VINEX UK Buying Update: Gemma Withenshaw
By Gemma Withenshaw, VINEX UK
Currently, what is the overall buying/sourcing market like in the UK?
Still strong with large volumes, but supply pricing has been the challenge! Its meant there's been some movement away from the age-old 'go deep with existing suppliers' to looking at opportunities in new supply markets and exploring new regions, even varieties. Certainly, some existing supply relationships have been really tested.
Are there any changes as we approach the end of 2018?
Pricing is softening. Out Global Price Index shows a decline of 6.2% overall in the last 5 months. Of particular note are the volumes being freed up in some countries. There is wine available, and obviously at the earlier higher prices buyers were reluctant to draw-down everything, or at least not until they absolutely needed it. There is more wine available than many wineries/regions are letting on.
Where are the biggest areas of demand from around the world in terms of wine being shipped to the UK?
New Zealand, Eastern Europe, Spain, Chile. South Africa has good demand, but limited supply. Rosé wine in general is strong, and increasingly from outside of Provence (due to the hot European summer).
Where have been the biggest challenges and shortages in supply?
Overall, France, Italy and Spain from 2017, and then South Africa due to their drought earlier this year. It's been a tricky time for buyers, having to navigate these supply shortages from established supply countries.
What have buyers done to overcome those shortages?
Generally accept the higher supply prices to secure supply, particularly where they have no easy supply substitutes. Many have sourced wine from alternative countries, new supply countries or reduced their number of SKUs and allocated more space to other wine types and alcoholic beverages (eg. aromatised wine, craft beers, etc). But make no mistake the shortages have caused much frustration and prompted more reviews of allocated shelf space, product mix, and promotions.
Which countries benefited most from the 2017 small harvest?
Portugal, Austria, Romania, Eastern Europe, and Australia.
How do you see the market shaping up for the next six to nine months?
New World pricing is softening, obviously in readiness for the 2019 harvest, but also because of the positive 2018 European harvest - that's going to really generate more competition. A ripe, high alcohol, high volume northern hemisphere harvest is going to set the tone for the southern hemisphere’s 2019 vintage - grape prices will need to return to more sustainable levels. With global prices already down 6% since July, we believe the market will decline a further 10% by year-end. Sunshine commercial wines from Europe will displace wines from the southern hemisphere, then we'll see what takes place through early 2019. We're seeing a gradual move away from higher alcohol, potent wines to fresher more medium bodied styles and therefore the 2018 European harvest is well placed to meet this taste profile and increasing demand.
What sort of prices are UK buyers looking for from the main grape varieties?
* New Zealand 2018 Sauvignon Blanc around NZ$3.20 per litre
* South African 2018 Chardonnay under 10 ZAR per litre
* Pinot Grigio 2018 (Eastern Europe) €0.65 per litre
Are buyers being frustrated trying to find them?
Yes, as there is good demand and the producers are able to hold back, at least for a period and then it can quickly become too late as the opportunity to sell evaporates. Both sides are playing it hard, often resulting in opportunities being missed for both. Buyers have found their impartial trading through VINEX, applying greater objectivity and sourcing samples more widely has resulted in new opportunities and very positive outcomes for both parties.
Have you seen any changes in the way that UK buyers are working?
Yes and no. Yes, in using VINEX to help them source wine from Eastern Europe, New Zealand, South Africa, etc. And, no with some electing to double-down of their existing supplier relationships and pull through that way. Of course for most, there's still an overriding need to hit a price point! So, they're seeking other avenues of securing supply and fortunately VINEX is able to play a role there.
Any channels of the UK market that are more active in sourcing bulk wine than in the past?
The most active are second tier importers who are looking to develop own-brands and bottle in-market. But there is a growing concern with the uncertainty of Brexit and what that will mean on bulk wine imports. We expect to see increased volumes entering the UK before 29 March 2019!
Is the drive towards more own-label making demands to source bulk wine even more important?
Yes. The reduction in producer branded sales in supermarket and the recent shake-up of the UK wholesale industry means more opportunities for own-label contracts. It doesn't necessarily equate to more volume in the market, but more operators, including new ones entering the industry.
What role are the UK bottlers playing as they look to become more brand developers in their own right?
A one-stop-shop. Offering integrated services including design, printing and packaging expertise, even with promotion mechanics or materials. Then coupling with sourcing, technical and handling services - all before the components get anywhere near a bottling line. And, of course warehousing and distribution. However, there's high capital and labour costs in delivering these services and financial losses are ever present. Many UK importers also have relationships with key European bottlers, but there's obviously now developing uncertainty which may threaten those arrangements.
Contact Gemma Withenshaw