Global Wine Update: Decreasing Inventories & Premiumization Trends

St. Louis, Mo. (January 23, 2017) – The global wine update for the first quarter by the Food & Agribusiness Advisory (FAR) group has concluded that although the global wine inventories have been trending downward in recent years, it may not necessarily be bad. The decrease is not causing a shortage, but instead helping to balance global inventory levels.

Asset-light models have both advantages and disadvantages. On one hand, there is less capital tied up in a vineyard, however, without contracts there is much more price vulnerability when supply is lower. Global Sector Analyst, Steve Rannekleiv, explains, “even as some California wine companies focus on asset-light sourcing to maximize the efficiency of capital use, many others have been focused on acquiring vineyards to secure supply and control costs in the long term.”

The analysts note that because most of the decline in global production decrease has occurred in Europe, the small cooperatives there are more likely to feel the pressure of reduced supply. Furthermore, because of size, they lack the ability to effectively compete against large, private wine companies for supply.

As U.S. wine imports increase it is important to note the quality of wine imported is also changing. “Imports from higher-value regions (France, New Zealand, Italy) are showing strong growth, while value-priced imports are generally declining,” explains Rannekleiv. He refers to this trend as “premiumization.” U.S. wine imports grew 2 percent by value and 3 percent by volume in 2016, and as premiumization continues the impact of growing imports will become clearer.

Analysts are predicting 2017 to be an interesting year in terms of exporting and challenges. The weakness of the British pound is likely going to hinder UK imports. This coupled with the strengthening U.S. dollar will make the U.S. market increasingly attractive. However, Chilean exporters are hoping to see improved export positioning with the weakening Chilean peso.

FAR Report Requests/Media Inquiries

Sarah Kolell
Rabo AgriFinance
(816) 516-7984

About Rabobank International Food & Agribusiness Research and Advisory (FAR)
The Rabobank International Food & Agribusiness Research and Advisory (FAR) group is a global team of more than 80 analysts who monitor and evaluate global market events that affect agriculture worldwide. This international team works to collect key insights into commodity markets; conduct in-depth analysis of the factors that drive sector success (or failure); and examine the megatrends that ultimately influence clients’ business strategy. These analysts are internationally respected experts in sectors from protein to produce, inputs to oilseeds, and their knowledge is shared with Rabobank customers.



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