How global wine shortage is making more buyers look to varietal first, country of origin second
By Richard Siddle
Michael Clarke, chief executive of Treasury Wines Estates, might have been talking about its use of augmented reality technology in creating attention grabbing wine labels when he described its business recently as moving from an “agricultural business to a brand-led business”.
But the same strategy could be equally applied to how major wine buyers are now looking to source wine for their supermarket or distribution ranges.
Varietal driven wines have been quite a feature of leading wine markets around the world for some time, where trade buyers and consumers alike are fixated more on the grape variety than the country where they are from.
We heard last week at the International Bulk Wine & Spirits Show from Clive Donaldson, wine sourcing manager at Morrisons, one of the UK’s Big Four supermarket chains, that his focus was 100% on building its private label range of wines, driven by bottled in market wines, over the big brand alternatives.
Wines that help build a loyalty amongst its customer base for Morrisons own wines rather than whatever message a major brand is trying to push.
Wines that have Morrisons, or an exclusive sub-retail brand, as the hero first, the grape varietal second and the country of origin a distant third.
It knows the consumers that are buying those wines don’t care where the grapes comes from, where they are made or bottled. They just know they like that particular style of wine, in the same way they like their coffee or tea made in a certain way. For latte read Pinot Grigio, for Americano read Cabernet Sauvignon.
Now all of this is very much the way certain mature markets have been going for some time. The UK, in particular, has arguably lead the rest of the world in this.
But now that there is such a shortage of wine from the 2017 harvest, primarily from big traditional wine producing countries like France, Spain and Italy, then other major buyers who previously had always bought on country of origin first are having to open up, be more flexible and go where they can get the most Pinot Grigio, Chardonnay or Sauvignon Blanc.
VINEX’s head of European development, Paul Attwood-Philippe, says he has seen a marked shift in opinion and attitude amongst major retail buyers towards varietal driven wine over the last six months, thanks to the lack of wine from traditional countries like Spain.
Retail buyers across Northern Europe, particularly Germany, Belgium, Denmark and Scandinavia, who previously have been “reluctant” to go varietal rather than country of origin first “have accepted” they need to take a different approach. Even if they have to create demand amongst their own consumers for these type of wines.
This trend is only going to increase over the next two years as those market dynamics change and there is less focus on country of origin, he stresses.
Polarised market
All of which is having a polarising impact, he adds, on the production market as a whole. Where major producers are transforming themselves into giant players as they hold more and more cards in the supply chain.
With fewer SKUs in supermarket wine ranges, and overall wine volumes flat or in slight decline, there is less need for major buyers to be constantly shopping around for the next best deal. They increasingly want to do more business with the suppliers they have.
This, in turn, helps those producers invest in their own scale, buying in more wine from more growers and build up an even bigger reason for major retailers to do business with them.
All of which opens the door to major producers in new and emerging wine countries. Wine producing countries, particularly in Eastern Europe, that traditionally have been inward looking, where it is quite possible to sell the majority, if not all their wine, either domestically or in neighbouring countries. Countries that have recognised the need to switch their focus and drive more exports to bigger western wine markets.
It is noticeable, for example, how much new vineyard planting is taking place in countries like Moldova and Ukraine, where the vast majority of vines going in are for the big, in demand super international super varietals.
A pivotal year
2018 could prove to be a pivotal year for many of these emerging countries and their producers. The year when market forces have pushed more buyers and brokers their way from across the rest of Europe, in search of both new sources of wine, and far more attractive rates.
Buyers who potentially have liked what they have seen, and the price, and will be happy to come back for more. Building up the kind of long term partnerships that we see in the more traditional Old and New World producing countries.
Which, in turn, creates a need and demand for experienced brokers to identify the right producers and partners in those countries for the right buyers and chains, adds Attwood-Philippe.
But again it is the thirst and need to find and tie down supply of the major varietals, be it for private label, exclusive or branded wines that is taking buyers, and their brokers, to parts of the world they have not been before.