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Significant in exports: 6 terms to define wine

CONTENTS
Global exports
French exports
How qualifying wine

Both an agricultural product and a cultural good, both anchored in local economies and traded on international markets, both regulated and promoted as heritage, wine is indeed at the intersection of many areas.

Understanding this sector, the changes in supply with the waves of emergence of new producing countries, against the backdrop of global warming and environmental issues, the new sociology of the global consumer, increasingly Asian and American, but also the strategies of the brands, the evolution of regulations and the organization of the markets, are all challenges to take up.

READ MORE Global Economics: Critical Trends and Risks

Wine: an agricultural product, a commodity, a luxury good, a cultural object, a financial asset, a work of art?

Wine is at once an agricultural product, a luxury good, a standardized manufactured product, a cultural object, and has even become an investment medium listed on the stock market. Just like the product itself, the wine economy is plural, complex and fascinating.

Some producers, and even some countries, such as Spain, focus on quantity and market wine at low prices, sold in bulk as a standardized product. Others, like the majority of French producers, have a strategy in terms of quality, which brings wine closer to a luxury good.

One of the most characteristic aspects of this demand, both cause and consequence of the variety of the offer, is its diversity: not everyone has the same tastes and does not consume the same wines. Since the post-war period, a taste for “refined” wines has developed and become more and more democratic. Today, wine is even considered as a cultural good.

Wine, a financial asset

The evolution of the global wine industry mirrors the changes of our times, in such a way that it reflects the environment of the world economy. On the other hand, it is influenced by the evolution in economic cycles. With the financialization, wine has obtained another title, that of an alternative financial asset. The investors induce an additional demand for prestigious wines outside the consumption and collection. Investor behavior, diversification and speculation can contribute to the evolution of prices. As a result, the price of wine is no longer determined by its fundamentals (time, terroir, know-how), it also responds to various It also responds to various macroeconomic and financial factors when it evolves over time on the market.

Macroeconomic factors can influence wine markets directly and indirectly. When macroeconomic shocks occur, financial markets react immediately. Their reactions will impact wine markets (especially fine wines) through channels such as the wealth effect and volatility transmission. These macroeconomic factors can directly affect the wine markets. However, the response of wine markets will be delayed because wines do not have as much liquidity as other financial assets.

The growing demand in emerging countries has significantly affected the wine industry, as well as the weakening of the U.S. dollar further consolidates the purchasing power in these countries. As a result of financialization, the relatively abundant supply of money combined with lower interest rates in real terms has favored investment in high-end wines. As a result, the price has fluctuated more. Thus, it is crucial to conduct a study devoted to the behavior of wine prices under the influence of financialization.

The price dynamics of each type of wine are different: while the price of low quality “bulk” wines has tended to rise since the end of the 2000s, the price of “fine” wines has tended to stagnate since 2012 after a sharp drop that year, which followed almost ten years of sustained increases. The trajectory of fine wine prices raises the question of the “financialization” of wine. Financialization refers to the phenomenon of capitalization of wine, bought as an asset, either to be resold at a higher price, or to serve as a store of value, and not to be consumed. Wine, as a “tangible” product likely to “improve” over time, can appear as a fairly safe investment. The development of this practice entails risks, notably by disconnecting the price of wine from the evaluation of its quality for consumption (through, for example, the phenomena of speculative bubbles).

The evolution of the global wine industry mirrors the changes of our times. The world activity has fallen heavily in 2020, facing a decline in global demand and constraints on the productive system, consequences of containment measures but also voluntary distancing behavior.

In contrast to previous downturns, the downturn in activity has been particularly marked for service activities because of their higher content of social interaction and thus their sensitivity to containment measures.

In emerging and developing countries as a whole, the contraction in activity in 2020 was less severe than in advanced countries, at -2.4% according to the IMF, but with significant disparities between countries. The recovery would be much more gradual. By 2022, the GDP gap compared to the pre-pandemic projection would be almost twice as large for emerging and developing countries (-6% according to the World Bank) than for advanced economies (-3.6%).

9% of world exports are devoted to food products

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World exports have almost doubled in the last decade, benefiting all countries in the world. The top ten exporters have all benefited from the resumption of export growth, recording positive developments of between 2% and 5% in 2019. The podium remains unchanged, consisting of the United States (9.2% market share), the Netherlands (7%) and Germany (5.5%). France retains its 6th place with 4.6% market share.

France Focus – Exports of Goods

-9.6%: this is the magnitude of the shock that international trade suffered in 2020 due to the COVID-19 pandemic, according to the IMF. This major shock, of an unprecedented magnitude in our history, has profoundly disrupted the global economy and international trade.
France has not been spared by this decline in world trade. France has seen a decline in both its exports of goods (-15.9%) and its imports (-13%). The goods deficit will deteriorate by €7.3 billion in 2020 compared to the previous year, reaching -€65.2 billion, erasing the recovery recorded in 2019.

Exports of goods, by industryAmount (YoY growth)Percent vs. total
Equipment goods€ 80.3 bn (-12.9%)19.2%
Transport equipment€ 79.1 bn (-33.3%)18.9%
Other industrial products€ 67.1 bn (n/a)16.1%
Agribusiness€ 62.2 bn (-3.4%)14.9%
Chemicals and cosmetics€ 54.0 bn (-9.3%)12.9%
Pharmaceutical€ 35.3 bn (+4.7%)8.4%
Fabrics€ 25.5 bn (-10.6%)6.1%
Energy€ 12.1 bn (-33.1%)2.9%
Miscellaneous€ 2.6 bn (-24.2%)0.6%
Total export of goods€ 418.1 bn (-16.0%)100%
French Diplomacy – export of goods 2021

The wine & spirits industry = 3.3% of the total French export.

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French agrifood exports amounted to €62.2 billion in 2021, a 45% growth over the last decade. They are one of the main strengths of France’s foreign trade, as nearly 15% of the French exports are generated by this sector. France’s food surplus grew again in 2019 to €7.9 bn. This was driven in particular by the growth of products from the food industry, which represent 75% of the sector’s exports.
Wines remain the most exported products (15% market share), ahead of cereals (10%), dairy products and spirits (8% each).

Export of AgribusinessAmount (YoY growth)Percent vs. total
Agriculture€ 15.4 bn (-0.6%)3.7%
Drinks, incl. wine & spirits€ 15.1 bn (-12.2%)3.6%
Other products€ 31.7 bn (+1.2%)7.6%
Total Agribusiness exports€ 62.2 bn (-3.4%)14.9%
French Diplomacy – export of agrifood 2021

Wines and spirits are the flagship of the French food industry and the driving force behind our food exports (15% and 8% respectively in 2019).
France dominates world wine exports, having maintained a market share of 30% over the last decade, or nearly of 30% over the last decade, representing nearly 10 billion euros of wine exports in 2019 (+26% compared to 2014), of which 62% were still wines still wines and 35% sparkling wines.
With a 17% market share, France is the 2nd supplier of spirits in the world after the United Kingdom. The sector’s exports are dynamic (+41% between between 2014 and 2019), particularly to the United States which alone account for more than 40% of French exports.

France: 24% market share in world wine and spirits exports

Business France