SINGAPORE'S wine market has experienced strong growth in recent years, with many feting its potential as a centre for the region. Is this kind of talk realistic, and if so, how far along are we?

Look at the figures: $190.7 million of wine was imported into Singapore last year, compared with $155.7 million in 2005. An increase of $35 million already sounds decent enough in isolation. However, in the context of a significantly smaller $8.2 million increase from 2004 to 2005, and an overall increase of $51.1 million between 2002 and 2005, the jump is even more significant.

Wine exports have also gone up by 16 per cent to $36.8 million last year, from 2005's $31.8 million. The year 2002 saw $14.4 million of wine exports, which means that exports more than doubled within three years.

What do industry players have to say about this upward trend?

Les Amis group manager and chef sommelier Randy See feels that Singapore does have what it takes to become a regional centre, despite the fact that Hong Kong is still ahead of Singapore. 'Wine drinkers in Singapore are definitely getting increasingly sophisticated, and wine consumption is going up,' he says.

Mr See cites the example of home design preferences as a reflection of the importance people in Singapore are placing on wines.

'In the past, people moving into landed property wanted a swimming pool, but that's changed. Nowadays, people who are moving from condominiums to houses put a wine cellar high among their priorities. Also, people who already live in landed property are converting unused rooms into wine cellars,' he points out.

Unique advantages

Mr See also notes the important role of restaurants in raising the profile of wine in Singapore. 'Three restaurants from Singapore have been numbered among the top hundred in the world,' he comments.

Frantz Dumey of the Diageo drinks company agrees with Mr See's take on increasingly sophisticated wine tastes. The company's commercial director for Asia-Pacific wine development admitted that Diageo has been slow in capitalising on the wine market, despite being a global leader in spirits, but that has changed and there's a definite initiative to push wine in Singapore, and in Asia as a whole. 'Singapore definitely has the potential to be a wine hub. Yes, Hong Kong is strong, but Singapore has unique advantages,' he says.

Tommy Lam, president of the Academy of Wine Singapore, pointed to Singapore's growing expatriate population as a contributing factor for growth in the market. 'The number of expatriates is growing, which will lead to a faster growth in wine consumption. Like it or not, expats are an important group of wine consumers, who consume wines both in private as well as in public,' he says. 'In Asia, booms in wine-related business depend a lot on the numbers of expats, though many do not want to admit it. Compared to Hong Kong, which is quite similar to Singapore, expats contribute a lot.'

Most people agree that Singapore's tax regime provides a major advantage over Hong Kong. Singapore taxes wine according to volume, not value, which means that the tax for wine is flat and predictable. A key consequence of this is that this current tax structure favours high-end wines, since a 750ml bottle of wine priced at $20 is still taxed the same $7.50 as a $2,000 bottle. 'Wine tax in Hong Kong is 40 per cent, and although this has been halved over the last year from the previous 80 per cent, it is much higher than Singapore's,' Mr See emphasises.

The Academy of Wine's Mr Lam points that Thailand's alcohol tax is even more onerous, at 400 per cent. This means that despite Singapore's limited size and population, it has the opportunity to carve out a unique niche for itself in high-end wines.

Diageo's Mr Dumey also feels that the increasingly sophisticated tastes of wine drinkers in Singapore has meant they have becoming increasingly willing to spend on expensive luxury wines. This is likely the affluent group of wine drinkers that Giorgio Ferrari, managing director of Giorgio Ferrari Pte Ltd, identifies as a distinct consumer group, and who are interested in cult and luxury wines.

People in Singapore, Mr See comments, have a mature palette in general because wine enthusiasts here have been collecting wine for over a decade.

Mr Lam thinks that our tax system is such a strong competitive advantage that it could, on its own, make Singapore a 'wine hub'. He also feels that despite taxes favouring expensive wines, the lower-end consumer market still benefits sufficiently. 'It looks like the $7.50 per 750ml wine would affect the consumption and sales of wine, taking into account the very keen competition among lower-end wines at the $15-$30 price range. But despite tax and freight already coming up to about $11, sales are still not bad, so we can see that consumers are still comfortable with this price level,' Mr Lam says.

Wine distributor Hock Tong Bee, known by its brand Cornerstone, was confident enough in Singapore's wine fundamentals to buy a 50,000 sq ft building and convert it into a temperature-controlled warehouse. From this Singapore headquarters, the company has developed a regional business that has seen 50 per cent growth in Hong Kong, China, Vietnam and the Philippines.

Mr Lam, of the Academy of Wine, points out though that the growth of the wine export trade depends on how long the countries in the region need Singapore, and for how long. However, the domestic market is guaranteed to grow as long as the tax system is not changed, he says.

Hock Tong Bee's Singapore business has averaged 10 per cent annual growth, with last year being their best year at 19 per cent, which matches the huge jump in Singapore's wine imports.

Tan Kim Hai, general manager of wine distributor Pinnacle Wine & Spirits, points out that the wine re-export market here is doing well.

Strenuous effort

'I am not sure if there was any deliberate effort or government strategy to make Singapore a wine hub. However, I believe owing to our friendlier tax regime, coupled with Singapore's eminence in logistics and being choice for MNCs to locate their regional headquarters here, we have significant incidence of re-export - roughly 30 per cent of total annual imports are re-exported every year,' he says.

'Indonesia accounts for about 40 per cent of these re-exports, while Malaysia accounts for about 30 per cent, with significant re-exports also to Indo-China countries,' he adds.

'We are of the view that prospects for wine business in Singapore is excellent, especially over the next three to five years, chiefly due to the government's strenuous effort to grow tourism and our population base. Specific strategies like the integrated resorts create a buzz in Singapore, and attract foreign talent and MICE (meetings, incentives, conferences and exhibitions) travellers, all of which have direct spin-offs on wine consumption. Of course, underpinning all these is the buoyant economy.'

Hotels have also been noticing an upward trend in their wine turnover. Jens Corder, executive assistant F&B manager at the Shangri-La Hotel, Singapore, says that the amount of wine ordered by the hotel has increased about 5 per cent per annum for the past five years. 'We work with over 35 wine suppliers and order wines as often as on a daily basis, to restock the wines that are sold out in the course of the day,' he says.

Steven Chen, Ritz-Carlton Singapore's director of beverage, says that the hotel's stocks are replenished every two to three days, with an average of eight cartons ordered per replenishment. 'In order to maintain inventory, a review of wines is done quarterly to check on the best sellers within the hotel as well as the slower moving wines. A thorough analysis is conducted to ensure new wines are introduced based on demand in the market, or to see if it's the selling price, vintage or brand that's affecting sales of the wine,' Mr Chen says.

Businesses have spent a lot of money and effort on stocking up on the right kind of wine to meet demand. But what are people buying, and are tastes going to stay the same?

Mr Corder of Shangri-La says: 'Currently, we observe that there is a growing demand for Sauvignon Blanc from New Zealand, Merlot from the United States and Chile as well as red blends from Australia. The prices for these wines can range from $120 to $250 per bottle. The amount spent by the consumer depends largely on the occasion. For example, for special events like wedding anniversaries, the average spending (per bottle) for wine tends to be higher as compared to that of a corporate function.'

At the Ritz-Carlton, Mr Chen says: 'In the past five years, we have seen a higher demand of mid-range to premium wines from Australia, Chile, France and South Africa from our local and overseas guests. Local guests have also developed a level of sophistication in appreciating fine wines that is unrivalled in Asia.'

Dr Ferrari points out that the Australian trade board has been promoting Australian wine by organising numerous events such as tastings. 'The still light wine segment grew 13 per cent (from 2004 to 2005) with Australian wines continuing to dominate the market, with a 46.4 per cent market share,' he adds.

Mr Lam at the Academy of Wine feels that demand for Australian wines will continue to be strong, despite them having been hit hard by a bad drought. 'France is coming back in a big way. Although their high-end wines are getting more and more expensive, the mid and low-end wines are getting more competitive,' he says.

Mr Dumey feels that the popularity of French wines is not only due to economic factors, but is a function of evolving tastes. 'People who are new to wine will naturally find New World wines more accessible since they are usually fruitier and sweeter, but once they have drunk wine for a while, they come back to French wine with a new appreciation for its complexity,' he notes.