The bulk market has experienced its second consecutive month of noticeably more normal activity levels following last year’s stark slowness. Much of the activity has been generated by generic white wine and its apparent shortness and/or increases in price in Spain, Italy, Chile and South Africa. Italy’s shortest harvest in many years led to a lack of supply and high prices there and in Spain, in turning upping demand in France as well as European need for Chile’s generic white – just as crop expectations in the generics producing north of the country are very pessimistic due to acute drought.
South Africa, meanwhile, is on course for its shortest harvest in 22 years, constraining its generic white offer, especially given strong domestic demand. In fact, all of the major Southern Hemisphere producers are on course for shorter-than-average harvests owing to a combination of climatic issues, vine removals, or uncontracted vineyards going unmaintained. Alcohol levels are expected to be down in both Argentina and Chile. Whether by Mother Nature or human hand, the global bulk wine market is getting the Southern Hemisphere crops it needs to restore some supply-demand equilibrium, at least on whites.
The red wine market remains more muted by comparison. The big news for the market came at the end of March, when China – finally – ended its 200%+ tariffs on Australian wine imports, effective from the 29th. China-based and domestic enquiries into Australia’s 2022 and 2023 Dry Red, Shiraz and Cabernet immediately rose; pricing has since started to firm up. This may, in turn, make red wine export prices in other countries appear more attractive by default.
Shorter Southern Hemisphere harvests, and the simultaneous return of a significant consumer market – China – to the wine-buying fold, help create the appearance of better bulk wine demand versus 2023. But it remains questionable how sustainable this appearance will be if the Northern Hemisphere crops perform average or better, all the while North American and European consumption remains subdued. As US wine industry analysts SipSource recently concluded, a “strong consumer pull would ease our pain” but a “significant move to increase inventory at retail” currently looks unlikely. With the US and Eurozone economies staggering on, and the UK technically in recession, it seems unlikely 2024 will bring concerted momentum in retail sales. Bulk wine buyers are increasingly using the just-in-time model to help ensure they only buy the volume a programme definitely requires while minimising storage costs. In the often-prolonged periods between sales, many wine companies are struggling for cashflow and are rationalising operations. Many growers, meanwhile, are considering grafting over or removing uncontracted vines.
Identifying sourcing and selling opportunities that provide margin and cashflow is where the Ciatti team can bring decades of knowledge and experience to bear: don’t hesitate to get in touch. In the meantime, read on for detailed updates on each market.