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May 8, 2013

Global wine consumption, which has outpaced production for the last six years, is set to come under pressure from rising prices, warns a first quarter 2013 report from Dutch multinational bank, Rabobank.

A key question for the industry in 2013, said the report, is whether bulk wine importers like Russia, China and Germany will continue paying rising prices from traditional Spanish and French suppliers. If not, options include buying New World bulk, a comparatively more expensive option up to now, or, switching to other drinks, said the report.

“Russia, for example, has been importing a lot of cheap juice. One of the questions is - will they continue with higher prices or switch back to vodka?” said Rabobank wine industry analyst, Stephen Rannekleiv in a phone interview.

So far, Russia, the fifth-largest bulk wine importer and one of the most price sensitive, has not yet started buying significant quantities of New World bulk, the report said. Instead, in 2012 Russia moved to replace Spanish bulk imports and with supplies from a range of countries including Moldova and the Ukraine. It also began importing some bulk, although not enough to compensate for the Spanish drop off, from Brazil and South Africa, where it took advantage of a weaker South African currency. The report adds that even recent news on Russia lifting its Georgian wine ban, may not fill the gap left by Spain.

China meanwhile, has already taken the step of replacing Spanish imports with Chilean. In 2012 China’s Chilean imports rose by over 25m litres, while Spanish bulk imports fell by 12m litres. Broader demand for Chilean bulk may however be limited by its generally higher cost, the report said. If so, buyers may look to Argentina, bearing in mind a possible devaluation of Argentina’s peso in 2014, Rannekleiv said. As for German bulk imports, the country has so far appeared to take Spain’s price increase “in its stride”.

With the southern hemisphere harvest now underway and expected to bring in good volumes, New World prices may become comparatively more attractive in the light of Europe’s smaller 2012 harvest. Over the next six months, though, buying decisions will also begin to take into account the outlook for Europe’s 2013 harvest.

The report’s 2013 currency forecast supports a “somewhat” stronger euro against a weaker dollar scenario, as short-term crises in Europe ease off and more quantitative easing is introduced in the US.


Source: Meiningers Wine Business international.