By: Sherwin A. Lao 

Overview:

The local wine industry is estimated at around P1.3 Billion annual sales turnover. 100% of all grape wines are imported. There are over 70 wine importers registered now, selling over 300 different brands, with over 5,000 different wines coming from 16 different wine producing countries. Despite these seemingly high figures, the country's per capita wine consumption is still just a little over 1 teaspoon (5.5ml) as compared to Luxembourg, the world's highest wine per capita consumption of around 61 liters.

The Philippines, with a population of around 89 million people, is a huge liquor consuming country. 98% of all liquors consumed – beers, spirits and wines, are domestically manufactured. Led by San Miguel Corporation (for SMB pale pilsen and Ginebra San Miguel gin), Asia Brewery Group (for Beer na Beer and Tanduay rum) and Consolidated Distillers (Emperador Brandy), the country is one of the cheapest source of alcoholic beverages in the region, and perhaps the world. These huge local producers, are not subjected to high import tariffs, and are selling alcoholic beverages at very affordable prices. Wine volumes are merely drops in the bucket of this huge local liquor industry. However, wine appreciation and consumption have shown tremendous growth over the last decade. Target consumers of wine comprise of 12-15% of the population, mostly the upper and middle income classes from Metro Manila, and the other key provincial cities like Cebu and Davao.

Industry Numbers:

*Source:National Statistics Office

Market Trend:

After the wine boom in the late 1990s and 2000, where wine grew from a mere 150,000 liter import business in early 1990s to over 4 million liters at the end of 2000 (an amazing 2,500%++ growth), the local wine industry seemed primed for a downward adjustment. However, from the start of the millennium in 2001 till 2006, wine imports continue to grow, but at a more normal average of 10% per annum. The 2004 aberration of a huge 48% jump in volume was to offset the negative 24% registered in 2003. 2005 showed a very modest increase of 6% after the government implemented Republic Act 9334 (see table below), that increased excise taxes by 30% on wine, but even higher on the spirits at 50%. Duty on wine is also slightly higher at 7%, up from 5% 2 years ago. Indicators however for this 2007 so far point to another 8-10% growth, despite a slight downturn (- 2%) in 2006. The wine market now has a decent consumer base to build upon.

Recent trend also shows a slow but steadier shift to higher valued wines. In 2001 to 2003, wine increment in volume is higher than its increment in value, indicating that more wines are being imported, but at lower value. But from 2004 to 2006, the value increment out-paced that of volume increment, showing signs that Filipinos may not be drinking more, but are drinking higher valued wines in general.

Market Characteristics:

Still wine constitutes 97% of the wine market. The disparity in excise tax makes it prohibitive for consumers to buy sparkling wine as compared to still wine. The implementation of RA 9334, which took effect January 2005 has further alienated the development of sparkling wine, which has continued to languished at the bottom with a puny 3% share of the total wine business. Of the still wine, over 87% are red, 12% are white and less than 1% rośe (or pink wine). Despite being a tropical country, where ideally, chilled white wine can be perfect and refreshing, the red wine is the preferred choice. The popularity of red wine is due to many factors, foremost of which is the belief in red wine's healthier and `good for the heart' qualities.

In share by country based on 2006 figures, American (Californian) wines remain the most popular, followed closely by Spain, with market shares of 25% and 22% respectively. Australia is securely in third place with 12%, and the market leader a decade ago, France is down to just 5% from over 40% market share 10 years ago. Numbers related to South Korea and Hong Kong are very deceiving as these countries are not really wine importers, but are suspected to be hubs for trans-shipment. National Statics Office only shows countries reflected in the invoices, regardless of which country the wine may have come from originally. Industry sources say South Korean stocks are mostly Californian wines re-exported to Philippines, while Hong Kong stocks are mostly on the more premium French wines.

The Top 6 Countries and its market share in the last 5 years:

	2006	2005	2004	2003	2002
USA	25%	36%	26%	16%	25%
Spain	21%	21%	22%	21%	16%
Australia	12%	9%	9%	7%	9%
Italy	8%	6%	7%	8%	8%
Chile	6%	4%	4%	4%	4%
France	5%	5%	9%	14%	18%

Chilean wines have the highest increment in the last 5 years with over 83% increase, followed closely by Spain and Australia with 70% and 61% growth respectively. Only France is down in volume from 5 years ago amongst the top six wine importing countries. The decline is an emphatic 67% off its 2002 volume, though the decline may have already plateaued the last 2 years. The growth of New World wines exemplified by the USA, Australia and Chile can be attributed to friendlier labels, less intimidating names, good value for money, more `aromatic' style and a more approachable `sweeter' taste wine.

Wine Retail Prices (on standard 750 ml. bottle):

Price Categories		Estimated % Share
Budget wines	PhP250.00 and below	60%
Mid priced wines	PhP251.00 to PhP500.00	25%
Premium wines	PhP501.00 to PhP999.00	10%
Ultra premium wines	PhP1,000.00 and above	5%

Wine importers normally make around 30-50% margin from the landed cost (duties and freight included). In return, supermarkets and wine shops make another 10-15% margin on the final retail prices. A PhP100.00/bottle wine at landed cost, will in effect be sold at P167.00/bottle (on assumption of a 40% importer margin) to the retailers, and the retailers will then sell the bottle at PhP196.50/bottle (on assumption of 15% retailer margin) to their customers. 85% of all wines are under the budget and mid-priced categories.

The budget wine category is dominated by the American (Carlo Rossi and Franzia), Spanish (mainly from the many brands of large Spanish bodega, Felix Solis, including Gran Tierra and Sol de Espaňa) and Italian brands (with the locally bottled Novelino). Beginner wine drinkers are susceptible to buy at this wine category because of its attractive price. On the other hand, the biggest chunk of the mid-priced category, of up to PhP300.00/bottle, is dominated by Chilean (Gato Negro) and Australian brands (Angove's and Hardy's). Only a small percentage of the population are buying the premium and ultra premiums wines, but the frequency of the purchase in these higher priced categories is on the rise in the last 5 years.

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