The Northern Hemisphere summer is now in full swing but the heat from a difficult economic environment is being felt globally. Supplier countries’ currencies are moving out sharply against the strengthening US dollar as investors seek a “safe haven” currency in response to annual inflation moving towards, or exceeding, 10% in many markets (including the US, UK and the Eurozone), continuing energy and fuel price rises, and growing signs consumers are now reining in spending.
These factors are exacerbating local causes for currency weaknesses, with the Chilean peso exceeding CLP1,000/dollar on 13th July – far past the previous record low – and the euro and dollar reaching parity, for the first time in 20 years, on the same day. The Argentinian peso, meanwhile, stood at ARS134/dollar.
Bulk wine and grape markets around the world are on the quiet side: while that is at least partly attributable to holiday season in the Northern Hemisphere, we suspect there is a rising level of buyer hesitancy as they assess consumer demand. In a highly competitive retail environment, amid rising inflation, retailers are demanding their suppliers hold price, so sourcing must adjust to retain margin. We expect to see volume requirements reduce – on whites as well as reds – and many supplier countries are reporting fresh bulk wine opportunities as buyers scale back their needs.
The market quietness is most felt on red wines due to the large inventory of these globally, but also seems to be increasingly affecting the whites. Further slowness is being injected by the ongoing supply chain problems, which means that, in some instances, wines bought some time ago are only now starting to get worked through on the shelf. A shortage of dry goods is exacerbating lags in retailing wine, one prominent example being Italy’s Pinot Grigio DOC, sales of which have been hindered by a lack of clear glass bottles.
A few weeks out from the first grapes getting picked, there is little in Europe or California’s vineyards to motivate buyers to move quickly: there is drought in California and northern Italy, Spain experienced an unusually early heatwave, and localized areas of France have been affected by hailstorms, but there’s little sign yet of overall crops coming in very short. Buyers know, too, that on many varieties in many regions, a short 2022 crop still leaves some 2021 carryover, especially adequate in size if buyers scale back their volume needs. That said, specific wines from specific appellations remain tighter – cool-climate Sauvignon Blanc, for example, Pinot Gris, premium reds, Prosecco – and activity on these is steady. The supply of New Zealand Sauvignon Blanc will have been boosted by the country’s large 2022 crop: the variety’s output experienced an uptick estimated at 47% versus 2021. Australia’s 2022 crop, meanwhile, was 13.5% smaller than 2021’s, in line with the long-term average.
The post-COVID picture remains in flux, with a ‘new normal’ yet to coalesce – though perhaps being in a perpetual state of flux is the new norm! All the more reason to get in touch with Ciatti who can draw on decades of experience to help you navigate the current and future marketplace. In the meantime, read on for detailed updates from each market.