While French wines are fairly successful across most price levels, it is in the premium fine wine end of the market where they enjoy a particularly strong leading role. Classic regions such as Champagne, Bordeaux and Burgundy are synonymous with luxury and are considered aspirational products continuing their gain in popularity in developing wine markets such as India and China. Even for everyday drinking wines, some cache is attached to the origin, ‘Made in France’.

 

Figures tell one tale, but trends seen in more mature wine centres such as Hong Kong, Singapore and Japan, reveal a concern: The polarization of top, expensive wines on one end, dominated by French wines, while on the other hand, affordable everyday wines are leaning away from French toward more friendly New World wines. The demand for reputable French chateaux and domaines are pushing fine wine prices through the roof. Meanwhile, Vin de Pays wines engaged in a price and taste war are losing market share to New World wines. Sadly, the options between the two extremes are sparse. 

 

 

For the top French producers, Asia is the next frontier. In Tokyo, French wines make up nearly the entire wine list in fine dining restaurants across the city. Hong Kong and Singapore are not that different. Hong Kong’s recent abolition of wine duties has spurned the growth predominantly at the fine wine end of the market, with value of wine imports increasing by nearly 100% in 2008 from 2007. Fine wine merchants from North America, the United Kingdom, Germany, France and Switzerland, along with international auction houses, have established offices in Hong Kong over the past twelve months. Pricing for fine wines in these difficult economic times is increasingly competitive and given the fairly transparent nature of the market and increasing competition, the margins for fine wines are declining.

 

For more modest French producers aiming at the mid to bottom tier of the price segment, the prospects look much more challenging. New World wines with easier to pronounce names and modern labels have continued to gain market share in cities such as Hong Kong and Singapore over the past 10 years. Australia and Chile have made huge inroads into traditionally French dominant markets, becoming synonymous with good value, easy to remember wines.

 

The most positive features of French wines are its sheer diversity of styles and price points, its terroir-driven or site-specific wines, long history and tradition and the aging potential of its top wines. Wines from regions such as Alsace, Burgundy or specific communes such as Margaux, can have unique, identifiable traits. Very few countries have the benefit of all of these special features. Thus, it is not a surprise that in the near term, the very best French wines will likely continue to represent the ultimate in wine quality despite increasing competition.

 

For the vast majority of more modest French wine producers eyeing Asia in the near term, the prospects are mixed. In certain markets, French wines are viewed as prestigious just by the fact of their origin. However, French wines are infinitely more confusing and require some effort to equate names of geographical places on the label with certain styles. Other challenging issues include different quality structures by region, fragmented wine industry with small producers and little information on the bottle to guide consumers. 

 

While marketing by grape variety can be too homogenous and simplistic given the hundreds of wonderful vitis vinifera species which can make terrific wine, the New World producers reaching out to new Asian wine lovers have advantages: The labels are modern, clean and appeal to the largely youthful population of new wine consumers in Asia. The grape varieties clearly stated on the label offer some guidance on the style of wine in the bottle. Back labels often include descriptions and useful information about how the wine was made. In other words, the future for the mid to lower price point French wines looks challenging in the face of fierce competition.

 

Hong Kong, as a duty free, vibrant wine market is a good gauge for trends and the future of French wines in Asia. A year after the removal of wine duty, there is a noticeable jump in the average price point of French wines from US$20 per 750ml bottle in 2007 to US$33 in 2008. French wines are not just being imported directly from France; the UK is the third most important supplier of wines to Hong Kong wine lovers by value, just behind France and Australia. UK wine imports consist mainly of French fine wines and this is reflected in the average per bottle price of US$100 per bottle in 2008. The top French wines add a halo of prestige for the more modest French wines. However, the halo glows dimmer in the tough economic environment and there will come a time, perhaps in the near future, when the halo no longer shines.