Is the global wine slump almost solely due to China?

I recently wrote a post about The demise of the (old) wine industry. There seem to be two issues that combine to create this situation:
    — declining consumption of alcohol among younger drinkers
    — declining consumption of wine relative to other forms of alcohol, especially cheaper wines.

This topic is worth looking at again, because it is not necessarily as simple as it is often painted. The situation is usually as presented in this first graph. Things do not look too good (Global wine demand drops to 27-year low as high prices hit). The OIV (International Organization of Vine and Wine) estimated world wine consumption in 2023 at 221 million hectoliters (mhl), down 2.6% from 2022, and 7.5% below 2018.

Quite a number of wine commentators have looked at this situation, but not all of them are despondent. There are, indeed, a number of things to take into account, when evaluating this situation. I will start by looking at what seems to me to be the most important one (next week I will look at some others).

The situation at hand was highlighted by the OIV, as reported by Just Drinks: China drives decline in global wine consumption in 2023. They produced the following graph, based on the data from the OIV. They note that the fall in demand last year was particularly big in China, estimated at minus 25%. The OIV noted:

In China, approximately 24.7% less wine was consumed in 2023 compared to 2022, placing strain on an already diminishing world market. This figure has been declining since 2018 — when consumption sat at 17.6m hectolitres. The two decades prior were characterised by rapid growth in consumption. While Chinese wine consumption had risen sharply at the start of the century in line with a growing middle class, it shed more than 60% over the past five years to 6.8 mhl due to COVID-19 restrictions and price pressures which tend to have a bigger effect on younger markets like China.

I think that this graph has not been given the attention that it deserves. The only place with a wine consumption problem is China (as shown by the red line) — everywhere else has a static situation in terms of the volume of wine consumed, and has had for some years. So, the answer to my title question appears to be: Yes.

The current situation in China is therefore worth looking at briefly. The country’s wine-making actually dates back more than 4,000 years (Lenz Moser: ‘We arrogant Europeans can learn a lot from China’). China currently has 800,000 hectares under vine, making it the third-largest wine producer by area in the world. However, only 40% of the wines consumed in China are domestically produced, so imports play a key role (Sober times for China’s wine sellers). China’s modern wine market really began in 2001, when the country entered the World Trade Organization; and from 2004 onwards, wines, especially imported ones, entered a rapid growth period, until 2017.

In general, it is likely that the West is grossly out-competed by China (China has clearly won the first round):

The success of China is evident, but it also contains the seeds of its own downfall, eventually. China is using the BRICS as an economic lever to get the Global South on its side, getting their support and fortifying their own economy in turn, by increased trade with them, thus flanking both the Anglosphere and the European Union. It is a beautiful move by experts in the game of Go, where the goal is not to kill the opponent (chess), or to bluff him (poker), but to progressively capture enough physical space and resources to render him weak and impotent as times go by.

Nevertheless, there are problems in wine sales within China itself (Flash sale frenzy: the controversial strategy reshaping China’s wine market):

Driven by economic pressure and an oversupply of wine, these flash sales are becoming a lifeline for cash-strapped merchants while simultaneously posing challenges to wineries’ financial health and sustainable growth. According to industry experts, the recent downturn in the market has led to an excess of clearance wines, which these platforms are now selling rapidly at minimal prices.

This situation obviously has relevance to the problem of Australian wine getting back into China, after the removal of the import tariffs, as I discussed a few weeks ago (Is Australia likely to recover from the devastating loss of the China wine market?). Indeed, this situation is apparently even more complex than I discussed at the time (Jeremy Oliver, the Aussie wine critic most active in China, explains the post-tariff market). This is thus also a situation worth keeping an eye on.