Number three after France and Australia, wines from this South American country are growing in popularity in Thailand.
by Jaime Rivera,
Trade Commissioner and Coordinator of ASEAN Markets, ProChile
Chilean wine has become an important player at a global level. Today, Chilean grand reserve and iconic wines are competing with the most famous wines in the world, and plenty of them are rated more than 95 points by international wine critics such as James Suckling and Robert Parker.
In the meantime, wine consumption in Thailand is on the rise. There are two milestones in the Thai wine market. The first one was before the 1997 financial crisis, when taxes on wine were lower and the economy was booming, driven by a very strong tourism sector. Thai people, at that time, became wealthier and started to try Western products. The second milestone was 1997, when the crisis, together with the new tax law, caused the tax levied on wine to soar as high as 400 percent. This caused a violent drop in the Thai wine market.
Since that time, vineyards from both the Old and the New Worlds have been changing their strategies to enchant wine lovers and recover the market. They have competed hard to conquer the top five in the ranking. In the past three years, the Thai wine market has been growing at an average of 15 percent, and the forecast for the medium term is also positive at around 15 percent , especially for those positioned as quality-range varietals; reserves; and a bit more conservative at around 5 percent for grand reserves.
During this time, Chile has been an active player that competes head to head with the world’s most renowned wine producers in Thailand, to have ultimately achieved an impressive position in the ranking. The wine market in the Land of Smiles is still led by France, followed by Australia, Chile, and the U.S., with a market share of 41.9 percent, 23.4 percent, 7.7 percent, and 6.7 percent respectively.
Thai consumers are playing a very important role in these figures, especially those in the middle to higher socioeconomic groups, as well as the new generations. This group of people drinks wine more and more often when they go out, since this can be a way to display their social status. Moreover, wine is usually given as a gift on special occasions. In Bangkok as well in some of Thailand’s most important cities, such as Nakhon Ratchasima, Pattaya, Chiang Mai, Puket, Krabi, and Hua Hin, there are many bars, nightclubs, and wine cellars where red wine is consumed by travelers and Thais.
However, in Thailand, the recognition of Chilean wine is limited to consumers who have some knowledge of wine: they truly appreciate its high quality, its different varieties, and its fair price. For the new generations, Australian wine is more popular. One of the reasons is that many of them have studied there and discovered wine; another is its very competitive price resulting from a free trade agreement (FTA) with Thailand. On the other hand, Chile is working hard to promote its wines by not only organizing wine tasting events, but also by introducing and delivering knowledge of Chilean wine to the market. Several Thai wine importers, such as Ambrose Wine Limited, Siam Winery Trading Plus Co. Ltd, Bangkok Beer & Beverage, Independent Wine and Spirit, and Italthai Trading (Thailand) Co. Ltd, have Chilean wines in their portfolios. After the FTA between Chile and Thailand is officially enforced—which is expected to be in the last quarter of 2014—it is foreseen that Chilean wines will be even more competitive in Thai market.
Another significant factor that impacts the wine market in Thailand is the new alcohol law launched by the Thai government last year. This new law is based on thee criteria: the wholesale price, which is in turn divided into price below THB 600 and above; alcohol percentage; and alcohol volume, instead of the old taxing system based on CIF value (total taxes were around 400 percent). Although this new law still charges extremely high taxes on wine, it is more advantageous than the previous one, especially for those wines with wholesale prices below THB 599.
In the medium and long term, when Thai alcohol taxes become more reasonable (under 100 percent of the total taxes) and the Thai economy comes back to its potential growth at around 6 percent, the wine market is expected to become at least five times bigger. This, together with the FTA between Thailand and Chile, will place Chile within the top two, as it has been in Vietnam since 2009.
Considering the above factors, and together with the benefits of the FTA, the competitiveness of Chilean wine will increase. It is not only a good opportunity for Chile but also for other New World wine producers.
