‘Global wine shortage’ and what the UK pays – part 1

Wine VisionLast week, I presented at a global wine conference in London, called Wine Vision. One presentation was on the ‘trials and tribulations of selling direct’, the other on digital communications, as part of a panel.

There were a few things to be gleaned from the event, other than the obvious networking thing (and, my word, there are some brilliant people in the wine trade):

One, if you want to fill a room, talk about how digital and social media can work for business. Two, that the US and China are the growing markets for wine.

Which brings me onto the news story about the global wine shortage. We’ve had numerous messages from friends who are concerned that wine is about to run out. Don’t worry, it isn’t, but there are some interesting points to come out of the detailed report by Morgan Stanley Research.

You can download the 77-page, 1.3mb pdf here. It reads like a massive Infographic.

The report made the mainstream news because of some fairly startling observations about a ’global shortfall’. Here’s the executive summary (page 3):

  • ‘Global wine production peaked in 2004 and continues to decline. In 2012, production declined to its lowest level in 40+ years. Global consumption inflected (?) in 2010 and continued growing in 2011 and 2012.’
  • ‘Global under-supply is at its deepest level in more than 40 years. Data suggests there may be insufficient supply to meet demand in coming years, as current vintages are released.’
  • ‘In the past couple of years, production declines have continued in France, Spain and Italy and new world production has peaked.’
  • ‘The French remain the largest consumers of wine, with consumption maintaining a positive trend since 2010, following decades of decline. The US is now a very close second.’
  • ‘The US and China are the main drivers of consumption growth globally.’

My experience of late, both here in Bordeaux and at the event in London, certainly supports that last point. (China came from nowhere to become the largest export market for Bordeaux in only five years.)

The price the UK pays for wine

What is relevant to UK consumers, and quite striking, is just how cheap wine is – or rather, how little the UK pays for it. Here are the four charts from page 53.

Average cost price per bottle

An awful lot of wine costs less than £1 at source. (Don’t forget, the average price of a bottle in the UK is just over £5, which includes £2.84 in tax. UK duty is a fixed £2 per bottle and VAT is 20%.)

p25-04Looking at the high figures for France, I should add that the average price of French wine is skewed by investments in top Bordeaux and beyond, much of which is stored in the UK under Bond before being sold on to the Far East. British wine merchants are smart traders.

UK imports by wine-producing country, by volume

p25-07Primary sources of imports are all the major producers. A strong A$ has seen Australia surrender the number one position by volume, having been overtaken by Italy.’

 

 

 

UK imports by wine-producing country, by value

p25-05‘The US, Chile and particularly NZ have all experienced strong growth in exports to the UK, both in volume and value.

 

 

 

 

 

 

UK wine consumption 2000-2013

p25-03The UK is the second largest importer of wine in the world by volume, although a weakened economy has seen modest declines in consumption in recent years.’

(A weaker pound since 2007 and a 50% increase in duty in the last 5 years has also played a part.)

The UK pays less

When you look at the individual exporters and the price they sell to the UK at, the UK pays comparatively little – Britain is, after all, a highly competitive, highly taxed marketplace for wine. Here are just some exporters’ figures from the report.

Australian wine export prices (page 25)

p25-01The UK and Germany pay the least for Australian wine. Connected with this is the remarkable shift from bottles exported to the UK, to shipping in bulk (page 26).

The red ring shows that ‘Asian countries make up the top 6 of average price for exports, with China showing a considerable step-up in 2012.’

New Zealand wine prices (page 71)

p25-06‘New Zealand relies on three key export markets: Australia, The UK and The US.’

New Zealand has an enviable reputation for achieving higher prices than other countries – double that of Australia, for example. The UK pays much less than anyone else, it seems. But there’s

‘.. an undersupply situation for the first time in more than 15 years.’

US wine prices (page 42)

p25-02‘The UK is by far the largest volume market for the US, but at lower price points.’

There’s a huge gap between what they sell in Napa, to what they sell in Asda.

 

 

 

On the face of it, British supermarket and trade buyers certainly drive a hard bargain. With the average UK retail price being just over £5, they have to.

See ‘Global Wine Shortage’ and what the UK pays – part 2, for some random thoughts about how all this effects UK consumers.

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