Due to close proximity to Australia, large populations and strong economic growth, Southeast Asia is an attractive region for Australian wine exporters to consider, particularly in the emerging wine markets of Thailand, Vietnam, Philippines and Indonesia. The four countries have a combined population of over half a billion people. While wine currently has a relatively small share of the total alcoholic drinks market in each market, wine consumption is forecast to grow in the next five years. In contrast, wine consumption is forecast to continue to decline in major, established markets such as Australia, the United Kingdom and the United States.
The region is a key focus in Wine Australia’s market diversification strategy. One key activity in the short-term is the Southeast Asia Roadshow, to be held from 7 to 16 October 2024. This an opportunity for Australian wineries to showcase their brands to wine importers, wholesalers, distributors, key trade and media in the Thailand, Vietnam, Philippines and Indonesia markets. Wine Australia and Austrade are collaborating to host the roadshow, which will follow a number of promotional activities in the focus markets and capability building for participants.
To help maximise impact of the roadshow, wine education and other activities in market will build awareness and momentum for Australian wine amongst target trade and media, whilst capability building and market briefings for participants will provide participating wineries with insights such as market realities and nuances; regulations; wine consumption and sales channels; and business cultural practices, ensuring everyone is well informed to make decisions about export potential and marketing strategies.
To assist in understanding the markets, the next two market bulletins will explore trends in the wine market in each of the four countries, including where the Australian wine category is placed and how it is performing. The first two markets explored are Thailand and Vietnam.
Thailand
Thailand has a population of close to 72 million people, about half of which live in urban areas and cities, mostly in big metropolises like Bangkok or Nonthaburi City. Thailand's capital, Bangkok, also called Krung Thep among Thai people, has the highest population, with approximately 5.7 million people.
The Thai economy is South-East Asia's second largest and one of its fastest growing, with GDP per capita up 3.7 per cent in the last 12 months.
Australia and Thailand enjoy a substantial commercial relationship, underpinned by the Thailand-Australia Free Trade Agreement (TAFTA). While TAFTA provides Australian wine with an import tariff rate of zero per cent (other countries except New Zealand face a 60 per cent tariff), the internal taxes on wine in Thailand are hefty, and FTAs do not address these as they are applicable to both imported and domestic wine.
Drinking alcohol is deeply ingrained in Thai society and plays a significant role in various aspects of life, with sharing drinks during meals commonplace, both at home and when dining out. However, to address excessive drinking concerns, the Thai government has implemented regulations to regulate alcohol sales and consumption. For example, the Thai government’s alcohol control laws ban alcohol commercials through media channels between the hours of 0600 to 2200 with only the brand name and product picture allowed to be shown. The ban applies to all forms of advertising, including the media, at theatres, shows and social functions. Sales of alcohol are banned in educational institutes, temples and gas stations as well as on certain Buddhist holidays other than through permitted hotels. The minimum age at which people can buy alcohol is now 20 years.
It is also very difficult to import commercial samples into Thailand. It generally requires diplomatic assistance from the Australian Embassy in Bangkok. In addition, Thailand has in the past and continues to contemplate the introduction of graphic health warnings on wine labels.
Almost 97 percent of wine consumed in Thailand is imported. While the COVID-19 pandemic negatively impacted on wine consumption in Thailand in 2020 and 2021 (see Figure 1), consumption has rebounded since, reaching 1.6 million cases valued at US$470 million in 2023. Wine is a relatively small category in Thailand with a 0.6 per cent share of total alcoholic beverage consumption in 2023. However, the future for wine in Thailand appears to be positive, with the IWSR forecasting wine consumption volume and value to grow to 3.1 per cent per annum out to 2028.
Australia is well-paced to take advantage of the growing wine market. In 2023, Australia was the number one wine category in Thailand with an almost 30 per cent share of imported wine consumption in 2023, ahead of second-placed Chile with 26 per cent.
Figure 1: Volume and value of wine consumption in Thailand
Source: IWSR and Wine Australia https://marketexplorer.wineaustralia.com/market-explorer
In 2023-24, 143 Australian businesses exported wine to Thailand. Australian wine exports increased to the country for the fourth successive year to reach a record financial year high, up 1 per cent in value to A$58 million. This places Thailand as the fourth biggest export destination by value in Asia behind mainland China, Hong Kong and Singapore. Sparkling wine was the key growth category with value up 88 per cent to $3 million. Despite the growth, with a 6 per cent value share sparkling wine is third behind red wine (82 per cent) and white wine (10 per cent) in exports to Thailand.
Vietnam
Vietnam is among the most populous countries in Southeast Asia, with a population of around 100 million people. More than a third live in urban cities such as Hanoi, Hai Phong, Da Nang, Bien Hoa, Ho Chi Minh City and Can Tho. The country has one of the fastest growing economies in the region, driven by export-oriented manufacturing, foreign direct investment and increasingly strong domestic demand. Vietnam's economy hit a record high growth rate in 2022 of 8 per cent. Despite slowing global demand for manufactured exports, Vietnam's GDP growth remains high at 4 per cent in the last 12 months.
In 2022, under the ASEAN–Australia–New Zealand Free Trade Agreement (AANZFTA), tariffs on Australian wine imported into Vietnam dropped from 80 to 20 per cent.
Australia and Vietnam are also parties to the Comprehensive and Progressive Agreement for Trans-Pacific-Partnership (CPTPP). AANZFTA has a faster tariff reduction schedule than the CPTPP. Australian exporters will see further tariff reductions under CPTPP from 2026 (which is year 9 of the CPTPP). Tariffs on wine will be eliminated in 2028.
Earlier in 2024, Vietnam’s Ministry of Finance (MoF) issued a final draft of a proposed new taxation regime applying to alcohol which would see the increases to the Special Consumption Tax (SCT) as part of Vietnam’s broader Tax Reform Strategy to 2030. For wine (and spirits) lower than 20 per cent ABV, there are two options being considered with the SCT to increase in 2026 from 35 per cent today in annual increments to reach 60 per cent in 2030 under option 1 and 70 per cent under option 2. The proposed changes are undergoing a consultation period for domestic stakeholders, although it is understood that some of the major alcoholic beverage brands are engaging with the process indirectly through their importers.
Like Thailand, wine is a minor category in Vietnam with a 0.3 per cent volume share of the total alcoholic beverage consumption in 2023. Unlike Thailand, the wine market in Vietnam has a significant domestic category which, in 2023, had a 25 per cent volume share of wine consumption. As with other markets in the region, wine consumption is heavily reliant on tourism and faced setbacks during the COVID-19 pandemic, with wine consumption falling in 2020 and 2021 (see Figure 2). While wine consumption has increased in 2022 and 2023, it has not returned to the level reached in 2019. In 2023, wine consumption in Vietnam totalled 1.5 million cases valued at US$208 million. However, the IWSR has forecast wine consumption in Vietnam to grow by 3.2 per cent and by 3.8 per cent per annum in volume and value respectively out to 2028.
Figure 2: Volume and value of wine consumption in Vietnam
Source: IWSR and Wine Australia https://marketexplorer.wineaustralia.com/market-explorer
With a 10 per cent volume share Australia ranks fourth in the consumption of imported wine behind Chilean, French and Italian wines.
There were 108 Australian businesses exporting Australian wine to Vietnam in the 2023-24. The value of exports to the country increased by 2 per cent to A$9 million, the fourth consecutive year in growth, despite a decline in volume in the last 12 months. Still red wine was the major category with an 82 per cent share of value, and exports grew by 2 per cent. Still white wine had a much lower share at 13 per cent but recorded much stronger growth at 22% over the last 12 months, driven by Chardonnay, Moscato and Riesling.