552.20

Total Trade Volume Million L 2,577.00 2,607.70 2,630.80 2,687.90 2,725.70

Off-Trade Value Million $ 14,384.45 15,567.73 16,197.14 16,773.76 17,079.41

On-Trade Value Million $ 17,015.68 16,999.13 15,754.29 16,214.28 16,718.21

Total Trade Value Million $ 31,400.13 32,566.86 31,951.43 32,988.14 33,797.62

ASIA With the Asian markets emerging at such exponential levels, many countries are shifting their focus to these markets. To have consumers accept a product, presenting a low price and the practicality and functionality of the products are not enough. Successful business transactions within Asian countries begin with understanding the culture and business etiquette. Business in Asia is very relationship-based and it could take a long time to close a deal.27 Only in recent years has grape wine become popular in Asia, as exporters from Europe and North America began to introduce it to the market. As an example, globally-recognized Bordeaux’s Grand Cru wines of France were rarely sold outside of Western Europe 50 years ago, but with the Asian markets experiencing a sharp wine education curve and increasing disposable income, Bordeaux has shifted its focus to Eastern markets including China, Japan, Taiwan, South Korea and Hong Kong.28 In Asian culture, red is a colour that represents good fortune and good luck, hence Asian consumers have historically preferred bold, red wine. It is also believed that two glasses of red wine per day is beneficial to health, and is deemed to

* Non-grape wine is wine made from other ingredients, such as cereal, rice or fruit.

† This statistic includes consumption in Hong Kong and China.

‡ On-trade sales are from establishments such as pubs, clubs and restaurants where wine is served as well as consumed.

Alternatively, off-trade sales are from retailer outlets where the wine is bought and consumed somewhere else, such as at home.

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be more sophisticated than white wine and represent high social status in Asian countries.29 Tastes are beginning to change, however, as Asian consumers start to realize that white wines pair well with Asian food, encouraged by the popularity of seafood ingredients.30 With wine often seen as a symbol of wealth and status, and as many Asian consumers are becoming more prosperous, many turn to Canadian icewine as a luxurious and high end gift. Icewine is generally more expensive, in a smaller bottle and attractively packaged, so many consumers are bulk-purchasing when in Canada to take home to Asia as gifts.31

Although not mentioned specifically in this report, it is worth noting that Taiwan was B.C.’s fourth largest wine export market with a total value of more than $180,000 in 2011, a 38 per cent decrease from 2010. South Korea is B.C.’s seventh largest wine export market with a total value of over $51,000 in 2011, a 13 per cent decrease from 2010. Of B.C.’s total export value, Taiwan and South Korea represented three per cent and one per cent respectively in 2011.32

China

Due to wine sales experiencing limited growth in traditional markets, wine exporters are beginning to focus on countries with exponential economic growth, such as China. China’s rapidly increasing middle-class population and average income level are causing an increase in food and beverage imports.33 China’s interest in table wine began approximately 15 years ago, and demand for wine has since grown about 30 per cent annually.34 China was ranked seventh in 2012 for wine consumption, with over 900 million L of wine consumed; this is a 36 per cent increase since 2009.35 China’s off-trade volume sales of wine were almost two billion L in 2011, an 11 per cent increase from 2010 (see Figure 7: China Off-Trade and On-Trade Statistics). The majority of these sales by volume were in the form of non-grape wine (60.6 per cent), followed by still light grape wine (39.4 per cent) and sparkling wine (less than one per cent). 36

Figure 7: China Off-Trade and On-Trade Statistics

Units 2007 2008 2009 2010 2011


On-Trade Volume Million L 1,145.20 1,295.70 1,465.90 1,657.50 1,874.10





The winemaking industry is very new in China, but as of 2010 it was the sixth largest producer of wine in the world. China is known for producing average quality wine and although the country has multiple wine growing regions, the growing season is not long enough to develop top-quality wine grapes.37 Wine grapes are mainly imported from traditional countries, such as France.38 The major cities for wine imports are Beijing, Shanghai, and Guangzhou.39 As table wine is rather new to the majority of the population, statistics show that off-trade wine sales only accounted for 28 per cent of total wine sales in 2011, whereas on-trade sales represented the remaining 72 per cent. However, in terms of volume sales, off-trade volume accounted for 52 per cent of total wine sales. This suggests that the mark-ups on wine served in establishments are much higher than those sold through retail outlets, and premium wines are being primarily consumed at restaurants rather than being bought for at home consumption. This emphasizes the Chinese culture, as most Chinese consumers prefer to order high-end wine while dining out to show affluence and wealth to relatives and business partners.40 B.C.’s wine exports to China saw a five year compound annual growth rate of 152 per cent between 2006 and 2011, increasing from $69,441 to $4.63 million. Although 80 per cent of B.C.’s exports in 2011 were sent to China, only one per

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cent of China’s total wine imports came from Canada, ranking 12th behind countries such as France, Australia, Chile, Spain and Italy. Of B.C. wine exports to China in 2011, table wine accounted for 37 per cent of the total export value ($1.7 million), sparkling wine for 34 per cent ($1.6 million) and icewine for 14 per cent ($0.7 million). 41

The majority of Chinese consumers generally prefer the taste of bold red wines, as these wines are perceived as healthier and the colour red is considered good luck.42 Eighty per cent of wine consumed in China is red; however, there has been a recent trend toward women and younger wine drinkers starting to choose white wines, especially Sauvignon Blanc wines.43 With seafood ingredients being a large part of the Chinese diet, especially in the southern coastal cities, consumers in the south generally prefer sweeter wines.44 The east and the north are known for preferring full bodied wines.45 As some B.C. wine exporters have already recognized, targeting the niche icewine market in China could prove prosperous. An example of this could be targeting the rising Chinese middle class through the growing trend of icewine as a luxury item. While icewine in the Chinese market was formerly only purchased as gifts, it is now being bought for more casual occasions.46 A challenge for Canadian icewine in China has been counterfeit and imitation products.47 Without an enforced system of checking wine, counterfeit wine is currently a problem; for example, 10 million bottles of fake Lafite wine was recently discovered in China.48 Measures are being taken to ensure that counterfeiting will be controlled in the future. Some companies

are choosing to include a unique tag with an identification number and design over each cork to prove the bottle of wine is authentic.49 One challenge for B.C. is the amount of the Chinese wine market already captured by well-known wine nations in Europe, South America and Australia (approximately $1.4 billion).50 However, China is currently witnessing strong growth in mid- to high-end wines, and Euromonitor predicts that the demand for international wines in China will continue to rise. This could present an opportunity for B.C.’s wine exporters to enter the wine market in China, or to strengthen existing successes and channels. The higher price of international wines also indicates a status of wealth.51 Currently, there are around 20 million consumers of imported wine in China (one and a half per cent of the total population), but this figure is expected to increase to 80 million by 2020, driven by flourishing middle-class cities.52 Chinese consumers still face a learning curve in distinguishing between top and low quality wines. Currently wine quality is depicted by the look of the packaging and the length of the vintage, with imported wines being seen as higher in value, thus driving the strong growth for mid- to high-end wines.53

Hong Kong The Hong Kong government is currently attempting to establish the region as a prestigious wine-trading hub,54 and is therefore importing high end wines from all over the world. In 2011, Hong Kong was host to 42 million international visitors, increasing by 16.4 per cent since 2010.55 This can be compared to Canada, which had 15.6 million international visitors, 74 per cent of which were from the U.S.56. In 2009, Sotheby International Wine Department listed Hong Kong as the world’s largest fine wine trading centre and the most profitable global wine auction market, surpassing London.57 Although Hong Kong has no vineyards, grapes are imported to produce wine within the country, mainly from Bordeaux, France.58 The region’s 40 per cent import tax rate on wine was abolished in February of 2008,59 which immediately increased sales and promotions of wine at the retail level. This also raised the demand for wine, while allowing consumers to learn more about wine culture and appreciate the quality.60 There were approximately 3,550 wine-related

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companies in Hong Kong in 2011, which increased from only 200 in 2008. The number of people employed in the Hong Kong wine industry also increased during this time, from 5000 to 40,000.61 The per capita consumption on average is two L per year and this figure is expected to increase to more than six L by 2014.62 In terms of trade, Hong Kong’s total global wine imports increased in value by 35 per cent in 2011, rising from $924 million to $1.2 billion. In volume terms, global wine imports increased by 20 per cent in 2011, from 40 million L to 48 million L. Of the total volume imported, table and fortified wines accounted for 96 per cent and sparkling wine accounted for 3 per cent. As red wine consumption has been a long-standing preference for Hong Kong consumers, red wine accounted for 93 per cent of total table and fortified wine imports in 2011.63 Due to the flavour, colour and health benefits of red wine, Cabernet Sauvignon, Merlot and Shiraz are the three most popular types of wine in Hong Kong, accounting for approximately 80 per cent of total volume sales.64 In 2011, off-trade volume sales of wine were 7.9 million L, a seven per cent increase from 2010 (see Figure 8: Hong Kong Off-Trade and On-Trade Statistics). Of total volume sales, still light grape wine accounted for 71 per cent with 5.6 million L.65

Figure 8: Hong Kong Off-Trade and On-Trade Statistics

Units 2007 2008 2009 2010 2011

Off-Trade Volume Million L 6.10 6.70 7.00 7.40 7.90


Total Trade Volume Million L 9.70 10.60 11.00 11.60 12.30

Off-Trade Value Million $ 132.60 141.19 146.10 155.49 170.88

On-Trade Value Million $ 159.20 169.95 174.41 184.57 200.95

Total Trade Value Million $ 291.80 311.14 320.50 340.08 371.84

B.C.’s exports to Hong Kong have increased by seven and a half per cent since 2006, rising from $24,649 to $210,411; however, B.C. wine exports to Hong Kong decreased by almost half in 2011, from $393,617. In 2011, Hong Kong received four per cent of B.C.’s total wine exports. Canada is currently ranked 18th among countries that export wine to Hong Kong, accounting for less than one per cent of the total wine imports in 2011. The majority of Hong Kong’s wine imports come from France, the U.K., the U.S., Australia and Italy. B.C.’s wine export gap to Hong Kong is $1.2 billion, meaning that much of the market is currently controlled by other country’s exports. In 2011, 69 per cent of the total B.C. wine exports to Hong Kong were icewines ($144,000) and 31 per cent were table wines ($66,000).66 There are many current trends within Hong Kong that are encouraging the consumption of wine. Hong Kong is deemed by some as the culinary capital of Asia,67 with the region having more than 13,000 eating establishments.68 The trend of drinking wine while dining out is declining as the mark up fee for wine is high and increasingly consumers would prefer to enjoy their wine at home.69 This could balance out as Hong Kong’s population is rapidly growing and the average disposable income of young consumers is increasing.70 Unlike their mainland Chinese neighbours, Hong Kong consumers are generally interested in the educational aspects of wine appreciation, taking wine knowledge courses71 and opening tasting shops.72 Social media is a popular way to promote, market, trade and sell wine, including websites, wine apps, and blogs.73 Champagne continues to be popular in Hong Kong as it is seen as suitable for celebrations and luxurious events. In 2011, Champagne sales accounted for 91 per cent of all sparkling wine with $50.6 million, with an 11 per cent increase from 2010. By tradition, red wine has always been the preferred table wine in

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Hong Kong. Still red wine contributed $191.3 million in wine sales in 2011, showing an 11 per cent increase from the 2010 sales of $172.3 million. In 2011 it accounted for 69 per cent of total still light grape wine sales and 51 per cent of total wine sales. Sales of white wine were relatively lower, accounting for 20 per cent of total wine sales with $75 million in 2011. Euromonitor predicts that wine sales will grow four per cent between 2012 and 2017, driven mainly by still red wine and champagne sales.74 With Hong Kong’s status as a major international business and tourism hub, consumers are very aware of international products, which results in demand for differentiated brands.75 Much of Hong Kong’s imports are supplied by China; however, with China’s worsening reputation for food safety, more consumers are becoming aware of food origin.76 This has created opportunities for international companies to cater their products to Hong Kong consumers who are always looking for differentiation and new tastes.77 Hong Kong hosts many internationally well-known wine shows and events, such as the Hong Kong International Wine & Spirits Fair,78 where B.C. wine producers can showcase their products in order to test the market. Hong Kong is also an ideal port way for products to enter China. 79 Despite an expanding market for wine, Hong Kong mainly imports wine grapes and wine from Old World wine countries such as France,80 which could make it difficult for B.C. wines to gain a significant share of the market.

Japan

Within the global wine market, Japan is currently ranked 23rd in regards to market size, surpassing Ukraine and Austria in 2011.81 About 70 per cent of wine in Japan is imported,82 with the top importing countries being France, Italy, Chile, Spain and the U.S. In 2011, Japan imported over $1.3 billion worth of wine.83 Japan imports wine from 54 countries, with 98 per cent of the import values come from Japan’s top 10 wine import countries. Although total wine sales in Japan had been steadily decreasing between 1999 and 2010, increased demand for wine sold in retail outlets caused the market to grow in 2011 (see Figure 9: Japan Off-Trade and On-Trade Statistics). In off-trade volume, 2011 saw a three per cent increase, from 544 million L to 563 million L. Total value sales decreased by two per cent in 2011, to $22.2 billion, but total volume sales increased one per cent to 862 million L.84

Figure 9: Japan Off-Trade and On-Trade Statistics

Units 2007 2008 2009 2010 2011







The Japanese wine market is comprised mainly of non-grape wine, with 63 per cent of total wine sales in 2011 ($14 billion) made from ingredients such as rice, plum and lychee. Sake, a type of rice wine, accounted for 95 per cent ($13.3 billion) of non-grape wine sales, showing a decrease of four per cent from 2010. 85 When it comes to non-grape wine, opportunities are very rare for international producers, as Japanese consumers prefer the domestic varieties. 86 Although Japan does produce wine, especially in the Yamanashi Prefecture, production has witnessed a decline in the past years due to the lack of successors and the country’s ageing population. Ten per cent of grapes produced in Japan are used to make wine, while ten per cent is used in the food industry, and 80 per cent are sold as food. 87 This contrasts the global

14

grape market, where on average 71 per cent of grapes produced are used to make wine, according to the Food and Agriculture Organization*.88

Of B.C.’s total wine exports, three per cent went to Japan in 2011 at a value of $170,000, making Japan the 5th largest wine export market for B.C. In 2011, the value of exports to Japan from B.C. increased by 209 per cent, from $55,000 in 2010. In volume terms, B.C. exports to Japan increased 260 per cent between 2010 and 2011, rising from 3,087 L to 11,070 L. Most commonly exported was icewine (40 per cent of the total volume), followed by fresh grape wine (35 per cent) and sparkling wine (25 per cent).89 While sake is very popular in Japan, grape wine consumption is gaining popularity for the perceived health benefits, the lower alcohol content and the visual appearance of those drinking the wine.90 Due to Japan’s uncertain economic condition, lower priced wines witnessed an increase in sales in 2011,91 with most wines being sold in the eight to 12 dollar range.92 According to Mintel’s Global New Product Database (GNPD) – a privately owned market research firm -, wine launched with the claim of ‘premium’ decreased by 64 per cent and those with the claim of ‘economy’ increased from one product to nine products.93 The most popular wine of this category was rosé wines, which grew by 18 per cent, with the grape varietal of Zinfandel proving to be the most popular. While red wine sales are predicted to increase, 94 it is white wine that is most often enjoyed with meals as it pairs well with the Japanese diet consisting mainly of vegetables and seafood ingredients.95 Sparkling wine is not a popular choice for Japanese consumers. As Japanese consumers are known as some of the most health conscious in the world, organic wines have seen an increase in popularity in the past years. In Japan, organic wine is premium priced, and there is a considerable difference between claims of “organically grown grapes” and “100% organic”.96 Though the Japanese population is ageing and shrinking, the younger generation is showing increasing enthusiasm for wine. In terms of per capita alcohol consumption, Japan is in the top quarter worldwide, even though wine consumption is rather low compared to sake, sochu and beer.97 Unlike beer that is largely price-driven, Japanese consumers select wine based on region and grape varietal.98 As a major emerging market for wine, B.C. has potential in this market, encouraged by the large increase of 2011’s export value. To further showcase B.C. wine, producers could consider the multiple international trade shows held in Japan such as Wine & Gourmet JAPAN,99 the Epcot International Food and Wine,100 and FOODEX Japan, the largest food and beverage trade show in Asia-Pacific.101

EUROPE Often referred to as the Old World wine countries, Europe has a long history of growing grapes and producing top-quality wine. Old World wine-making is based on tradition and the specific characteristics of geography, as opposed to

New World wine that is based on mainly science and the role of winemakers, from countries such as Chile and Australia. Old World wine reflects the culture of the region, the people who made it, and the flavours of the land. This explains why Old World wines are labelled by their regions, as opposed to defining the wine by the grape varietal as is done in Canada. With such a deep history of wine-making, European wine is considered sophisticated in the international scene without having to necessarily follow international trends.102 The top 5 countries in 2010 for per capita wine consumption worldwide were Luxembourg (53 L), France (46 L), Italy (42 L), Portugal (42 L) and Switzerland (38 L); in comparison, Canada’s per capita consumption was 10 L.103 Currently, Europe’s wine consumption accounts for over 60 per cent of world wine consumption and this figure is expected to show a small increase of less than half of a per cent between 2011 and 2015.104 Europe’s

* A specialized agency of the United Nations.

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off-trade sales accounted for 53 per cent of the world’s total in 2011, with $73.9 billion. 105 However, due to the unstable 2009 recession, Europeans are starting to consume less wine, especially in France where consumption has declined to about a third of what it used to be causing supply to exceed demand. 106 It is forecasted that key European wine markets, such as France, the U.K. and Italy, are expected to experience a decline in wine consumption of four and a half per cent, four per cent and three per cent respectively. In contrast, only Germany is expected to grow by about two per cent.107 Among all wine exporting countries in the world, European countries accounted for five of the top 10 spots in 2010 including France, Italy, Spain, Germany and Portugal (a combined 64 per cent of total world export values).108 Specifically, France leads in wine export by value and Italy leads in wine exports by volume.109 Despite European countries producing many top quality wines, they also produce a bulk amount of low quality wines which struggle to be sold.110 To avoid this issue, the EU implemented a prohibition on the planting of new vineyards. A reform has been proposed by the EU to lift this restriction after 2015 in order to enable competitive producers to once again drive the European wine market and enhance the image of European wine.111 With such a long tradition of winemaking, European wines evidently have a secure position in the international market, holding approximately 20 international wine shows annually.112

France

Residents of France have a long history of wine production. Subsequently, most French consumers select wine based on wine appellation, origin, brand, year, cultural identity, name of the chateau or domaine, and the type of grape varietal. Domestic wine is very dominant in France, with foreign wines continuingly witnessing declines in sales. New World wines represent a niche in French wine sales, whereas larger wine producing countries, such as Italy and Spain, are more successful. Total volume sales in 2011 were stagnant at 2.5 billion L, with the average unit price of wine increasing by two per cent. Cabernet Sauvignon is the most popular still red wine in France, and has been for numerous years. For still white wine, Sauvignon Blanc is the most popular, and Cinsault is dominant within the still rosé wine market.113 Total wine sales in France have only seen a one per cent growth on average in the last five years, with a two per cent increase in 2011 to $32.2 billion. Still light grape wine accounted for 56 per cent of total wine sales, at $17.9 billion, including $11.7 billion in red wine, $3.3 billion in white wine, and $2.9 billion in rosé wine. Rosé wine witnessed the greatest increase of five per cent in 2011, with a variety of new flavours released, including the most popular grapefruit rosés. There has been an increase in both on-trade and off-trade sales of rosé, as this wine is seen as fashionable and as a suitable choice for many occasions. Still white and red wines have seen stagnant growth. The well-known and popular Bordeaux red wine had sales drop drastically in value and volume sales in 2011. Sparkling wine accounted for 36 per cent of total wine sales in 2011. The most popular type of sparkling wine was champagne with 75 per cent of total sparkling wine sales at $8.7 billion, an increase of four per cent from 2010. Euromonitor predicts that on-trade volume sales will decrease by five per cent between 2012 and 2017, whereas off-trade volume sales will rise by two per cent, highlighting the trend of at home consumption (see Figure 10: France Off-Trade and On-Trade Sales).114

Figure 10: France Off-Trade and On-Trade Sales

Units 2007 2008 2009 2010 2011







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In 2004 and 2005, B.C. exported small amounts of wine to France, but exports seized in the following years. It was not until 2011 that B.C. began to export wine to France again, in the form of icewine. The climate in France is generally too warm to produce good icewine grapes, whereas Canada is the leading producer of icewine worldwide. France has a long history of importing icewine from Canada, but the majority of these imports were from Ontario and Quebec. Icewines from B.C. only became a French import in 2011, at a value of $12,600.115 As the popularity of icewine is on the rise in Europe, B.C. could continue to explore this niche market; however, Canadian icewine exports to France were largely dominated by Quebec and Ontario in 2011. 116 B.C. producers will need to overcome the transportation advantages that these provinces have as a result of being situated closer to the east coast.

Switzerland Switzerland is one of the largest wine consuming countries in Europe.117 In 2010, Switzerland was ranked eighth in the world for the most wine imports (over $1 billion), getting the majority of the imports from Italy, France and Spain.118 Wine imports to Switzerland increased from 194 million L in 2009 to 197 million L in 2010. Seventy per cent of red wine consumed in 2010 was imported, and 60 per cent of white wine consumed was imported, as these wines are less expensive than domestic, premium wines. Domestic wines are generally preferred, however, as they are valued for their unique taste.119 Switzerland has over 15,000 hectares of vineyards, including some grape varietals that are unique to the country.120 Throughout the world, Switzerland is not generally considered a wine producing country, as most Swiss wine is consumed domestically.121 The principle of open markets was adopted by the Swiss in 2010, allowing other European nations to enter the Swiss market freely and creating more competition for domestic producers who produce generally more expensive wines than neighbouring countries.122 Swiss wine associations have been given until the end of 2013 to present their case for protecting domestic wine producers through custom duties or import quotas.123 Swiss wine is generally quite expensive, due to the uniqueness of the wine and the aversion to producing it in bulk quantities.124 Switzerland began exporting wine quite recently,125 and in 2010 were ranked 17th worldwide for wine exports.126 Switzerland was B.C.’s sixth largest export market in 2011, with $82,000 in exports. This was an increase of 251 per cent from 2010, which saw $23,000 in exports. In volume terms, exports increased from 300 L in 2010 to 1,800 L in 2011. However, wine exports to Switzerland still only accounted for one per cent of B.C.’s total wine exports. All the wine exported to Switzerland from B.C. was wine from fresh grapes, with sparkling wine accounting for the majority at $67,000 (81 per cent).127 Sparkling wine accounted for 13 per cent of total wine sales in 2011, showing a two per cent increase from 2010, and its rising popularity is seen as a major current trend. Currently the consumption of Cupli (a type of sparkling wine) is gaining popularity. Still grape wine accounted for the majority of wine sales at 86 per cent ($4.7 billion), demonstrating a one per cent increase from 2010. Red wine accounted for 66 per cent of still grape wine sales and 57 per cent of total wine sales, but experienced a one per cent decrease to $3.1 billion. Still white wine accounted for 32 per cent of total still grape wine sales, showing a four per cent increase to $1.5 billion. Rosé wines are projected to see a volume growth of three per cent between 2012 and 2017, and it is predicted that producers will attempt to

17

launch new rosé wines into the Swiss market to capitalize on this growing trend. Most Swiss consumers prefer to buy wine for home consumption, as off-trade sales accounted for 85 per cent of volume sales and 58 per cent of value sales (see Figure 11: Switzerland Off-Trade and On-Trade Sales). 128

Figure 11: Switzerland Off-Trade and On-Trade Sales

Units 2007 2008 2009 2010 2011







Prior to 2011, B.C. only exported small amounts of fresh grape wine to Switzerland; however, with sparkling wine becoming a major trend, 2011 marked the beginning of B.C.’s expanded market in Switzerland, largely exceeding the only other Canadian sparkling wine exports from Ontario and Quebec.129 Commercial production of sparkling wine began in Okanagan, B.C. in 1989 and since then, this wine has become the largest selling premium sparkling wine made in Canada.130 As the second largest wine exporter in Canada, with a deep history of expertise in producing high-quality sparkling wines, B.C. may find strong opportunities for further growth within the Swiss market.

CONCLUSION The global wine market is complex and diverse. In order to properly enter and be prosperous in an international wine market, it is important that B.C. producers know the trends and preferences of each country’s consumers. Most of the countries discussed in this report are possible export opportunities for B.C. wine, depending on the situation and the wine produced. Currently the second biggest export market for B.C. wine producers is the U.S. The U.S. is an appealing market to B.C. wine producers, due to the close proximity of the market as well as the fact that the U.S. is the main wine market in the world, in both volume and value terms. This is expected to continue, with wine consumption increasing by 10 per cent between 2011 and 2015. Many of the Asian markets are seeing an increase in average disposable income, as well as a sharp wine education curve. Wine is seen as a symbol of status and wealth in Asian countries, with the consumer appearing more affluent while drinking an expensive glass of wine. Canadian icewine is increasing in popularity within Asian markets, as it is seen as a luxurious and high-end wine. It is important to remember that business is very relationship-based within Asia, and due to this, deals can take longer to close than in other markets. The rising middle class in China presents increased opportunities for B.C.’s icewines, which have been enjoyed there for several years as a luxury gift item. China’s middle class is also beginning to consume icewine products more often. The Chinese wine market is very large, demonstrated by the fact that while 80 per cent of B.C.’s wine exports in 2011 were sent to China, only one per cent of China’s total wine imports came from Canada. Countries such as France, Australia and Chile have already captured a large portion of China’s wine market, which could present a challenge for B.C. exporters. Another recent challenge for Canadian icewine entering China has been counterfeit and imitation products. China does still present as a feasible B.C. wine market, as exports from B.C. to China have seen a five year average increase of 152 per cent since 2006 and measures are being taken to ensure that counterfeiting will be controlled in the future. For example, some companies are choosing to include a unique tag with an identification number and design over each cork to prove the bottle of wine is authentic.

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Hong Kong is the third largest market worldwide for B.C. wine, and the market is consistently and dramatically expanding. In 2011, over two thirds of B.C.’s wine exports to Hong Kong were icewine. B.C.’s wine export gap to Hong Kong is $1.2 billion, demonstrating how much of the market is currently captured by other country’s exports. In 2009, Hong Kong surpassed London as the world’s largest fine wine trading centre and the most profitable global wine auction market. Hong Kong has many internationally recognized wine shows, which attracts local buyers and demonstrates the nation’s potential as a port way for products to enter China. Hong Kong consumers are very aware of international products, due to the nation’s status as a major tourism and international business hub, resulting in demand for differentiated products. The per capita consumption average of two L per year is expected to increase to six and a half L by 2014. It is suggested that to enter the Hong Kong market, B.C. wine exporters do so through the many tradeshows and events that offer opportunities to showcase products to buyers, distributors and consumers. This provides an opportunity to gain valuable first-hand knowledge of which wines could be most successful in this market, and how B.C. wines can be positioned to ensure they are differentiated from the many other products on the market. B.C.’s wine exports to Japan increased rapidly in 2011, showing that B.C. wine producers are already taking advantage of this major emerging wine market. Grape wine is rapidly growing in popularity in Japan, presenting an excellent opportunity for B.C. exporters. Non-grape wine has been the largest seller in Japan throughout history, in particular a rice wine known as sake. B.C. exporters could have difficulty in the Japanese market when it comes to non-grape wine, as consumers prefer domestic varieties and opportunities for international producers is very rare. Similar to Hong Kong, Japan has multiple international trade shows, presenting an opportunity for B.C. wine producers to showcase their products before making a commitment to enter the market. With 53 per cent of the world’s total wine off-trade sales in 2011 occurring in Europe, it is easy to see why this large market holds some potential for B.C.’s wine exporters. Wines produced in Europe, known as Old World Wines, have a very secure position in the international market, as many European countries have a long tradition of winemaking. There are approximately 20 international wine shows held annually within Europe. B.C. has a very limited history of exporting wine to France. While Quebec and Ontario have traditionally been the largest suppliers of icewine to France in both value and volume terms, B.C. only just began exporting icewine into this market in 2011. Icewine in France is a niche market that could continue to be explored by B.C. wine exporters, however other markets discussed in this report present more potential for B.C. icewine products. With the dominant preference by consumers for domestic wine in France, this market could be difficult to penetrate for B.C. producers. Within Europe, Switzerland is one of the largest wine consuming countries. Although domestic wine is preferred by consumers, 70 per cent of red wine consumed and 60 per cent of white wine consumed in 2011 was imported. Sparkling wine has recently become a major trend within Switzerland, and B.C. began exporting sparkling wine to this market in 2011. B.C. has a deep history of making sparkling wine and is a leader in sparkling wine exports, including exporting more in 2011 to Switzerland than Ontario and Quebec. This presents a major opportunity for B.C. exporters. In particular, a type of sparkling wine known as Cupli is rapidly gaining popularity within this expanding market. Once a B.C. exporter determines that there is an opportunity for their product to enter a new market, it is important to develop an appropriate export marketing strategy. This is done by conducting a deeper analysis of opportunities, threats and challenges of the market by collecting appropriate market information. This report is intended to provide information for the foundation of this analysis. It is necessary to conduct further sector-specific research before making a commitment to compete in these markets. After B.C. exporters have developed an export strategy and are ready to connect with a buyer in a new market, they can attend tradeshows in the market, participate in a government-led trade mission, or reach out to federal Trade Commissioners at the Canadian embassies and consulates. For more information on key tradeshows and how the Federal Government can assist B.C.’s wine industry in taking advantage of emerging export opportunities, please visit AAFC’s Agri-food Trade Service Website (http://www.ats.agr.gc.ca/intro/index-eng.htm).

http://www.ats.agr.gc.ca/intro/index-eng.htm

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APPENDIX A: CANADIAN WINE EXPORTS BY PROVINCE

CANADIAN EXPORTS TO ALL COUNTRIES Province/Territory Unit 2006 2007 2008 2009 2010 2011

All Provinces $ 19,161,325 19,624,305 20,291,031 19,160,267 27,903,332 36,869,391

Ontario $ 15,633,639 16,450,110 15,791,058 11,719,854 16,653,385 23,159,015

B.C. $ 2,489,641 1,596,652 1,399,673 3,068,549 5,514,432 5,758,068

Quebec $ 190,400 578,811 1,903,883 2,833,311 3,827,821 5,666,318

Alberta $ 823,297 998,732 1,182,295 1,400,468 1,862,905 1,696,745

Nfld. and Labrador $ - - - 138,085 34,727 365,213

Nova Scotia $ - - 7,032 - 8,268 141,243

New Brunswick $ - - - - - 50,530

Nunavut $ - - - - 1,794 32,259

P.E.I. $ 13,155 - 1,948 - - -

Manitoba $ 11,193 - 5,142 - - -

All Provinces L 1,330,866 2,832,563 7,786,681 10,710,538 14,893,263 21,642,309

Quebec L 28,009 1,549,917 6,649,265 9,081,485 10,286,875 10,752,229

Ontario L 718,644 655,997 572,473 811,798 3,588,641 8,714,052

Alberta L 434,975 491,782 492,562 598,372 643,316 1,365,260

B.C. L 126,257 134,867 71,465 176,395 363,414 577,656

Nfld. and Labrador L - - - 42,488 10,685 225,044

Nova Scotia L - - 162 - 309 4,833

Nunavut L - - - - 23 3173

New Brunswick L - - - - - 62

P.E.I. L 21,664 - 34 - - -

Manitoba L 1,317 - 720 - - - (Source: Global Trade Atlas, November 2012)

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APPENDIX B: WINE EXPORTS FROM B.C.

B.C. EXPORTS TO ALL COUNTRIES

Country Unit 2006 2007 2008 2009 2010 2011

World $ 2,489,641 1,596,652 1,399,673 3,068,549 5,514,432 5,758,068

China $ 69,441 234,952 748,573 2,252,978 4,358,841 4,631,991

United States $ 1,043,100 531,894 209,198 171,169 192,158 408,010

Hong Kong $ 24,649 60,134 137,378 74,352 393,617 210,411

Taiwan $ 531,941 413,393 48,901 42,260 291,392 180,220

Japan $ 364,867 262,432 77,725 128,073 55,032 170,192

Switzerland $ 34,063 - - 39,083 23,386 81,968

South Korea $ 39,840 19,200 88,375 170,893 59,598 51,768

France $ - - - - - 12,600

Philippines $ - - - - - 4,170

Malaysia $ 26,794 14,166 - 34,299 - 3,360

Netherlands $ 56,917 36,232 9,329 23,048 5,892 2,878

Nigeria $ - - - - - 500

New Zealand $ - - - - 5,760 -

Singapore $ 38,101 3,804 - 31,762 7,520 -

U. Arab Emirates $ - - 6,301 33,083 - -

United Kingdom $ 72,279 5,278 - 28,886 37,162 -

Belgium $ 57,168 - 100 - - -

Denmark $ 35,071 5,060 44,944 - - -

Vietnam $ 1,704 - - - 50,000 -

Afghanistan $ - - 1 - - -

Greece $ - - 4,872 - - -

Australia $ 5,381 5,763 - 24,333 - -

Fiji $ - - 1 - - -

Germany $ 10,163 4,344 22,175 9,416 24,069 -

Italy $ 42,203 - - - - -

Mexico $ 18,691 - 1,800 4,914 - -

Cayman Islands $ - - - - 4,333 -

Panama $ - - - - 281 -

Sweden $ 17,268 - - - - -

Spain $ - - - - 5,391 -

China L 1631 16005 38962 146110 290243 512328

United States L 29386 14880 7680 4619 7961 29155

Taiwan L 17060 37705 1774 675 15063 17148

Japan L 20154 61815 2903 2959 3087 11070

Hong Kong L 450 1202 2613 2305 15279 3901

Switzerland L 2008 - - 411 297 1772

Philippines L - - - - - 1283

South Korea L 712 266 15087 5467 736 608

Netherlands L 1326 1305 360 1710 180 162

France L - - - - - 100

Nigeria L - - - - - 81

Malaysia L 540 311 0 720 - 48

Fiji L - - - - - -

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Belgium L 8558 - 6 - - -

New Zealand L - - - - 536 -

Singapore L 689 470 0 574 700 -

Spain L - - - - 32 -

Afghanistan L - - - - - -

Cayman Islands L - - - - 135 -

Panama L - - - - 26 -

United Kingdom L 3004 32 - 1192 1808 -

Australia L 978 434 - 3276 - -

Greece L - - - - - -

Mexico L 298 - 45 142 - -

U. Arab Emirates L - - 180 4968 - -

Vietnam L 54 - - - 25935 -

Denmark L 4752 316 743 - - -

Sweden L 9867 - - - - -

Germany L 270 126 990 1267 1396 -

Italy L 24520 - - - - - (Source: Global Trade Atlas, November 2012)

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APEPNDIX C: SALES OF WINE BY CATEGORY, ALL COUNTRIES IN CAN$ MILLION

United States

Wine Type 2006 2007 2008 2009 2010 2011

Fortified wine 1,782.36 1,817.92 1,790.43 1,656.38 1,616.78 1,581.71

Port 134.26 141.15 145.39 135.44 134.65 134.45

Sherry 59.10 56.44 55.95 52.80 52.21 51.61

Vermouth 369.87 379.32 378.73 359.62 346.13 338.35

Others 1,219.23 1,241.00 1,210.47 1,108.42 1,083.89 1,057.30

Non-grape wine 207.05 230.39 248.52 239.45 264.97 273.34

Fruit wine 41.27 43.64 44.92 45.31 47.38 48.66

Rice wine 165.87 186.66 203.60 194.14 217.59 224.68

Sparkling wine 2,593.11 2,639.11 2,564.35 2,505.35 2,640.10 2,777.90

Champagne 1,101.53 1,075.92 954.47 846.90 896.55 931.51

Other sparkling 1,491.59 1,563.29 1,609.98 1,658.35 1,743.55 1,846.48

Still light grape wine 24,506.21 26,712.81 27,963.46 27,550.35 28,466.30 29,164.67

Still red wine 11,656.79 13,110.55 13,774.04 13,639.98 14,060.68 14,389.47

Still rose wine 2,298.01 2,312.48 2,276.63 2,107.70 2,023.49 1,966.65

Still white wine 10,551.52 11,289.77 11,912.79 11,802.76 12,382.14 12,808.55

Total 29,088.82 31,400.13 32,566.86 31,951.43 32,988.14 33,797.62

China

Wine Type 2006 2007 2008 2009 2010 2011

Non-grape wine 8,889.42 9,634.99 11,078.36 11,891.42 13,371.93 15,130.37

Economy rice wine 650.46 674.63 749.65 783.11 841.93 911.59

Lower mid-range rice wine

2,063.86 2,246.85 2,635.38 2,880.35 3,236.80 3,675.09

Premium rice wine 2,585.97 2,799.07 3,198.16 3,403.28 3,831.70 4,333.62

Upper mid-range rice wine

3,589.11 3,914.44 4,495.17 4,824.66 5,461.49 6,210.08

Sparkling wine 63.68 86.81 98.75 70.16 139.59 157.43

Champagne 58.61 81.47 92.73 63.65 132.25 148.99

Other sparkling 5.07 5.34 6.04 6.51 7.34 8.43


Still red wine 3,526.17 4,818.46 6,409.42 8,405.73 10,953.60 14,400.86

Still rose wine 421.31 439.02 487.94 515.97 563.75 625.90

Still white wine 1,159.30 1,456.88 1,851.06 2,333.58 2,969.63 3,808.46

Total 14,059.91 16,436.16 19,925.53 23,216.86 27,998.49 34,123.03

23

Hong Kong

Wine type 2006 2007 2008 2009 2010 2011

Fortified wine 16.94 16.35 16.18 16.11 16.35 16.76

Non-grape wine 22.17 22.45 23.81 23.73 24.68 24.33

Rice wine 7.84 7.98 8.16 8.23 8.37 8.77

Sake 14.33 14.48 15.66 15.48 16.31 15.56

Sparkling wine 44.24 45.99 49.76 46.58 50.02 55.38

Champagne 39.55 41.47 45.23 42.20 45.57 50.58

Other sparkling 4.69 4.53 4.54 4.38 4.45 4.78

Still light grape wine 201.13 207.01 221.38 234.10 249.03 275.38

Still red wine 135.10 139.92 151.94 160.96 172.05 191.27

Still rose wine 8.28 8.49 8.41 8.54 8.73 9.15

Still white wine 57.74 58.60 61.03 64.58 68.25 74.96

Total 284.47 291.80 311.14 320.50 340.08 371.84

Japan

Wine Type 2006 2007 2008 2009 2010 2011

Fortified wine 63.76 67.37 66.17 57.75 54.14 51.73

Non-grape wine 17,442.54 17,015.44 16,418.71 15,575.33 14,303.66 13,910.24

Chinese wine 125.12 123.92 122.72 113.09 111.89 105.87

Fruit wine 84.22 86.62 84.22 73.39 68.58 62.56

Sake 17,157.41 16,713.47 16,097.48 15,245.68 13,834.45 13,272.60

Other non-grape 77.00 92.64 115.50 143.17 288.74 469.21

Sparkling wine 2,435.07 2,816.46 2,808.04 2,490.42 2,485.60 2,421.84

Champagne 1,673.51 1,965.87 1,898.49 1,684.34 1,673.51 1,535.16

Other sparkling 761.56 850.59 909.54 806.08 812.09 885.48


Still red wine 3,572.00 3,667.05 3,516.66 3,472.15 3,399.96 3,367.48

Still rose wine 511.32 538.99 545.00 590.72 617.19 642.46

Still white wine 1,513.50 1,545.98 1,545.98 1,712.01 1,748.10 1,808.26

Total 25,538.20 25,652.50 24,902.97 23,897.18 22,607.45 22,203.21

24

France

Wine Type 2006 2007 2008 2009 2010 2011

Fortified wine 3,164.41 3,099.67 3,004.79 2,906.85 2,820.27 2,783.24

Non-grape wine - - - - - -

Sparkling wine 10,232.46 10,794.31 10,916.39 10,747.58 11,162.84 11,535.07

Champagne 7,687.75 8,163.67 8,265.83 8,074.41 8,396.71 8,695.14

Other sparkling 2,544.71 2,630.64 2,650.69 2,673.29 2,766.13 2,839.94


Still red wine 12,301.11 11,978.94 11,698.65 11,316.33 11,523.32 11,649.61

Still rose wine 2,371.17 2,429.91 2,555.82 2,711.99 2,799.59 2,941.20

Still white wine 3,175.77 3,182.03 3,223.92 3,237.96 3,245.50 3,268.10

Total 31,245.05 31,484.86 31,399.56 30,920.71 31,551.52 32,177.10

Switzerland

Wine Type 2006 2007 2008 2009 2010 2011

Fortified wine 80.29 80.18 80.39 79.34 79.97 75.96

Non-grape wine - - - - - -

Sparkling wine 653.59 724.90 713.92 652.22 675.15 691.52

Champagne 434.50 489.43 455.10 399.00 418.44 432.70

Other sparkling 218.99 235.47 258.82 253.22 256.71 258.71


Still red wine 3,257.83 3,416.93 3,416.19 3,226.56 3,151.77 3,110.89

Still rose wine 78.60 81.98 87.47 90.64 92.96 95.60

Still white wine 1,301.91 1,377.86 1,411.14 1,388.00 1,429.63 1,492.90

Total 5,372.22 5,681.85 5,709.10 5,436.76 5,429.37 5,466.76 (Source: Global Trade Atlas, November 2012)

25

ENDNOTES 1 “The History of BC Wine...,” Doug Sloan’s – WineWise, http://winewise.weebly.com/the-history-of-bc-wine.html, accessed December 2012

2 “Wines of British Columbia,” British Columbia Wine Industry, http://www.winebc.org, accessed November 2012

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