After another challenging 12 months, the global wine industry is preparing for a year ahead that promises continued economic turbulence, concerns about the balance between supply and demand, as well as ongoing anxiety about the climate crisis. Chris Losh presents what will be top-of-mind in boardrooms and among winemakers this year.
2023 is a year of less …
If 2020 was when the world had to deal with the medical impact of Covid-19 and 2021 was about its knock-on effect on global logistics, 2022 was the year when we started to wake up to the economic aftershocks. And that looks very much like being the major narrative in 2023.
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With the exception of China (which even after the significant civil protests of recent days has so far eased few curbs), the world seems to have more or less reached an uneasy accommodation with the virus itself. But its impact on global financial wellbeing has been significant, with many economies seeing high single-figure inflation even before the Putin-induced energy crisis. Some other economies have been recording much higher rates.
A situation where businesses are slowing investment and holding pay rises below inflation levels, and consumers feel both poorer and less certain about the future is bad news for wine which, however much the industry likes to pretend otherwise, is a luxury product, not a necessity.
Many consumers will be cutting back on discretionary spending in 2023 and wine looks vulnerable. Hospitality could be in serious trouble over the next 12 months (the UKHospitality trade association, for instance, estimates the country could lose as many businesses over the 18 months to January 2024 as it did during Covid), but volumes are likely to be down in retail, too.
…and also less but more
Oddly, it’s not all bad news, with cutbacks in spending potentially working in favour of more expensive bottles.
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By GlobalDataYou’d think a time of economic uncertainty would mean a race to the bottom. In fact, current trends suggest a significant portion of consumers are saving money by buying fewer bottles – but trading up to create more of an ‘occasion’ when they do drink.
So, even stripping out the effects of inflation, spend per bottle could well rise this year.
… and definitely less – but no alcohol
Tying in further with the ‘less but more’ idea is another major trend – though this one is driven by health rather than disposable income or consumer confidence: the move away from alcohol.
At a major European wine fair earlier this year, three major wine buyers, ranging from independent wine specialists to supermarket buyers to hospitality all told me – independently and unprompted – they saw low and no as the major industry trend of the next few years.
The majority of consumers are not abstaining entirely, they’re cutting back – or ‘sober curious’ in the terminology of the day. Wine, clearly, will not be immune from this trend. But certain areas are more under threat than others. While it’s extremely difficult to make good non-alcoholic still wine, there are a growing number of sparkling versions on the market that could affect prosecco, for instance.
That said, temporary non-drinkers are not necessarily always looking to replace like with like but simply to shift from alcoholic to non-alcoholic. Wine drinkers are often happy to make the switch to zero-abv beers, RTDs and even spirits.
Whoever learns how to make varietal- or terroir-specific, alcohol-free, still wine will be very wealthy indeed – though there are no signs anyone is on the verge of doing so over the next 12 months. Meanwhile, this is a trend that will continue to grow – and impact wine.
Finding balance
Around the millennium, there was indisputably too much wine in the world. Efforts by the Australians and EU in particular have reduced production.
But the Europeans’ strategy for balancing their vineyard area was based on noughties figures that assumed consumption would continue to grow. In fact, wine is in a period of, at best, stagnation, and, more likely, gentle decline.
Throw in all of the trends above and we can expect another disconnect between supply and demand. Growers’ unions are already calling for action in Bordeaux. This could be the year when Brussels starts to discuss the possibility of another programme of EU-funded arrachage.
Column, September 2022: Vine-pulls back on agenda as Bordeaux’s wine struggles continue
In the boardroom
A feature of the last ten years has been the general lack of corporate activity in the wine industry. The 1990s, when companies seemed to be merging into ever-bigger behemoths on a weekly basis, are long gone.
Two years ago, I felt the economic strictures of Covid might lead to some distressed sales. That hasn’t come to pass. But I think we could well see Carlyle Group try to find a buyer for Accolade Wines over the next 12 months.
Rumours have been swirling for a while. And while the Australia-based company has remained tight-lipped, it’s been quietly disposing of non-core elements of its business. In the last six months alone, it has sold its UK bottling and warehousing facility, vineyards in McLaren Vale and the Yarra, a winery and a couple of estates, including, most recently, the blue-chip Stonier on Mornington Peninsula.
Private-equity firm Carlyle bought Accolade in May 2018 and most observers at the time predicted two to three years of balance-sheet tightening followed by a quick flip. Covid clearly messed up the time scale but the signs are that 2023 could be the time.
Can we can?
Wine is typically a two-way battle between the forces of tradition and the forces of innovation, with the former winning out 90% of the time. Beyond the advent of screwcaps have there been any major changes in the category over the last 30 years?
Well, that could change. Bottles – expensive (and ecologically damaging) to produce, heavy to transport and too big for single people or couples – are under attack from all sides. Whether the replacement turns out to be more premium bag-in-box offerings, cans or pouches is up for debate. Maybe a combination of all three.
But there are simply too many winds blowing in the direction of change for it not to happen. A statement ‘wall of cans’ by a retailer, or a row of bag-in-box, by-the-glass wines in a bar can’t be far away.
Spotlight, October 2022: Wine drinkers raise glass to alternative packaging
Transparency will out
Equally high on the ‘impending’ list are labelling changes. The EU is already discussing adding both cancer warnings and nutritional information to labels.
Since they are classified as ‘food products’, alcohol-free drinks already have to comply with this. As their share of the market grows, consumers are increasingly going to question why one bottle gives full label information and the one next to it gives next to none.
If social media has taught one thing, it’s that people expect transparency and are tenacious about demanding it. Secrecy – for whatever reason – plays badly.
The recent decision by the Tobacco, Tax and Trade Bureau (TTB) in the US to rethink adding nutrient content, allergens and ingredient labelling after 20 years of stone-walling is hugely significant. The drinks world will not be able to pretend this isn’t a live issue for long.
Column, October 2022: Why wine industry must be ready for more warning labels
Plus ça change
Finally – the easiest prediction – let’s assume the world will see another chaotic year of climatic madness. 2022 was, admittedly, somewhat better than 2021 (not difficult) but the plethora of bad-news stories, covering frosts, floods, drought and wildfires is too regular to be dismissed as a fluke.
Wine producers are slowly dealing with the unwelcome reality that abnormal is the new normal, and the old normal is a welcome aberration.
The question, perhaps, is which country/region gets the chamber with the bullet in it this year?
Column, July 2022: Global heating should make wine industry rethink relationship with water
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