LOOK ON. the bright side

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LO O K O N

t h e b r i g h t s i d e

While 2020 has been a challenging year for the bulk wine sector, there are some

reasons to be cheerful, with good harvests, new suppliers to the market, and the

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> This year’s World Bulk Wine Exhibition (WBWE) in Amsterdam has been cancelled, and has been replaced with an online platform called WBWE Connect.

> Otilia Romero de Condés, chief executive of WBWE, says that the 2020 harvest has been superior to 2019’s, therefore it has been possible to fulfil all needs, distillations and exports of bulk wine.

> One sector that bucked the trend was bag-in-box, which grew by 7.9% in volume, the only category in growth in 2020.

> While the pandemic has challenged the market, 2020 has been fraught with political hurdles, including the effect of tariffs imposed by the US on the EU, new laws in Russia that prohibit both the use of grape must and imported bulk wine to make ‘wine’ in Russia, and continued uncertainty around Brexit.

b u l k w i n e

> AS YEARS go, 2020 won’t be up there

with the best of them. The shock arrival of a global pandemic early in the year has cast a pall over everything, shuttering restaurants and bars around the globe, and many winemakers are struggling with the uncertainty of the future.

As Otilia Romero de Condés, chief executive of the World Bulk Wine Exhibition, notes: “In many ways, the Covid-19 outbreak has posed the greatest challenge of our time. The situation has had an impact on the entire wine sector across the board because it is a beverage consumed within the catering, restaurant and hostelry channel, which has been one of the sectors most affected by this crisis.”

However, she argues that “bulk wine has a golden opportunity ahead”.

Retail and e-commerce have boomed during the lockdowns that have spread

across Asia, Europe and North America – and this is particularly significant for players in the bulk market.

“The positive side for the bulk wine industry is that a significant part of the wines we can find on the supermarket shelves come from bulk wines, and its consumption has increased during the confinement periods,” she says.

“The opportunity for acquiring quality wines at more affordable prices is there thanks to quality bulk wines and the benefits offered by their international transport. Those who know how to position themselves in this field of bottling at destination will have ensured their relevance in the future market.”

Not even the cancellation of the face-to-face World Bulk Wine Exhibition in Amsterdam, the largest trade event dedicated to the bulk sector, can hold

Feature findings

back progress. Having been established 12 years ago, the fair has built its reputation as the place where

international operators close some of the largest transactions. This year, the event was supposed to take place later this month, but the organisers have switched to a digital event with the launch of an online platform called WBWE Connect.

Running from 23 November until 4 December, the platform will enable producers to showcase their portfolios to a broad audience of international professionals. This year promises the largest portfolio of bulk wines, while a personalised search system will enable participants to zone in on the perfect products for their portfolio and link with producers via an online meeting hub.

This move demonstrates the ability of the sector to adapt. One challenge was

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various markets. Spain, the world’s largest bulk wine producer, suffered a large hit during the summer Covid-19 spike, with volumes down by 22% in April, and by 28% in May. Overall, in 2019-20, Spain’s bulk exports dropped by 10.5% in value on volumes down by 6%, with the year-on-year average price falling. It also exported 1.15 million hectolitres less year on year in the first seven months of 2020, and turnover plummeted by €19m, although the average price rose by 5 cents per litre.

Australia, Chile and Italy also saw their exports fall, declining by 4.7%, 12.7% and 5.6% respectively in the year to April 2020.

seen this year when eye-catching headlines talked about the mass

distillation of wine grapes into industrial alcohol in France and Spain. It’s

reasonable to wonder whether this negatively affected bulk wine, but Romero de Condés is sanguine. “The 2020 harvest has been superior to 2019, therefore it has been possible to fulfil all needs, distillations and exports of bulk wine. Alongside Italy, France and Spain dominate the annual wine productions on a global scale. They have sufficient strength in order to derive grapes for distillations and still continue to serve a market with an increasingly greater demand for bulk wines of higher quality and therefore they are better paid.”

Paul Braydon, buying controller at Kingsland Drinks, for example noted that some New World wine countries complained that “it was clearly a state subsidy, which would not be available in many of the southern hemisphere countries, whether this support is from

the EU or individual countries.” Despite the wider political and economic uncertainty, bulk wine is well placed to remain resilient. According to the Bulk Wine Club – a club for the sector – global bulk wine exports have remained significantly stable during the first half of this year, with bulk being the only wine category to see a price rise in 2020.

A TURBULENT YEAR

The year has undoubtedly been turbulent – world wine exports dropped by 12.6% in value to €13.180m, and volumes were down by 4.7% to 4.782m litres in the first six months of 2020. Although the volume of bulk exports declined by 2.8% (a fall of around 48m litres), bulk wines gained market share compared with bottled and sparkling wines, and was the only category that increased in price (from 73 cents per litre to 75 cents per litre). Meanwhile, bottled and sparkling wines were hit badly, falling by 6.8% by volume (down by 184m litres) and by 5.6% (down

by 21.6m litres). There was a noticeable bump in June bulk exports, up by nearly 22% following a sluggish spring.

One sector that bucked the trend was bag-in-box, which grew by 7.9% in volume, the only category in growth in 2020. Romero de Condés notes: “It has a bright future for growth if producers know how to do the right thing about marketing,” There were fluctuations in

‘Bag-in-box has a bright

future for growth if producers

know how to do the right thing

about marketing’

Kingsland Drinks in Greater Manchester

Bulk wine imports,

January to July 2020

Source: Il Corriére Vinicola

Bulk 000 Litres 000 US$ $/L

UK 263,512 347,502 1.32 Germany 388,979 268,016 0.69 US 174,036 158,145 0.91 France 250,565 137,496 0.55 China 53,262 46,307 0.87 Canada 72,937 46,032 0.63 Switzerland 27,406 38,948 1.42 Japan 23,213 25,943 1.12 Russia 22,862 13,451 0.59

Bulk wine exports,

January to July 2020

Source: Il Corriére Vinicola

Bulk 000 Litres 000 US$ $/L Spain 501,072 249,391 0.50 Australia 182,296 173,677 0.95 Italy 201,185 160,552 0.80 New Zealand 57,415 156,325 2.72 Chile 174,352 145,718 0.84 US 108,325 134,398 1.24 France 90,312 131,057 1.45 South Africa 58,787 50,308 0.86 Argentina 112,164 43,323 0.39 Germany 3,776 5,157 1.37

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Hungary was another market that saw growth, with trade up by around 30%.

Highlighting trends in international and emerging markets, Braydon says the New World has always been attractive. “New Zealand, Australia, South America, South Africa and the US have always been – and will continue to be – significant volume drivers for bulk wine.” However, he admits that Kingsland has seen an increased volume of wine shipped from Spain in recent years, as well as Bulgaria and Moldova.

“Last year, we shipped the first wines from India to be bottled in the UK, and we are always looking at emerging supply markets that will be of interest for UK customers and consumers from a quality, value and unique offer position.”

And Paolo Lasagni, managing director of Bosco Viticultori, comments: “I’ve seen a consistent increase in demand for sustainable wines; not necessarily Australia’s unpackaged wine exports

increased by 13% in value to AU$576 million and 2% in volume to 427 million litres (47 million 9-litre case equivalents). The average value of unpackaged exports has remained high, increasing by 10% to AU$1.35 per litre – levels not seen since late 2004 – due to the relative short supply of Australian wine in an already constrained global supply situation.

This follows the wine grape crush for 2020 being down by an estimated 12% from last year, at around 1.52 million tonnes, a fall of 13% from the 10-year average of 1.75 million tonnes. There is significant variability in volume terms in its wine regions, with Adelaide Hills significantly affected by fires early in the year, and other cooler climate areas being significantly down in volume terms.

“This, coupled with strong demand and a shortage of older vintage or reserve wines, meant that pricing from the 2019 vintage to the 2020 one remained firm,” Braydon points out. “But with China

launching investigations into wine supply from Australia, it will be interesting to see what happens to demand and pricing, particularly for red wine and premium regions over the coming months.”

STABLE PRICES

New Zealand has had a promising year, Romero de Condés says, after sales surged by around 18% in the year to April, while it also sold its products at a higher price – a picture also seen in the United States, where prices were stable and exports rose by 5%.

South Africa’s bulk exports also substantially decreased. The country has suffered a perfect storm of issues, from severe drought over the past three years, which has hit production, to the crippling effect of the export ban and ban on domestic alcohol sales introduced by the government following the Covid-19 crisis. “South Africa is one of the most advanced countries in terms of technology and marketing, so we are confident that they

will find solutions,” Romero de Condés says.

Chile’s smaller harvest has seen short supply of some varieties, including Sauvignon Blanc, while Argentina is fast becoming a go-to destination for best-quality red grapes because of the economic crisis and its effect on the exchange rates. Volume growth grew by almost 70% in the year to April, but the average price fell by 32%.

‘South Africa is one of the most

advanced countries in terms

of technology and marketing,

so we are confident that they

will find solutions’

> Following the cancellation of the annual WBWE in Amsterdam because of Covid-19 restrictions, the organisers of the fair are launching a digital event that will bring the bulk wine together in spirit, if not in person.

> WBWE Connect, which will run from 23 November until 4

December, is an online platform that enables producers to showcase their portfolios to a broad audience of international professionals.

> The service will also act as a meeting hub to facilitate digital meeting between producers and buyers across the two weeks, without sales commissions or intermediaries. > A personalised search system will

enable participants to zone in on the perfect products for their portfolio and link with producers from around the world.

WBWE Connect

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from the perspective of the New World and developing countries.

“That said, trade talks are ongoing with key supply countries, so it’s uncertain what may happen in the future,” Braydon says.

“A removal of import tariffs will open up the possibility for wines from New Zealand, Australia, the US, South Africa and Argentina to reach UK shelves at a slightly more competitive price point. The UK already has in place an interim trade deal with Chile, and this will mean that Chile will be able to continue to supply wines without having to pay Common Customs Tariff.” db organic ones, but ones that are vegan- or

vegetarian- certified.”

While the pandemic has undoubtedly challenged the market, 2020 has been fraught with political hurdles, including the effect of tariffs imposed by the US on the EU, new laws in Russia that prohibit both the use of grape must and imported bulk wine to make ‘wine’ in Russia, and continued uncertainty around Brexit. Potential tariff changes and “complex and unnecessary” VI-1 certificates on EU wine being imported into the UK are likely to have a negative impact in the short term, although the impact of Brexit on bulk wine remains unclear.

“While there are potential benefits, none of them have been realised yet, so the net

impact thus far has been negative with increased workload, complexity and cost,” Braydon argues.

SIGNIFICANT RISK

Recent developments in the past month has seen the UK government suspend VI-1 certificates on EU wines being imported into the country for six months (from 1 January to 30 June 2021). While

encouraging, the WSTA says there is still a “significant risk” that these “pointless” forms could ultimately go ahead, causing “permanent damage to the UK as an international wine trade hub”.

Extra documentation is likely to make supplying wine to the UK more costly and complicated, Braydon argues, and

therefore may make the UK a less attractive place to sell wines.

Lasagni disagrees. “For the big commercial producers, the UK is a fundamental market. We cannot live without the UK, perhaps smaller producers will be put off by the documentation but the big producers cannot afford to dismiss the UK.”

Meanwhile, because the UK is mirroring the agreements for tariffs already present under EU legislation with just a slight change from the euro to the pound, there is minimal impact

‘A removal of import tariffs will

open up the possibility for

wines from New Zealand,

Australia, the US, South Africa

and Argentina to reach UK

shelves at a slightly more

competitive price point’

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