Why you should not believe all you read in wine export figures
By Richard Siddle
It might be a bit harsh to pick up on a famous quote that you can prove anything about statistics except the truth when talking about the amount of wine that is being shipped around the world.
But as we are bombarded with the latest statistics from seemingly every generic or wine body around the world about how well (or not) particular countries did in 2016 in terms of the volumes of wine they exported then we might need to take a technical time out.
In recent weeks we have seen the likes of Vinexpo, IWSR, American Association of Wine Economists, Wine Australia, Wines of South Africa, Wines of Chile, the Canadian wine authorities, AgriMer, and a host of other respected bodies all release their latest export volume and value figures for 2015 and some for 2016. Most of which we have covered here on VINEX.
But a word of caution. The figures given do not, as always tell the full story. They are certainly correct in terms of recording the amount of wine being physically shipped and exported from different countries. Equally they also accurately convey the amount of wine that is actually being imported by one country from another.
Which on the face of it is all we need to know. But is it? When we start digging in to what is actually being sold in those countries then we are faced with more questions than answers. Time and again the amount of wine a particular country is exporting to another, does not always reflect the proportion of that wine that is being marketed, retailed, bought and drunk in that country.
It is not just wine, but the situation is so unclear across a whole host of products that the Office Of National Statistics in the UK calls it the “Rotterdam Effect”. Or the problem of goods being exported to the huge European ports of Rotterdam and Antwerp never then actually going on to be sold in Europe, but being sent on to other markets around the world. The ONS admits it is hard to put a hard and fast figure on this discrepancy but a conservative estimate would be anything between 2% to 7% of all exports are unaccounted for, and that the same situation will apply in all other major ports around the world.
Just look at the amount of wine that is being shipped between Spain and France. Then visit a range of supermarkets, convenience stores, restaurants, bars or hotels in either France or Spain country and try and buy a bottle from the alternative country. So where does it all go? How is it being packaged and sold?
As the bulk wine world knows only too well what is shipped is not always the final product a consumer gets to buy. It might be a straightforward assignment that arrives at a bottling facility in the domestic market, is bottled and then distributed right out to the appropriate retail channel.
But it is just as likely to be used as a blend to be added to other wines already made or waiting in that country for the additional bulk wine to be added. Rules are always there to be stretched and it is clear when it comes to blending and bottling bulk wine there are those willing to push those rules right to the boundaries, and, at times, probably beyond.
What is quite clear is we are seeing an increasing amount of wine that is being shipped to one of the large central bulk wine hubs for bottling, blending and packing, but could then be exported again out of that country to another final destination.
Take Accolade Wines’ bottling facility in Bristol in the UK which claims to be the biggest of its type in Europe and bottles around 25 million 9 litre cases a year, which equates to 1,200 bottles a minute. It has made quite clear from its outset that Accolade Wines sees that facility as key to its European strategy and that much of the wine bottled there goes straight out again to key markets across Europe and beyond. What’s more it is doing the same for third party contractors, with its biggest customer, at least for now, being major competitor Treasury Wine Estates.
Yet when it comes to volume exports to the UK how much of that wine, which never sees the light of day in a British retail store, is being recorded as being exported to the UK.
No clear picture
And that's the real hub of the issue. Thanks to the increasingly sophisticated and failsafe way that wine can be shipped, treated and re-shipped to different markets that it is becoming almost impossible to really say for sure how much wine from a particular country is selling in another.
Yes, we can look at till rolls and retail sales, but that does not tell the full picture either. Large numbers of impulse and convenience stores, for example, do not have the recognised technology to record what they are selling. Equally the on-trade is rarely analysed and recorded to the same extent as the major retail channels meaning there are large holes in any data you are looking at.
Then there is the amount of wine that is sitting in bonded warehouses, under the radar, waiting to be even registered as being available for sale in that particular country. In the UK, for example, many point to the data from the HMRC, the customs body, as being the most accurate in terms of the amount of wine from different countries that is actually in the British market as it has been declared and duty paid to be sold in the UK.
But not all countries, duty, tax and bond arrangements are the same, making similar global comparisons difficult again.
What to rely on?
So which data and figures do you most rely on? Arguably for a wine producing country looking to drive the value received from its exported wine back to the producers that made it then it does not really matter where it is finally sold. After all even the most sophisticated multi-national wine operator does not know where its wine is being sold in China. It just knows it went through Shanghai or Hong Kong to get there.
It does, however, make it increasingly difficult to say for sure how well different countries are really performing in their target markets. Is the money they are spending marketing their wine in that country being particularly well spent?
So next time you see your country’s wine sales booming in a particular market for no apparent reason it might be worth reflecting on what is really driving those volumes.