Young Brazilians take to wine

Brazil, one of the world’s largest economies, is slowly emerging from an economic crisis, a glass of wine in hand. Marcelo Copello reports.

Photo by Agustín Diaz on Unsplash Copy
Photo by Agustín Diaz on Unsplash Copy

Young people in their twenties and thirties dance to electronic music, each holding a plastic cup. So far nothing new – except that inside the cup is wine.

The scene took place in August at the Rio Wine and Food Festival, which is now in its seventh edition. It brought together 70,000 wine lovers, most young people who until recently had not drunk wine, and who look at it very differently from their elders.

It’s a sign of how wine consumption in Brazil is changing, growing and diversifying. 
 

The market at a glance

The only stable thing about the Brazilian economy is its instability: the Brazilian market suffered an enormous shock in 2014 and has been slowly recovering since 2017. It is, however, the eighth-largest economy in the world, with a GDP of R6.8 trillion ($1.63trn) and has grown 0.5% in the first quarter of 2019. The wine segment represents only 0.2% of GDP but its value is not negligible: it represents a market of R15 billion and almost 400m litres. Of this, almost 70% is imported, a segment that has grown more than 500% in value in the past two decades.

According to Nielsen Consulting Group, which audits the off-trade market and consumers’ homes, the typical wine buyer is a woman over the age of 56 with a monthly household income between R3,992 and R9,980; this group is known as C and represents 48.7% of the consumers. Another 40.2% are in the A and B classes, with income between R9,980 and R19,960 respectively.

The growing importance of young people to the wine market is undeniable. Research conducted by Grupo BACO with eCGlobal found 59% of young respondents (aged 18 to 24) agreed wine consumption was increasing among their age group. They said 32% drank wine only occasionally, 15% consumed it monthly, 21% bi-weekly, 23% weekly and 9% daily.

Per capita consumption in Brazil is still low, at an average of about two litres per inhabitant, according to Nielsen. Wine has penetrated 47% of Brazilian households, versus 65% for beer, a mature product. This represents growth of 1.5% in wine consumption over the past 12 months and equals one million new consumers. Even more interesting is that 22.3% of off-trade wine purchases are made by people who have never bought wine before. The average value of a bottle varies by channel and origin. In the off-trade – where Brazilian wines have the biggest share and are made mostly from non-vinifera grapes – the average spend per bottle is R12.20 ($2.95).

In imports, the average FOB value in 2018 was $28 per case, which is nowhere near the $34.20 per case of 2013, but better than $26.70 per case in 2017. When it comes to imported wine, 73% of the market is represented by wines that cost less than $30 per case FOB; by the time they reach the shelves however such wines cost an average of R70 per bottle. Imports with an FOB case price above $50 represent only 7% of the market but account for 26% of the business, or about R2bn.

Consumption is quite regionalised, with the south and south-east regions accounting for about 80% of the total volume. Rio Grande do Sul mainly drinks Brazilian wine, while Rio de Janeiro is the leader in imported wines. With São Paulo, Brazil’s biggest city, already quite saturated, the Centro-Oeste, Norte and Nordeste are the regions where consumption is growing most quickly, though often forgotten by those who invest in the Brazilian market. While the per capita consumption is less than a bottle a year, this market is enormous, comprising some 80m people. 
 

What are people drinking?

Which Brazilian has never had a mug of demijohn wine? These sugary reds that turn the tongue blue, made with non-vinifera varieties, represent about 60% of all wine drunk in the country. They are usually the consumer’s gateway to the pleasures of Bacchus, the next step being basic South American reds, then other styles.

“I don’t know anything about wine, but I know good wine is red wine,” has been a stock phrase for more than three decades, since blue-bottled German white wines stormed into the market in the 1990s. This red dictatorship is, however, gradually easing. One category that already has a captive audience is sparkling wine, driven by domestic products. Sparkling wines represent 7.4% of the market, with local wines accounting for 77.3% of this niche.

According to Nielsen, alcoholic beverages that recorded the fastest sales growth in the year to June 2019 were gin (158%), sparkling wines (19%), still wines (12%) and beer (6%). Bubbly wine, and wine grape juices, are the only Brazilian wine categories showing growth. Red wines still dominate the imported still wine market, accounting for 77%, followed by whites (18%) and rosés (5%). Pink wines in general are experiencing explosive growth, at 212% over five years.

In terms of style, traditional Brazilian consumers still prefer the full-bodied reds that come in heavy bottles with natural corks. However, Millennials, female consumers and new wine drinkers do not follow many traditional rules and are more open to new styles.

There is also a growing awareness of organic, biodynamic and natural wines. Although there are no official statistics, an indication of the growing importance of this niche is the Naturebas fair, an annual event created by sommelier Lis Cereja in 2013 in São Paulo. According to Cereja, attendance has risen from 100 to 2,000, while exhibitor numbers have grown from 17 to 100. “The number of natural wine producers in Brazil has also grown from 10 in 2013 to 30 wineries now,” she adds.

For Brazilians, wine is not a daily accompaniment to food but a social drink. “Experience” is the buzzword and wine events are on the rise. According to a Grupo BACO/eCGlobal survey, 26% of respondents drink wine either at their own home or at a friend’s home; 13% drink in winter; 15% at restaurants with friends or family; 12% on a romantic date; 10% at parties; and 9% at business meals.

Consumers generally buy wine on the same day they consume it. According to Nielsen, 42% of sales are made on Fridays or Saturdays. In terms of festive dates, the best days for imported wines are Father’s Day, Valentine’s Day and Black Friday. For local wines, the best times are Christmas and New Year’s Eve, when much of the national production of sparkling wines is sold.

Domestic product claims 66.2% of the market, with non-vinifera wines accounting for 54.9% of it. Imported wines dominate in value, with a 66.4% share, and have been growing every year for three decades in volume and value. In 2018, imports grew 3.2%, three times more than GDP.

According to figures from the Anuário Vinhos do Brasil (Wines of Brazil Yearbook), Chile has been the leader for about 15 years when it comes to imported wines but has been gradually losing market share. It fell from 47.2% in 2016 to 42.4% in 2018.

Carlos Cabral, wine consultant for Brazil’s largest importer, Grupo Pão de Açúcar, says: “The new consumer is getting tired of Chilean wine and already realises its sameness. He sees in Chilean wine something mass produced. I am afraid that what happened to the Germans in the blue bottle will happen to Chile. A migration to the wines of Portugal is happening.”

Portugal, second in volume and third in value, has become the European substitute of choice for many South American wines, but its market share has grown mainly in the low value sector, which could damage the country’s image in the long term.

Second in value is Argentina, which lost half of its share in recent years, not because of the quality of its wine or consumer perception, but because of its internal crisis and exchange rate, which disrupted supplies and reduced the price of its wines.
 

Where wines are bought

Brazilian sales channels have changed a lot since the 2014 crisis. The trend clearly points to direct imports from large retailers, which already account for 31% of imports, compared to 15% in 2014. In the off-trade, the trend of the moment is to buy from cash and carry outlets – wholesale warehouses – whose sales grew 9.3% in the last 12 months.

Internet traders are also relevant and import 10% of the wines that enter the country; according to the Grupo BACO/eCGlobal survey, 30% of respondents have already purchased wine online and 19% via an app.

In Brazil, sales channels are highly associated with the origin of the product. Cash and carry warehouses and hypermarkets offer mostly domestic products, which generally cost 60% less than imported ones, so stock mostly non-vinifera wines. Supermarkets, delis, bars and restaurants have more imported wines. In short, the off-trade tends towards the domestic, while the on-trade tends towards the imported.

And when it comes to dance parties and festivals? Then anything goes. What’s important is that wine is now on the list. 

Marcelo Copello

This article first appeared in Issue 5, 2019 of Meininger's Wine Business International magazine, available in print or online by subscription

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