A 2020 that no one could have foreseen is drawing to a close: bulk wine activity around the world has slowed to varying extents while the industry takes a breather, assesses OND retail sales and waits to see what 2021 looks like bringing on several fronts, not least the COVID-19 battle and vaccination rollouts.
COVID-19’s second wave across Europe from October onward – and the ensuing reimposition of lockdowns/restrictions – injected further hesitancy into buying activity towards the end of the year, with bulk wine getting purchased in conservative increments if at all. One of our offices summarizes it well: “Most buyers over the last three weeks have said ‘yes, it can work, but my marketing team or the supermarkets don’t want to pull the trigger and say go for it’.”
Another concern for Europe’s suppliers in particular is Brexit uncertainty, grinding on tediously since the autumn of last year: at the time of writing, with days to go until the UK exits the EU’s Single Market and Customs Union on 1st January, it is still unknown if there will be a trade deal in place between the two parties or if tariffs will come into force. It should be noted that this issue concerns the UK and the EU: wines the UK receives from non-EU countries will be unaffected by any changes – unless, of course, they are to be forwarded on to the EU.
A more certain development on import taxes is the imposition by Chinese authorities of tariffs of up to 212.1% on Australian wine imports in containers of two litres or less, provisionally for three months (see this month’s ‘China Australia Wine Tariff Update’). The authorities claim the tariffs are a response to wine dumping, but are widely perceived to be the result of political tensions. In addition, China has also imposed a temporary countervailing duty of 6.3-6.4% on Australian wine imports. It is currently unclear if/how these tariffs and duties apply to bulk wine.
A tariff regime that realistically precludes Australian wine imports could boost China’s interest in alternative sources such as Chile, which – enjoying an FTA with China – was a leading destination for China’s buyers until the past year or so. Despite the significant reduction in Chinese custom and the pandemic over this period, Chile’s bottled, bulk and packed export volumes have held up or even grown – symptomatic of wine’s robust sales at European and North American supermarkets/online retailers. It has been a heavily fragmented year difficult to summarise – and offering little forward visibility - but strong offtrade wine sales in key markets has helped offset the on-trade slump to varying extents volume-wise. Value, however, will take a greater hit.
Apart from October’s frost episode in South America, the Southern Hemisphere’s growing conditions have so far been good and water reserves look sufficient. What will be the state of the world by the time the Southern Hemisphere’s 2021 reds are getting shipped? Fingers crossed, visibly moving back to normality. In the meantime, everyone at Ciatti wishes you and yours a very Merry Christmas and a prosperous – and healthy – New Year.