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Why 2025 ‘will be a telling year in the wine industry’
Following a challenging period for the drinks trade, David Bowman, chief commercial officer for Ste. Michelle Wine Estates, tells db why 2025 “will be a telling year in the wine industry”.
Making the comment during a discussion with db last month, the industry veteran and former executive vice president for Jackson Family Wines outlined his views on the trading prospects in the year ahead, having said that the “primary headwind right now” is oversupply.
“Whether it’s California or Chile, we are clearly in surplus,” he said, adding “And that is a function of consumer demand, which, since Covid, has changed significantly.”
Noting that “Covid drove the industry to think that demand was more significant than it was,” he said that the escalation in wine consumption during the pandemic came about because “the consumer did a bit of cocooning and splurged on creature comforts; cooked at home, and bought better and more wines.”
This trend, driven by unprecedented conditions, encouraged the wine industry to “make unsustainable projections of where growth was going to be, and wineries planned on that, making more wine, and taking on more grower contracts.”
As a result, “there is a lot of wine in tank, barrels and bottles – and that has to unwind over next few years relative to consumer demand.”
However, when it comes to next year specifically, Bowman believes we’ll have a better idea of the true nature of trading as he predicts more stability in the market.
For a start, he observes “a lot of global uncertainty in the economy” at present, which he sees diminishing by 2025, while “the political uncertainly in the US I think will be resolved by January” – when the elections are over.
“We will then have a good understanding of where we sit,” he said, commenting that 2025 will have also followed “a couple of years of destocking in the wine industry and alcohol-beverage in general.”
Indeed, while Bowman believes that a grape surplus will take a few further years to “unwind”, the excess stock in major retailers and suppliers will have disappeared by mid-2025.
Referring to this part of the trade, he said, “Coming out of covid they had built big inventories, and most of that will be done through the first quarter and half of next year.”
Concluding, he said on this topic, “I think a reset is in place, and the consumer’s mindset will be assuaged in terms of uncertainty, so we will see if we hit a plateau – and I think ‘25 is that plateau.”
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