A report released this month by Dutch bank Rabobank suggests that global supply and demand for wine are finally beginning to balance.
‘Sharp decline in production’ since bumper years
There has been a series of large global wine harvests from 2004 to 2006. This boom in production coupled with a decline in demand since the global recession that began in 2008, have led to a chronic global oversupply.
There has been a sharp decline in production, however, since these three bumper harvests, and a gradual increase in consumption, particularly in the US, China and other emerging markets.
‘Global inventories of commercial wine are at their lowest point in over a decade, and stronger grape and bulk wine pricing in many markets suggests that the industry is much closer to balance,’ the Rabobank report says.
It goes on to say that the balancing of supply and demand is likely to lead to increased prices. ‘The tighter supply situation has since eliminated much of the unsustainable competition that had been undercutting pricing, allowing wine companies to focus on more sustainable brand development.’
Another effect will be a reduction in the diversity of wines available in certain markets as wineries have less pressure to operate in more difficult markets, such as the UK.
The reduced harvests in most of the southern hemisphere this year, added to the small harvests predicted for nearly all of the major wine producing countries of Europe, is likely to add to the pressure on supplies.
Written by Matt Walls