Global wine production set to drop

Wine grape production is set to decline across nearly every major wine producing region in the world, with global production predicted decline by 2 to 4% in 2014, according to analysts at Rabobank.

With the exception of France and New Zealand, wine production is predicted to drop in every wine producing region in the world in 2014, according to the firm’s Q4 Wine Quarterly report.

Its estimates come at a time when yields of southern hemisphere harvests have been tallied and analysts are able to get a better idea of the outlook of crops in the northern hemisphere.

In the US crops are estimated to drop by between 5% and 10% below last year, but still larger than most crops prior to 2012.

European production looks set to register a “significant decline”, particularly in Spain and Italy, with the latter predicted to register a decline of 15%.

In contrast French production is predicted to “rebound” with quality and quality returning after a challenged 2013 vintage.

Moving onto the southern hemisphere, Australia has already seen a 7% decline in its harvest with only “modest” exports recorded, with China exports said to have stabilised but having dropped in value.

The largest decline was seen in Chile where wine production fell 22.8%, which analysts attributed to an “exceptionally hard frost at the early stages of the growing season.”

Despite an 8% drop in production, Argentina saw the strongest growth in exports with varietal wines rising by 16.2% and sparkling wines by 23.5%.

In South Africa exports throughout the last 12 months were down 19.1%, a drop attributed to tighter inventories following strong exports in 2013, but also the “increased availability of bulk wine at reasonable prices” in other markets, for example Spain.

New Zealand was the only region to see growth in terms of production with its harvest increasing by 29%.

The report also noted the increasing challenges faced within the US market in terms of pricing.

The average price of a bottle of wine sold in the US has now risen to $8.23 with “the high-end of the market gaining share at the expense of lower priced wines.”

“Improving wine sales and rising average prices are good news for the market, but what often receives less attention is the role that pricing has played in these trends. Wines priced below $9 have seen volume declines largely because prices have increased in response to rising grape costs,” explained Rabobank analyst Stephen Rannekleiv.

The report added: “The US wine market is littered with once-profitable brands that were seduced by the short-term benefits of discounting and subsequently degraded their brand equity. In this increasingly challenging environment, wine companies with more sophisticated price management tools will see direct results to their bottom line.”