|Price gap between own-label and branded wines to narrow|
|Written by Lucy Britner|
|Friday, 01 February 2013 10:51|
Soaring supply prices could be good news for branded wines as the price gap is set to reduce between own labels and big brands, according to Rabobank.
The report, called Thirsting for Growth: Global Beverages Outlook 2013, said much of the wine industry had become structured around cheap supply."This situation is likely to necessitate some adjustment to sourcing strategies for those brand owners particularly exposed to spot markets, including private label buyers," it stated.
Price increases for own label and other value brands that function on "razor-thin margins" will drive some decline in demand, but will also reduce the pricing gaps with competing manufacturer brands, making the higher priced brands relatively more affordable by comparison, according to Rabobank.
The report used the agricultural commodity price spike of 2008 as an example.
"Some of the private-label food products were more adversely affected than the branded players because the increase in their cost of goods represented a larger portion of their final price that eventually had to be passed on to consumers. The decline in the price gap between higher priced branded products and lower priced private label products led to a shift towards branded products in some categories such as soft drinks," it said.
The report suggests the elimination of the oversupply challenge in the global wine market should generally be viewed as a positive development for branded wine companies. Though it said the timing makes it difficult to appreciate, particularly in Europe where consumer spending is still affected by the financial crisis.