“The global wine industry,” wrote Rabobank in its latest Wine Quarterly, “has evolved in a context of cheap freight, cheap energy, and declining trade barriers […] these assumptions may be far less certain than we had previously assumed”. We echo this message, though we see each of the three assumptions being challenged to differing extents. 

The last issue cited, the re-emergence of trade barriers, can be attributable to localised political volatility that eventually passes: for example, the US-EU aircraft subsidies dispute appears to be over, so too Brexit’s acutest effects on trade. The world is united in hoping the Russia-Ukraine conflict, too, ends imminently. Such wounds to global trade are patched-up by workarounds and innovation; trade adjusts to the new realities, and carries on. China’s blocking of Australian wine imports is an opportunity for red wine suppliers elsewhere in the world, for example. 

Of greater fundamental concern to the wine trade globally are the freight and energy challenges. Both are intrinsically linked, of course, but if we take them in turn: shipping rates experienced exponential growth in 2021 as there is high demand and a shortage of containers. There is also a shortage of vessels. Vessels take years to build and new or imminent emissions laws are making current designs redundant, effectively placing a moratorium on new construction. Shipping, like haulage, is generally concentrated in few hands, reducing price competition and slowing innovation. 

Energy supply, also, is concentrated in few hands – the Russia-Ukraine conflict has highlighted some European nations’ reliance on Russian oil and gas, for example – and green levies are in some markets compounding the rising cost. The annual energy bill for UK households increased by an average of GBP693 (USD904, EUR756) from this month. Spain and Portugal are temporarily withdrawing from the EU’s internal energy market in order to cut prices for their citizens. Measures are being introduced to ease record fuel prices: the UK has cut fuel duty by GBP0.05/litre; France has introduced an EUR0.15/litre rebate. But fuel poverty is likely to drag back consumer spending this year. 

Rabobank references a “regionalization of supply chains” in response to rising shipping and fuel prices, with companies moving production closer to the endconsumer. We are seeing shipping, once some way down the list of concerns during transactions, becoming in some cases the first discussion point. There is a growth in what might be termed “supply chain parochialism”: while some buyers are casting the net wider for sourcing options that maintain margin, others are ruling-out wines located at a distance or in a specific location so as to avoid high shipping costs and/or delays. 

The freight and energy challenges are here to stay in 2022 and potentially well into 2023. But a potent weapon in offsetting challenges has returned after a two-year absence: wine fairs are back, and with them a greater ability to build new relationships, enhance existing ones, and mutually establish workarounds to business impediments. 

April brought Alimentaria in Barcelona (busy, and “everyone was happy to see everyone in person”); May brings Fenavin in Ciudad Real and ProWein in Düsseldorf and Ciatti will be attending both, out in force at the latter as in pre-COVID days, with a stand – G24 – in Hall 12. It’s going to be great to see you! In the meantime, read on for detailed updates from each market, and stay safe. 

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Bulk Wine Grape Market