Economic recovery drives wine market

The wine trade is reaping the benefits of the global economic recovery, according to Rabobank’s latest Wine Quarterly Report.

Compared to the first quarter of 2009, nearly all major global suppliers are reporting improved export trends for the first quarter 2010.

“While 2010 will almost certainly prove to be a much better year than 2009 for global wine trade, pricing for super-premium wines has yet to fully recover,” said Rabobank Food & Agribusiness Research and Advisory executive director Stephen Rannekleiv, who co-authored the report.

In some cases, such as in Argentina, volumes have declined due to poor harvests, but average prices per bottle are improving.

Even Chile, which suffered through a devastating earthquake in February this year, managed to generate a strong increase in total exports and improvements in average prices for bottled wine exports.

“This is, in part, a reflection of the improving performance of the global economy, but also to some degree, a reflection of the easy comparisons to the first half of 2009 when trade had slowed dramatically,” said Rannekleiv.
 
The report recognised that the US is an important market for super-premium wines for both domestic and foreign producers – even though sales fell in 2009.

During the first half of 2010 there has been marked improvement in sales of wine priced over $15 per bottle, according to Rabobank’s figures, which showed strong growth in retail channels, while on-trade sales appear to be stabilising.  
 
“The main challenge moving forward will be to recover pricing power,” said Rannekleiv.  
 

Rannekleiv said that while US super-premium wine sales are showing momentum in the right direction, the true litmus test of growth will come in the second half of 2010. Declines in discretionary spending were most pronounced in first half of 2009, when consumers were bracing for the worst, but began to improve in the second half.

The nominal growth rate for super-premium wines may slow down in the second half, as compared to the improved second half of 2009, but this should not be seen as a slow-down in the real growth rate.  
 
According to Rabobank projections, the euro is likely to remain relatively weak for most of the upcoming year, with some mild improvements starting in 2011.

The report claims this could drive European wine imports into the United States and may also improve European exporters’ competitive position against Australia and Chile in the price-sensitive emerging markets.
 
However, the report warns that oversupply will remain a key factor determining success in the global wine sector.

According to the International Organization of Wine and Vine, wine production exceeded wine consumption by approximately 9% in 2007 and 2008, and with the recession, consumption was believed to have declined twice as fast as production, further widening the gap.  
 
“The excess supply constantly available in the market has made it difficult to build solid brands with strong pricing power, creating headwinds for profitability in the sector,” said Rannekleiv.

Alan Lodge, 28.07.2010