Subscriber login Close [x]
remember me
You are not logged in.

Industry at a tipping point

Published:  18 January, 2007

Abnormal vintage issues are nothing new. Viticulturalists and winemakers have learned to live with adversity, and have managed to turn climatic conditions to their favour, sometimes in the most extreme conditions.

Yet recent reports of the impact of the drought in Australia are clearly extreme - especially when considered in light of the poor 2007 vintage.

The Australian Wine bureau is predicting a harvest of between 800 and 1,300 thousand tonnes of grapes in vintage 2008, a large enough vintage to avert panic, but at the mid-point still nearly 50% down on a normal' vintage from the long-term category growth driver that is the Australian wine industry.

Add in the impact of a clear demand-versus supply imbalance emerging in New Zealand, and near-drought conditions in California (albeit the crop is high-quality), and we are potentially facing the most challenging conditions for the wine industry in the UK for some time.

Low grape prices from Australia, driven by surpluses of lower grade fruit, have had a major impact in the establishment of the now-expected half-price and 3.99 offers.

Now suppliers who have relied on spot purchasing may struggle to get sufficient quantities, let alone competitive prices, to sustain these deals.

Allied to the prospect of further duty rises to come in the Spring budget - and with the current focus on social responsibility, who would not predict them? - this could represent a significant tipping point for the category, and one that finally moves average unit prices over 4.

Yet that would imply a significant change of behaviour from all parts of the industry, from supplier to retailer. Will there be a significant switch from one country to another? Are the countries that might possibly benefit ready to market themselves aggressively enough to change long-held consumer loyalty?

A cursory store tour currently highlights that we are some way from this happening; yet the real implications of the drought are yet to be seen. Like good winemakers, smart retailers and suppliers will adapt quickly to the new conditions and thrive.

Angel Mount is MD of Love That Wine/associate director of Wine Intelligence.