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Battle of the bulk: The world’s biggest exporters

04 January 2017 By Lauren Eads

There’s no denying that the bulk wine trade is getting bulkier, or its importance to the global wine trade. But with the 2016 harvest yielding smaller crops, fluctuating prices and predictions of a global shortage, who is winning the battle of the bulk?

Bulk wine “Flexitank”

In 2015, global bulk wine exports reached a record 36.3 million hectolitres – a 3% increase on 2014 – but dropped in value by 13.7% to US$3.1 billion, according to Italy’s Il Corriere Vinicola.

While high volumes kept prices relatively low for buyers in 2015, 2016 has, to some extent, seen the pendulum swing in the opposite direction, with a smaller harvest and less supply driving prices up.

In Europe, severe hailstorms in France hit the bulk wine region of the Languedoc, while drought across much of Europe has driven down yields, with France recently reporting on its smallest harvest in 30 years.

In the southern hemisphere, 2016 harvests in Chile and Argentina dropped by 30% and 25% respectively, due largely to the effects of El Nino. Here, the rising price of bulk wine has left international buyers grappling with fluctuations in price and limited supply.

The smaller harvest has led to warnings of a “global shortage” of bulk wine, with Vinex founder Denys Hornabrook predicting in September last year that prices would steadily rise in the next 12 to 18 months.

Today, Vinex’s Global Price Index (VGPI), which combines the major producing countries trading each varietal to determine a average weight price, is reporting a 21% increase in the past 12 months to 1 December, which represents slowing rise on the 12 months to 16 December when it was tracking at 28% increase on the previous year.

While prices are rising, with variations in the rate from country to country, is the outlook at unpredictable as it seems? Should buyers be rushing to secure supply, or are there still deals to be had, for those with the nerve to wait.

The required approach to each market varies from the northern to southern hemisphere, and from region to region, and is constantly shifting. While full export figures for 2016 are yet to be confirmed, and the full impact of the northern hemisphere’s smaller 2016 vintage is yet to be felt, Italy’s Il Corriere Vinicola provides the most up to date snapshot of the industry, collating export stats for the first nine months of 2016, from January to September.

Click through for an insight into the movements of bulk wine throughout 2016, the market’s top five exporters of bulk wine and where the industry might be headed in 2017, or here for a more concise, one-page list.

Source: Wine by Numbers – Il Corriere Vinicole (January to September 2016), Ciatti Global Market Update December 2016

5. Chile

Chilling in Chile

Volume: 299.086,000 litres

Value: $218,961,000

US$/litre: $0,73

With regard to the 2017 harvest, a “significantly large percentage” of grapes have already been allocated, driven by a smaller 2016 crop and fears over the potential size of the 2017 crop.

This panic purchasing slowed in the tail end of 2016, according to Ciatti, with continued concerns over the 2017 Argentine harvest presenting Chile with a potential opportunity.

“Chilean Malbec grapes will likely become a target of Argentinian and international buyers soon,” said the report. “The generic reds and whites have already been allocated by the domestic wineries, to go into wines for domestic consumption or to sell to Argentina. Shipments to Argentina of 2016 vintage generics are now fully underway. These will cover Argentina for Christmas and New Year needs, after which Argentina is expected to return to Chile for more 2016 wine and then some 2017 wine.”

Overall, Argentina imported 17 million litres of Chilean bulk wine in January-November 2016, according to INV statistics, with nearly all of this imported in October (4.1 million litres) and November (12.8 million litres). Despite this increased movement of exports to Argentina, the USA remains Chile’s biggest export market, followed by China and the UK.

For now, Ciatti believes demand for bulk wine from Chile will remain strong with prices stable into the middle of 2017.

4. Australia

Volume: 293,647,000 litres

Value: $218,961,000

US$/litre: $0,75

Throughout 2016, bulk wine exports of Shiraz and Cabernet Sauvignon has been particulalry strong, driven largely by demand from China, which has gone some way in helping to boost the price of its grapes.

Rising demand from China can be exemplified by a recent purchase by China’s Weilong Grape Wine Company, which this year spent AUS$13.4 million on acquiring a number of Australian vineyards as part of a wider plan to invest $120m in the country.

While the extent of its impact is not yet known, a recent hailstorm in the Riverland and Sunraysia growing regions could impact grape prices going forward, with many vineyards affected losing up to 80% of their crops, resulting in a 10-15% drop in national production.

A hub of Australia’s bulk wine production, Riverland vines supplied 63% of South Australia’s crush in 2015 and 27% of the nation’s grape crush.

3. France

Volume: 163,680,000 litres

Value: $244,240,000

US$/litre: $1.49

Again, hailstorms, as well as prolonged drought, affected crop estimations in France, with authorities revising its estimate for the 2016 vintage from 42.2 million hectolitres to 43.2 million. This is still 10% down on 2015 and 8% on the five-year average. However there is still a strong supply of varietal bulk wine available to buyers, with such stock resulting from France’s general loss of market share, particulalry to Spain, in recent years. Ciatti said losing share on 3-litre or 5-litre bag-in-box programmes had “exaggerated” France’s market share loss in terms of volume.

“The upward revision in the harvest forecast has only served to further slow a backlogged varietal bulk wine market,” said Ciatti. “For premium and super-premium wines as well as mixers and blend-boosters, the situation is different: buyers of these should look to cover their needs now.”

Generally, buyers are waiting for prices to settle before securing supply. Despite a sluggish market, France maintained the highest price per litre of all top exporters commanding a healthy $1.49 per litre.

2. Italy

Volume: 383,216,000 litres

Value: $313,377,000

US$/litre: $0,82

The picture in Italy is similar to that if France. While production has been lower, bulk wine sales have been slow with prices relatively stable and buyers more able to play the waiting game.

Buying has been slower than usual, with the weakness of the Sterling, impacted by the UK’s vote to leave the EU, resulting in less profitability of wines being exported to the country.

“There is some uncertainty: big companies are seeing a slowing in wine consumption across Europe and are feeling the pressure in the post-Brexit UK market which, due to the fall in pound Sterling, is demanding wine for less.”

In particular, Ciatti cited strong demand in Abruzzo and Veneto, the latter for sparkling base whites for the production of Prosecco.

Italy’s buying campaign has commenced slower than expected. Prices are nearly competitive with Spain. The weakness of the post-Brexit pound is squeezing the profitability of exports to the UK.

1. Spain

Volume: 971,573,000 litres

Value: $417,089,000

US$/litre: $0,43

Spain was the biggest exporter of bulk wines in from January to September 2016, but with the biggest volumes commanded the lowest price per litre – just 43 cents per litre.

Overall, prices for good quality generic reds and whites are falling, but the prices for good quality rosé, is expected to remain firm and could potentially rise. With supply steady, buyers are waiting to see if prices will soften in the coming months.

“Purchasing of Spanish bulk wine was slow at the annual World Bulk Wine Exhibition (WBWE) in Amsterdam, reflecting the current market,” said Ciatti.

“Historical buyers from Germany, the Netherlands and elsewhere were impressed with the samples but most did not put a position on the wines. The WBWE is becoming increasingly international and there was plenty of interest from China and Russia. China will still be active among European opportunities on the cheaper side from Spain and the upper side from France. Russian buyers, meanwhile, are back in full force as the rouble has made gains in 2016.”