With a new year underway, we at Ciatti wish all of our friends, clients and business associates a very happy and prosperous 12 months ahead. Many thanks for your continued support.
If 2022 was characterised by rising annual inflation levels and a supply chain crisis, 2023 will be remembered for interest rates rises and sluggish buyer demand. Inflation levels, and the interest rates increased to curb them, reined-in consumer confidence and discretionary spending in most key markets through the year. In turn, this reduced distributor and retailer demand for wine – many were, in any case, still working through inventories they had accumulated during the 2020-21 pandemic-induced consumer demand spike, or supplies that had only recently arrived after 2021-22’s shipping delays. Distributors and retailers also pushed back against bulk wine suppliers seeking to increase prices in order to maintain margin amid the inflationary environment. Consequently, bulk demand was slow and, when it did occur, transactions often took time, were price-sensitive, and only for incremental volumes.
Pushbacks against price always ultimately end up at the grape grower, and we saw vine pull-outs starting to occur in some producer countries as the industry begins to come to terms with the twenty-year decline in global wine consumption – a rightsizing that felt imminent during the similarly slow year of 2019, but which was put on hold by the pandemic. The second and third quarters of 2023 were especially slow: wine ‘need’ simply was not there. As this month’s Australia New Zealand page makes plain, “global wine production has been higher than consumption in recent years and 2023’s output is expected to have exceeded demand by approximately 10%, even with output coming in below average for the fifth year in a row.”
Activity levels rose a little in the final quarter, stimulated by Italy’s short crop and some softening bulk prices elsewhere. What can we expect from 2024? The US, UK and Eurozone (including Germany and France) all come into the new year with consumer confidence at higher levels than for some time, as annual inflation steadily trends downward and interest rates – although still elevated – are subsequently expected to follow. On bulk wine as on many other products, the ‘justin-time’ business approach, in which inventory-holding and speculative buying is kept to a minimum, has grown more common during the higher-cost environment of recent years, and is likelier to increase in 2024 than reduce.
If distributors and retailers are now moving clear of their pandemic inventories or have been proceeding with lean stocks over the past year or two, any uptick in consumer demand might fairly quickly translate into fresh bulk need. Further incentives for buying are the many attractively-priced opportunities on a range of quality wines that currently exist, together with a – in the main – return to prepandemic shipping prices and schedules. Therefore, the year 2024 arguably starts with more glimmers of hope than its predecessor.
The Ciatti team stands ready to draw on its many decades of experience to help buyers harness the opportunities, while assisting suppliers in finding good homes for their grapes and wines: don’t hesitate to get in touch. In the meantime, read on for our review of 2023 by country, and some tentative projections of what 2024 might bring.
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