Wine Intelligence: caution recommended for wine brands
Market analysts, Wine Intelligence, believe that “global wine now faces more challenges in 2022 than it did during the immediate impacts of COVID in 2020 and 2021”.
Wine Intelligence described a “perfect storm” of inflation, reduced access to inputs, labor shortages, currency volatility and supply chain disruptions, as well as “tariff wars” and real wars.
The combination of these conditions means that the relative stability of the past three decades, which allowed the wine industry “to become a truly global business platform”, is – for now – over.
However, this global expansion has given way to increased ‘localism’ during the pandemic lockdown era, with wine drinkers in Australia, Canada, the US and Germany all turning to locally produced wines. and turning away from imported wines.
In 2020, the net percentage of Australian consumers buying more domestic wine increased by 31%, followed by a 39% increase in 2021. While the net percentage of drinkers buying more imported wine fell by 16% over the two years. So the suggestion is that even if conditions abroad are not optimal, producers can be rewarded for focusing on the domestic market.
And analysts believe there are some steps wine companies can take to protect themselves from the worst effects of the current uncertainty.
‘Successful wine companies in 2022 will be those that develop a ruthless and pragmatic approach to their supply chains, product portfolios and market focus,” the report states.
“Shorter supply chains will benefit from longer supply chains, as will national and local markets. Costs that seem unnecessary will be dropped; innovations with weak business cases or high start-up costs will be killed.
Although there is growing localism in the market, Wine Intelligence believes this approach could have global benefits for wine brands, including in overseas markets.
“This pragmatic and ruthless attitude may not translate into shrinking export markets – in fact, companies with a wider range of export markets may benefit from a portfolio effect that hedges their exposure if one of these markets suddenly deteriorates due to tariffs, economic crises or war.’
Wine Intelligence has previously suggested that lessons from the pandemic can be very useful to wine producers.
In this report, Wine Intelligence states that wine producers would do well to make safe bets, noting that “known and trusted wine brands will increasingly be what [consumers] are looking for.
“The more well-known and trusted the brand, the more likely the brand will continue to be purchased as inflation fuels higher prices, forcing consumers to seek more value,” the analysts continue.
“Innovation – especially in sustainable and not/weak wines -[is[likelytosupporttoplinevenuegrowthinthemediumtolongtermtheprimarydriverofwinebusinessreportssuccesswillcomefrommanagingcostsofdistributionand’safe”brandsconcluded[estsusceptibledesoutenirlacroissanceduchiffred’affairesàmoyenetlongtermeleprincipalmoteurdusuccèsdel’industrieduvinviendradelagestiondescoûtsdeladistributionetdesmarques”sûres””conclutlerapport[is[likelytosupporttoplinerevenuegrowthinthemediumtolongtermtheprimarydriverofwinebusinesssuccesswillcomefrommanagingcostsdistributionand‘safe’brands’thereportconcludes
Read the full analysis here.