A snapshot of Brazil's wine market

Friday, 11. August 2017 - 12:00

Despite the financial and political turmoil that has gripped Brazil – including a deep recession, major corruption scandals, and the 2016 impeachment and removal from office of President Dilma Rousseff – the wine market showed surprising resilience throughout 2015 and 2016. In 2015, the volume of imported wines remained steady, although there was a decrease in value, partly explained by the devaluation of currency. This means that the increase in volume was largely seen in the low price segment of up to $29.90 per 9-L case, to the detriment of higher-quality wines.

This was down to consumer behaviour, as consumers went shopping with a fixed price tag in reais (Brazil’s currency) rather than with brands in mind. Importers therefore looked for cheaper wines in order to keep serving consumers at this reais price. Unfortunately, the result was that consumers began to experience a downgrade in their wines.

The silver lining
Then came 2016, which saw a surprising increase in still wine volume – 9.9m 9-L cases in 2016 versus 8.9m cases in 2015 – and an increase in the free-on-board (FOB) total value for still wines, or $264m in 2016 versus $257 in 2015. Champagne, on the other hand, saw a colossal drop of 40% in volume and 47% in value. Overall, however, the resilience of the wine market through 2015 and 2016 proves that Brazilian consumers have embraced wine as an essential part of their lives.

Supermarkets have played a growing role as importers supplying the demand for cheaper wines, and the new store assortments available in the chains have exposed wines to millions of consumers who visit the stores weekly. For example, Grupo Pão de Açúcar became the second-biggest importer of wine in 2016, with volume of 815,000 cases and a value of $23.6m, coming second behind VCT Brasil, the importer of Concha y Toro, at 1.1m cases and an FOB value of $32m. Of the 30 biggest wine importers in 2016, nine were supermarket chains.

The overall Brazilian wine market in 2016 was 343.7m L, of which Vitis vinifera wines accounted for 129m L, and of which 92.9m L were imported. Early attempts at growing vines in Brazil failed, until a cultivar of Vitis labrusca was introduced in 1840 that made winemaking possible. As a result, Brazilian wines were, up until the 1970s, largely made from labrusca. It is a significant sign of the maturing of the wine market that Brazilian producers are now focusing on Vitis vinifera wines, and diverting their labrusca grapes to grape juice. Thanks to a perception that grape juice is healthy, consumption of juice has been rising in Brazil, offering wineries two sources of income: wines made from Vitis vinifera, and popular grape juices made from labrusca.

In 2016, 78.5% of imported wines were reds, 19.3% were whites, and 2.2% were rosé; in 2015, the numbers were 81.8% red, 15.9% white, and 2.2% rosé. The increase in white wine consumption is a slow but steady trend, while the global passion for rosé has not yet arrived in Brazil.

The market today
This year is following the same pattern, with imports in the first four months increasing 40% in volume and 22.6% in value compared to the same period in 2016. The biggest winners have been Chile and Portugal, with Spain, the USA, and Uruguay increasing their market share. Argentina has lagged behind, while sales of Champagne have plummeted.

Meanwhile, the sales of Brazilian wines fell by 30% for still wines and 21% for sparkling wines over the same period. The increased valuation of the Real coupled with the decline in the euro meant a decrease in prices of imported wines. “This decrease in sales is due to higher costs in the 2016 vintage, when climate factors led to a decrease of 57% of the grape production volume,” explained Oscar Ló, vice president of the Brazilian Institute of Wine (Ibravin). “This led to higher wine price tags. Our perspective is that by the end of the year, sales are going to be closer to 2016 levels with the more favourable 2017 harvest.”

Trained sommeliers are now being delivered to the market by the thousands every year, coming from such organisations as the Association of Brazilian Sommeliers (ABS), WSET, and the joint programme between two universities in Italy and Brazil, ALMA-SENAC. Today, no good restaurants in the state capitals lack a sommelier, which is a major change within only a few years.

While the typical wine consumer remains the 35- to 55-year-old male, younger consumers (25- to 35-years-old) are joining the market, along with more female consumers.

Other trends
Brazilians have fallen in love with oenotourism. Today, wine and wine tourism has become the second-biggest industry in Bento Gonçalves – the heart of Brazilian wine production – just behind the local furniture industry.

Ten years ago small importers from the interior of Brazil were trying to get into São Paulo, the capital, because that’s where the wine drinkers were. Brazil, however, is rich in natural and agricultural resources, and sales of these commodities on the world market is making the inhabitants of the interior wealthier. While the major consumer market remains São Paulo, customers outside the city are also beginning to clamour for wine. At a recent tasting in the city’s upscale Fasano restaurant, the 25 people who attended paid $3,000.00 each to taste ten 100-point Parker wines. Of this group, 20 of them came from outside São Paulo.

Due to the high demand, a second dinner had to be scheduled, and that itself quickly resulted in a list of people waiting to buy a place at the table. Today, importers from São Paulo are visiting the interior to explore this unknown wine consumer territory.

Some wineries, such as Chile’s Luis Felipe Edwards, have taken note of the trend and established an operation under Eugenio Echeverria, the owner of one of Brazil’s WSET schools. The enterprise has achieved astonishing growth by selling wines directly to regional supermarket chains across Brazil.

Pure internet players had most of the market growth to themselves up until 2016, as more consumers bought wines through ecommerce. Now, however, the boundaries between internet and bricks-and-mortar companies are blurring, with dot-com companies becoming importers, and established importers investing in online sales.

The wine clubs that appeared by the dozens several years ago mostly proved unviable and have vanished. But some, such as Wine.com.br and Evino, achieved thousands of members. The wine club hasn’t gone away, however – some of the high-circulation media outlets have got into the wine club market, with Veja+Concha y Toro, Paladar+Grand Cru, and Caras+Adega (the wine club of my own company) being the most visible ventures.

Speaking of large media outlets, the ‘Be a Chef’ trend of the last decade is receiving a push as gastronomy-oriented TV programmes grow in importance. More people are looking to food as an element of lifestyle, which will further open opportunities for the wine industry. Other industries such as specialty beers have already spotted the opportunity and are fighting for this market segment, but with little success.

All in all, the wine trade is experiencing one of the most interesting and frenetic times ever in the Brazilian market, with investment funds and other big investors getting into businesses such as Wine.com.br, Evino, Grand Cru, and, more recently, Winebrands. Of course, not every importer has a reason to celebrate, and they’re not all going to make it over the next few years, but as the American stock market adviser Jim Cramer says, “there is always a bull market somewhere”.
Christian Burgos

This is an extract from a longer feature about the Brazilian market, which includes information about Brazilian distributors. To see the entire article, you can buy a single issue of the magazine, Issue 3, 2017, Meininger's Wine Business International.