Harvest shortage: producers urged to rein in prices

Details: Published on Friday, 02 November 2012 09:17; Written by Gemma McKenna

Distributors are urging producers to be true to long-term partnerships and not be “too greedy” when it comes to putting prices up, as the impact of 2012’s short harvest is felt.

As getting hold of wine becomes increasingly difficult, the trade is getting jumpy
about how to maintain supply and not force consumers to pay more. The International Organisation for Vine & Wine (OIV), said earlier this week that this was the smallest crop in 37 years.

PLB’s category insight director Guy Holland said: “The key is not to be greedy – build long-term market share rather than push through price increases and bank the quick buck.”

The firm’s buying director Paul Meihuizen described the year ahead as promising to be “one of the most challenging for the global wine industry”, causing a lot of uncertainty around pricing and availability.

Large shipments from countries with abundant harvests this year, such as Chile and South Africa, are fast depleting stocks there and pushing prices up.
Meihuizen warned that some of the price increases were the “highest we have experienced for over 20 years”.

Steve Barton, joint director of Brand Phoenix, warned that rapid growth of export markets, combined with the short harvest, was compounding problems. “The litreage per head has still got a lot of room to grow elsewhere,” said Barton.
“The conundrum in the UK market is that the average price of a bottle of wine is still increasing too fast for consumers – volumes have dropped by 2 million 9-litre cases.”
He said the wine world is “going to change dramatically”. “It already has – look at FQR, Oddbins, WaverleyTBS, Stratford’s and D&D.”

While UK buyers may not be worried about stocks, “certain key producing countries would look to sell what’s available to markets where they can make the most money”.

“UK retail businesses have got to work in partnership. It’s incredible that the wine trade is not working on three to five-year trading cycles to protect supply price and quality – like every other commodity market.

“The upside of longer-term deals is that investment decisions are made jointly – no one partner will have to swallow all the downside. The longer you plan for, the more straightforward it is to hedge currency, plan for duty and make country of origin bottling decisions,” Barton said.

Dan Irving, managing director of broker Winery Exchange’s international division, said that while prices had jumped significantly given short harvests, neither retailers nor consumers were keen to pay more.

The knock-on effect is “increased pressure on everyone’s margins in the value chain”.

* For a full analysis on this topic, see this week's issue of Harpers.

Comments

#1 Hugh 2012-11-08 18:59

Frankly I have little sympathy for them, they and consumers have had record low prices for years whilst growers have been paid less for their grapes than they were 10 years ago. You can bet all of the supermarket prices have gone up meantime, they have made sure that their margins are protected and at the same time they have messed around wine suppliers but not honouring their purchase agreements, so much for relationships! Grower inputs have increased some 100% over the last 10 years, and these plus adverse weather conditions, have placed incredible pressures on growers and wineries. It is just time for an adjustment to come through the system so that the primary producers get some of the wealth and not just the supermaekts and retailers. 1000's of heactares of grapes have come out of production due to low prices, if they conitnue there will be no wine industry to speak of at all, so let us get some balance here.

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