This year’s Northern Hemisphere harvests are now underway and while Mother Nature has seemingly been even more capricious than usual – heatwaves, humidity, hailstorms, flooding, mildew, disease pressure – there has been little news emanating from the vineyards to stimulate an uptick in buying activity on bulk markets carrying large inventories.
Despite mildew pressure in Bordeaux and drought in western Languedoc, France as a whole is estimated to be on track for a crop of 45 million hectolitres, in line with the five-year average. A suffocatingly hot summer in Spain has taken its toll on the juice yield of La Mancha’s international varietals, but we currently do not expect the overall crop to be significantly down from last year’s 40 million hectolitres. Italy’s crop is estimated at 42-43 million hectolitres, down markedly from last year’s 50 million hectolitres due to heat and hailstorms, but this size is not unprecedented, being in line with 2017. California’s crop is lagging 2-4 weeks behind due to an unseasonably mild and wet growing season, so that it remains too early to make a forecast.
Meanwhile, the Southern Hemisphere’s export sales remain steady at a reduced level: Chile could possess its largest ever carryover stock as of 31st December as total export volumes remain 25% reduced versus last year; Argentina has normal availability levels despite its 2023 crop being one of its shortest on record, illustrating the sales decline; South Africa’s domestic sales volumes now outpace its export sales. In fact, South Africa’s domestic wine market is one of the few around the world actually growing, possibly the only significant-sized market doing so: the drinking age population is approximately 40 million. Growth is being driven by entry-level red and white wines for the bag-in-box market.
Inflation is trending downward in many markets, pausing further interest-rate rises in some; cautious optimism is being aired regarding final-quarter 2023 consumer sales. Typical of recent reports of improved consumer sentiment, market research company GFK in its August update on the UK market declared: “Hopes for the personal financial situation for the coming year are heading back towards positive territory. This renewed optimism can also be seen in the similar turnaround for our view on the general economic outlook for the next 12 months [negativity is at half the level it was a year ago], and the eight-point advance in major purchase intentions is potentially better news for retailers as we move into autumn.” It ought to be remembered, however, that grocery price inflation – the measurement probably most relevant in assessing what sort of consumer sentiment wine is facing in the retail aisles – is proving one of the slowest to fall.
Ultimately, the wine industry is entering a period of painful but necessary rationalisation of production to bring global supply back into greater balance with demand after 15 years of declining consumption. COVID-19 delayed this, but we are now seeing vineyard removals discussed and in some instances being carried out. In the meantime, many bulk prices constitute an opportunity, offering great value, and – if consumer sentiment really does improve towards the end of this year – now may be the best time to take advantage. The Ciatti team stands ready to help pair up buyers with suppliers. In the meantime, read on for detailed updates on each market.