'Hidden gem' countries present opportunities for wine firms

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Wine companies who were late off the mark in investing in China and South Korea could get a head start on competitors by edging into "hidden gem" markets.

 

According to Rabobank, the four "hidden gems " of Mexico, Brazil, Poland and Nigeria have the potential to become major wine markets.

 

But the analysis shows that while investing in these markets is risky, getting in early is the key to long-term growth.

 

The Mexican market has a strong economy and growth in the middle class population is boosting wine consumption trends. Wine imports grew at a 20% compound annual growth rate between 2006 and 2011. Volumes of wine imported from Brazil grew by nearly 30% percent in the four years from 2007.

 

Poland has also seen strong demand for imported wine, and low levels of corruption there make it an attractive option for foreign investors.

 

Nigeria, which requires a much higher appetite for risk, has seen wine imports grow at 16% CAGR in recent years, and steps have been taken by the government to modernise the economy and reduce social conflict. Its 170 million-strong population and large petroleum reserves give it a strong foundation for continued economic growth and increased demand for wine.

 

Stephen Rannekleiv, Rabobank food and agribusiness research analyst, said: "Wine companies are now facing the question of what to do with these four hidden gems. Although they present opportunities, each has a very different market with much uncertainty for traditional branded wine companies.

 

"Furthermore, along with the opportunities in these markets come risks, and the possibility that the opportunity may not be realised. The flip side is that early exposure to nascent markets gives a company hard-won experience and expertise as well as a head start on the competition that will likely emerge as the markets develop. Wine companies that manage these opportunities correctly have a chance at securing long-term profitable growth".

 

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