- Bulk wine prices for white wine are at the level of December 2021. Red wine is trending softer
- Declines in imports on the Chinese market led to a significant oversupply. Australian reds, in particular, are ultra-competitively priced.
- It is, however, not yet clear if the current demand for white wine is the result of a long-term consumer switch or rather a consequence of the short white harvests in 2021.
Buying activity has predominantly occurred in the Northern Hemisphere after its harvests came to an end in October, on those whites with little 2021 carryover: Sauvignon Blanc, Chardonnay and Vin de France white in southern France; most whites and sparkling bases in Italy; and Sauvignon Blanc, Chardonnay, Pinot Grigio and sparkling bases in California’s Central Valley. Prices are roughly in line with where they were in December 2021. The red wine market, meanwhile, is becalmed in both hemispheres and pricing is trending softer. Although many Northern Hemisphere reds are still undergoing malolactic fermentation, lack of interest in the remaining – sometimes large volumes of – 2021 reds would suggest a slow start to the 2022-vintage buying campaign in the new year.
Depending on the Chinese market
The contrasting fortunes of bulk white versus bulk red, evident for a few years, grew more acute in 2022. It is now clear that rising Chinese demand for imported reds through the 2010s concealed a decline in demand from mature markets; some suppliers unwittingly came to over-rely on the Chinese market. Since China’s imposition of prohibitively high import tariffs on Australian wines in 2020, Australia’s bulk reds have moved into significant oversupply and are now ultra-competitively priced on the export market – something that has ramifications for all other supplier countries considering these reds are available in package deals with whites. But it is not only Australia that grew over-reliant on China. Bordeaux, too, has suffered from a recent pull-back in Chinese demand compounding a long-term decline in red wine consumption in key markets, its growers marching the region’s capital in December demanding government-subsidised distillation and uprooting plans. Consequently, as on Australian wines, there are ample bulk opportunities to be had on high-quality, attractively-priced Bordeaux reds.
Stringent COVID-19 restrictions in China and a decline in consumer trust – following high-profile news stories about counterfeited wine – have damaged the country’s demand for imported wine. It is widely hoped that the lifting of its strictest COVID measures – announced on 7th December following widespread protests against them – will help rejuvenate Chinese demand in 2023.
Understanding the overall demand
The logical grower response to the current red-white sales dynamic is to graft red grapevines over to white, as is now occurring in Australia. But how much is the comparatively healthy demand whites enjoy versus reds down to a long-term consumer switch to white wines and sparkling, and how much is simply down to short white harvests in 2021 upping demand for the 2022 vintage? While adapting production for the next 10-20 years is a must, in the longer term there needs to be a better understanding of the evolution of consumer behaviour in order to increase wine’s popularity among younger consumers and, in so doing, grow overall demand.
This means thinking open-mindedly about sourcing, marketing, innovation. Ciatti can draw on its decades of experience to help clients do this, harnessing the opportunities 2023 will bring: get in touch. In the meantime, we wish you and yours a Merry Christmas and a Happy New Year.