The Southern Hemisphere harvests have passed their midway point and Argentina (-40%), Chile (-15-30%) and Australia (-30-40%) are all expected to produce tonnages some way short of their respective averages this year. South Africa’s crop, too, is projected to be on the lighter side, while Cyclone Gabrielle’s impact on the Gisborne and Hawke’s Bay growing regions of New Zealand is still being assessed.
The prospect of shorter harvests has not stimulated a great deal of extra interest from international buyers of bulk and, like their counterparts in the Northern Hemisphere, the bulk wine markets are slow, especially on reds. (Domestic business is active, especially in Argentina, Chile and South Africa, pushing up the price of generic red and white wines.) Consumer confidence in the UK and parts of the Eurozone is patchy, and grocery price inflation high, reducing European demand for Southern Hemisphere bulk wines and – of course – Europe’s own. Southern France is suffering from little export demand: an emergency distillation plan has now been agreed in principle, while Bordeaux has won funding for the uprooting of at least 9,500 hectares. International interest in Spain is also highly limited and the same applies in Italy outside the usual suspects like Prosecco DOC and Pinot Grigio DOC.
Meanwhile, the release in mid-February of a smaller California 2022 crop figure than anticipated – at 3.349 million tons, the smallest since 2011 – failed to move the market there. Despite four consecutive lighter crops, early grape offers in California’s Central Valley have sometimes been well short of grower expectations. What does this tell us? That wineries are in no rush to produce or procure wine as retail sales are lagging.
With producer margins squeezed by elevated input costs, and retailers and price-conscious consumers pushing back against price rises, shouldn’t there be a movement towards sourcing entry-level wines, the type that have found less favour in recent years amid the premiumisation trend? A recent survey commissioned by Prowein of 2,500 wine business people found that while 46% of respondents said they were adapting their product portfolio to market trends as part of their mitigation against the current economic situation, only 17% were focussing on the entry price level.
This might suggest many newly price-sensitive consumers are not trading down within the wine category but trading out altogether, to alternatives that provide better price per alcohol unit ratios. The rise in the number of alternative alcohol beverages in recent years might partly explain why the cooling of the premiumisation trend has not led to a corresponding rise at the entry level – at least not yet, if bulk wine buying behaviour is anything to go by. Programmes are internally recalibrating sourcing to maintain margin and price tier where they can, hoping to retain consumers that way while they observe how 2023 unfolds. Entrylevel programme expansion would be a sign that 2023 is living up to its gloomy economic billing, but – while certainly feeling headwinds – wine markets are yet to actually see the storm itself.
Ciatti can bring decades of experience to bear in these uncertain times: this month you can come see us in person at ProWein, on stand H72 in Hall 14. In the meantime, read on for detailed updates on each market.