Wine Quarterly Q4 2017

Declining global production and rising prices are likely to affect supply and consumption, in particular at the lower end of the market. This may benefit beer producers and perhaps also encourage premiumisation in developed markets. But lower volumes and higher input costs will also affect revenues and margins, putting a number of industry players under pressure, particularly in Europe.

For the latest wine quarterlies, please go to Wine Quarterly

Rising bulk prices

With this year’s production decimated by frost, heat, drought, and hail, bulk prices for Italian and Spanish wines have been rising significantly since May. This follows increasing prices for Chilean and Argentine wines earlier in the year, and French wines are likely to follow. As a result, shifts in demand will be inevitable.

M&A to remain dynamic

Industry consolidation continued during the summer, based predominantly in local deals. At the same time, private investors remained attracted to the industry, particularly in Europe. There is still money available and the adverse harvest may eventually result in some investment opportunities.

US imports still rising

US wine imports continue to rise, with value growth (6%) outpacing volume growth (3%). France and New Zealand maintained their strong momentum both in volume and value. For Australian wines, there has been a clear shift from bottled to bulk wines, bringing down the average price per litre.