Top 5 predictions for buying and selling wine in 2017
By Richard Siddle
It is that time of the year when our minds not only start thinking about taking a well earned festive break, but also fix our attention on what is likely to be in store for us in 2017. To help you plot the way forward to January and beyond here’s our Top 5 predictions for what will be driving the world wine agenda in 2017.
Exchange rates
Exchange rates have to be the number one factor of this or any other year when predicting the main global wine buying trends. But 2017 looks like being an even more volatile year on the currency markets as the world comes to terms with having a maverick, unpredictable new President of the United States. As the strength or weakness of the dollar dictates all other currencies around the world we could be in for a very rocky period.
The euro is also likely to come under increasing pressure as a series of major elections take place, notably in France and Germany, that are likely to again question the viability of the eurozone.
As the UK continues on its Brexit course we can also expect to see sterling rock back and forth throughout the year
The Australian dollar has not had a good 2016 and things don’t look too sprightly for the coming months with increasing pressure on the government to cut interest rates to help boost the economy.
Predicting currency movements is notoriously difficult, but playing the long ball game and hedging your bets look like being the best options for 2017.
Supply availability
With world harvests down by at least 5% to the lowest levels in 20 years it is not hard to see why getting your hands on the right amount of supply for your business is going to be a major concern for international wine buyers.
The International Organisation of Vine and Wine (OIV) estimates there will be 259.5m hectolitres of wine produced around the world in 2016, 5% down on 2015. This makes it one of the three lowest-production years since 2000.
A quick look at the main wine producing countries shows where the big losses (and gains) have come from (Source OIV):
- Italy will still produce the most amount of wine in the world at 48.8m hl, but this is down 2% overall on 2015 with some regions between 10% to 20% down
- France is likely to see its amount of wine made this year fall 12% to 42.2m hl
- Spain comes third in production, at 37.8m hl, which is actually up 1%
- Germany will see a close to record production fall of 4% to 8.4m hl
- United States should see overall production rise 2% to 22.5m hl
- Argentina though is one of the biggest loser with production some 35% less to 8.8m hl
- Chile is not far behind with a drop of 21% to 10.1m hl
- South Africa will have to cope with 19% less wine at 9m hl
- Australia has better news with 5% more wine to play with at 12.5m hl
- New Zealand is sitting pretty with a 34% rise with a near record 3.1m hl. There is, therefore, going to be even more need for buyers to be fleet of foot to secure contracts to keep up with demand.
Growing demand
A likely global wine supply tightening could not come at a worst time with far more mouths to feed with wine than ever before. Although wine drinking levels might be falling or plateauing in some of the more traditional wine drinking countries across Europe, they are being more than compensated by the big rises in consumption in big key markets such as the US, China and most areas of Asia. The OIV estimates total world drinking levels to have risen from 239.7m hl in 2015 to 246.6m hl in 2016.
Importantly these newer markets are much more open to the styles of wine they like to drink and we can expect to see more imported wine being drunk in the US and China in particular.
China, for example, saw imports of wine rise by 19.1% for the first nine months of the year with the year end figure expected to take it over 20%. In all it imported US$1.77 billion worth of wines up to September with total volumes up 14.4% to over 464 million litres (China Association for Imports & Export of Wines & Spirits).
Although 93% of the 354 million litres of imported wine in to Chia come in bottles, bulk wine imports in the first three quarters of the year were also up 9.76% year-on-year to US$74.8m.
Sourcing partnerships
With such uncertainty in the market going in to 2017 we can also expect to see both buyers and sellers of bulk wine look to secure their own futures by signing up to longer term forward contracts with suppliers.
Yes, the nature of bulk wine means there are always going to be short term, spot deals on the market, but for major players it is going to be even more important than normal to secure wine early at an agreed fixed price.
Barney Davis, head of commercial operations at Lanchester Wines in the UK, emphasised this point on VINEX last week. He said: “We’ve seen a move away from pure trading and changing source from vintage to vintage. This has been replaced by provenance sourcing and a greater emphasis placed on creating solid working partnerships.” He added: “We recently attend the World Bulk Wine Fair in Amsterdam and the general sentiment was that both producers and buyers are going to be more proactive in securing deals quickly.”
The rise and fall of varietals
When you scrape back all the pricing and supply chain negotiations, buying and selling bulk wine all comes down to the price of each grape variety. Which is now very much how wine drinkers in bars, or shoppers in supermarkets are now deciding which wine to buy.
It has led to what Lanchester Wines’ Barney Davis referred to as the “super varietals”. The must stock grape styles every buyer wants in their portfolio. Pinot Grigio, Sauvignon Blanc, Chardonnay, Malbec, Merlot, Shiraz… the list goes on.
With some significant shortages and pricing uncertainty in the market where do buyers go to get supply is going to be one of the big underlying themes of 2017. Varieties sourced from mainstream countries today, may well have changed this time next year.
And as consumers are less bothered which country actually makes the Pinot Grigio or Malbec they want to drink, then the speed at which countries are dropped in favour of another can only intensify over the next 12 months.