Market analysts, Wine Intelligence believe that ‘global wine is now facing a greater set of challenges in 2022 than it in did during the immediate impacts of COVID in 2020 and 2021.’
Wine Intelligence has described a ‘perfect storm’ of inflation, reduced access to input goods, labour shortages, currency volatility and supply chain disruptions, alongside ‘tariff wars’ and actual wars.
The combination of these conditions means that the relative stability of the past three decades, which has allowed the wine industry ‘to become a truly global trading platform’ is – for the moment – over.
However, this global expansion gave way to increased ‘localism’ during the lockdown era of the pandemic, with wine drinkers in Australia, Canada, the US and Germany all turning to domestically produced wines in their droves, and turning away from imported wines.
In 2020, the net percentage of Australian consumers who buy more domestic wine increased by 31 per cent, followed by a 39 per cent increase in 2021. While the net percentage of drinkers who purchase more imported wines fell by 16 per cent in both years. The suggestion is then, that although conditions overseas are less than optimal, producers can be rewarded for turning their focus domestically.
And the analysts believe that there are certain actions wine businesses can take to hedge themselves from the worst effects of the current uncertainty.
‘Successful wine businesses in 2022 will be those that develop a ruthless and pragmatic approach to their supply chains, product portfolios and market focus,’ the report reads.
‘Shorter supply chains will benefit over longer supply chains, as will domestic and local markets. Costs that look unnecessary will be jettisoned; innovations with weak business cases or high launch costs will be killed.’
Although there is a growing localism in the market, Wine Intelligence believes that this approach could have holistic benefits for wine brands, including in overseas markets.
‘This pragmatic and ruthless attitude may not result in fewer export markets – in fact, businesses with a broader sweep of export markets may benefit from a portfolio effect which hedges their exposure if one of those markets suddenly deteriorates because of tariffs, economic crises or war.’
Wine Intelligence has previously suggested that the learnings of the pandemic can stand wine producers in good stead.
In this report, Wine Intelligence states that wine producers would be wise to make safe bets, pointing saying ‘known, trusted wine brands will increasingly be what [consumers] are looking for’.
‘The more known and trusted, the more likely the brand will continue to be purchased as inflation feeds into rising prices, forcing consumers to seek out more value,’ the analysts continue.
‘Innovation – particularly in sustainable and no/low wines – [is[ likely to support top line revenue growth in the medium to long term, the primary driver of wine business success will come from managing costs, distribution, and ‘safe’ brands,’ the report concludes.
Read the full analysis here.