Tuesday, 9 October 2012

Why the price of wine will go up and up.


Things are changing in the world of volume wine trading which makes my job quite interesting at the moment. A series of factors have come into play that mean that wine as a whole is going to become a bit more of a luxury item for most people rather than the first thing that they thoughtlessly reach for from the fridge after a hard day at the office. This is not just down to high taxation although this plays a part. What used to happen was that if the price of something like Chilean Cabernet went up because a poor harvest or more likely foreign exchange movement, then buyers would just drop it and move onto whatever else was cheap which could be Spanish Tempranillo or California Merlot, it didn't matter.
  For years there has been over supply particularly from the European powerhouses of France, Italy and Spain. Growers have been desperate to get anybody to buy their grapes but also with the full knowledge that if nobody did then a friendly EU official would come along and take them off their hands to distill into industrial alcohol. For a few years now governments have been encouraging people to plant alternative crops to cut out the surplus. Unfortunately good sites are just as likely as bad sites to be grubbed up and so it doesn't mean anything for quality. 

Another factor is that the world has become smaller and so growers have cottoned onto what  everybody else is getting for their grapes and coupled with rapidly rising demand particularly in the USA and China means that there is less chance of trading off one region against another. It only took one important Chinese buyer to take a trip to Spain last year to hoover up a six or seven million litres to have a major knock on effect on pricing. 
You now hear from many important producers that they are less interested in selling the the UK when they can get more money and get treated better elsewhere. It is true that some supermarkets can be abominable in doing things like delisting lines without warning for stock specifically labelled for them that can't be sold elsewhere. It has to be said not all of them do this and it's certainly not necessarily the ones who are always seen as being the bad guys in the media!
 In the shorter term there have also been poor harvests in some of the real volume regions of Spain, Italy and to some extent France. New Zealand is also short from 2012 which all stacks up to price rises.
What does this mean - well in general it should be good news for growers. The suppliers of raw materials are always the ones that feel the real pain of our insatiable desire for cheap goods. People need to look to providing them with more secure long term contracts that they can take to banks in order to borrow money for cash flow, expansion and maybe even better quality who knows! 
What does it mean? In the long term it will also be interesting to see where new plantings emerge. It will be dependent on climate change and  water availability in particular  which would rule out places such as Australia, California and maybe South Africa. My money is on serious expansion in China where they have already proved with crops such as apples that they are capable of large scale consistent and efficient production. Much as I would love England and Wales to fill the gap we will always be a niche high cost region however much growers currently worry about oversupply.
My other prediction is that consumers will turn to wine based drinks that have fruit juices or other flavourings added and probably lower alcohol - Peach Bellini or a Cranberry Cabernet anybody?

Watch this space!









1 comment:

  1. Interesting, Guy. It sounds like another factor here is rising consumption from China -- which I don't usually think of as either a wine-growing or wine-drinking country! Also, as you look at up-and-coming regions, I wonder about other places in the USA -- it's a big country, spanning many climate and soil types. If climate change depresses production in one area, it may encourage production in other regions... And viticulture, wine-growing regions are sexy in America. ... they grow tourism as a secondary crop... so I wouldn't count the New World out just yet...

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