Remember the legend of the Chinese curse that supposedly says, “May you live in interesting times”? Interesting times are upon us, in every political and economic dimension. What do they mean for wine?
In recent years, Covid and the Ukraine conflict dramatically disrupted global logistics, raising the costs of transporting products to levels few had imagined. When the pandemic was over and we have learned to live with war in Europe, prices have fallen. But new conflicts have change that and we still pay more than we used to.
Now there are new threats.
As a consequence of climate change and El Niño, the water level in the Panama Canal is nearly two metres lower than normal. In October it was the lowest it has been since the 1950s. This means it could only handle 24 ships per day in December, compared to 38 in November. In February, this number will likely fall to 18. When it is operating normally, around 3% of world trade passes through this waterway. Cutting that figure, even by a third, will have an impact, and channelling more water into the canal — by damming a river and digging a 15km tunnel through a mountain — will take six years.
In the Middle East, Israeli officials are talking about their soldiers still being in Gaza at the end of the year and Houthi rebels are attacking ships close to the Suez Canal in support of the Palestinians. The US and Britain are reacting by bombing Houthi bases, and all eyes are on Iran, source of the rebels' arms and money.
Meanwhile, shipping companies are taking longer routes to avoid the canal and analysts are calculating the direct and indirect costs that will entail. Few are ruling out the worst case scenario of another major Middle East conflict.
In any event, shipping wine - or the dry goods used by wine producers - is not going to get easier or cheaper.
Prices are rising less rapidly than they were, so - assuming that the more pessimistic observers of the situation in the Middle East are wrong - interest rates should fall. There are hopes that the serious recession many feared may be avoided, though growth will be flat or limited. But it is worth considering the views of JP Morgan’s Chief Global Markets Strategist and Global Co-Head of Research, Marko Kolanovic published on December 13th.
“As we approach 2024, we expect both inflation data and economic demand to soften, as the tailwinds for growth and risk markets are fading. (…) Looking at the relatively small number of recessions throughout history as a reference point, yield curve inversion signals indicate recession risk is highest between 14 and 24 months after the onset of inversion."
"That time period will cover most of 2024 and should make it another challenging year for market participants… We think the decline in inflation and economic activity we forecast for 2024 will at some point make investors worry or perhaps even panic.”
Readers can decide for themselves how seriously to take Kolanovic’s words, but they should pay attention to another of his findings: “Household liquidity trends indicate that for 80% of consumers, excess savings from the COVID era are already gone, and by mid-2024 it is likely that only the top 1% of consumers by income will be better off than before the pandemic.”
Many wine buyers will be feeling the pinch.
Four billion people have the chance to vote this year in 50 democratic or so-called-democratic states. A foretaste of what this could mean has already been offered in Argentina and the Netherlands, where right wing populists have recently benefited from a change in the national mood. European elections may well see an influx of new MPs who look at the EU rather differently to their predecessors and, of course, the return of Donald Trump to the White House is a very real prospect.
Those who prefer to focus on vines, barrels and bottles rather than politics should remember that changes of government, especially when combined with populism can have remarkably swift and drastic results. Many Europeans took little notice of President Trump, or laughed at him — until he slapped a 25% tariff on US imports of their wines. Even in the run-up to the November vote, he has the potential to move markets, simply by making a throwaway comment in a speech or interview.
Australia and China
All being well, within the next few months, China will finally drop its punitive tariffs on Australian wine.
Will this provide an essential reboot to both sides of this equation? Will Australia’s winemakers rebuild an export market that plummeted from a peak value of just over $800m to less than $6m in 2022? And will China’s share of global wine consumption climb back to the 6.2% of 2016 from the 2.3% of 2021? As Kim Anderson pointed out in a 2023 paper the Asian giant’s per capita wine consumption “has fallen every year since its peak in 2017 and is now less than one-third of that peak.”
The answer to all these questions is almost certainly “no” for the foreseeable future, but there are reasons to hope that Australians may be able to reignite at least some of China’s interest in wine. Producers in other countries will be watching with interest, partly because they’d like to see a recovery in Chinese wine imports, and partly because they’d be happy not to have to compete with Australian bulk red wine prices as low as $0.20/litre.
President Macron cheered the 500,000 men and women who work in the French wine industry by saying that he thinks a meal without wine is ”sad”. The most recent official FranceAgrimer study into French wine consumption suggests that he is not very representative of his countrymen. The five-yearly report, by Ipsos Observer revealed that in 2022, only 11% considered themselves “regular wine drinkers” — down from 16% in 2015, 30% in 1990 and more than half in 1980. The percentage of French adults who say they never drink wine has nearly doubled over the last four decades to more than one in three.
The percentage of French adults who say they never drink wine has nearly doubled over the last four decades to more than one in three.
These French figures are worth considering by those in other countries with flat or declining consumption who attribute the blame to local distribution models or taxation, or the range of wines on offer. None of these is constant across different markets. The wines French consumers are rejecting are not the same as the ones that are failing to attract interest on the other side of the Atlantic.
The crucial point is that where wine was once part of a daily diet, it is now a discretionary purchase that has to compete with a growing range of other beverages and products. This is something that many wine professionals struggle to accept. They should take note of 2021 US research showing that, with the exception of the 45-54 year-olds and over 65s, every age cohort would be more likely to take beer to a party than wine. And that an American tour company thought it worth telling people thinking of going to Rome that “Wine is the drink of choice to pair with dinner. Cocktails are not normally drunk with food, although a few trendy restaurants have started pairing cocktails with dishes on their menus.”
The best-selling new SKU (Stock Keeping Unit) in the US last year, according to Nielsen, was Stella Rosa’s Pineapple & Chili which joined a range that already included Blackberry, Orange Fusion, Ruby Rosé Grapefruit, Watermelon and French Vanilla. A set of spicy flavours was introduced after Steve Riboli, CEO and President of Riboli Family Wines, the brand owners, saw “a group of young people ordering spicy margaritas.” As he told Liz Thach for an article in Forbes “I liked it… and it dawned on me that there were many people eating spicy foods, spicy chips, etc. and I thought, why not create a spicy wine?”
Riboli’s mental leap is no different to the one that lies behind the success of the bourbon-barrel-aged wines that are such an anathema to wine purists. These are not intended for people who love wine; they’re for the ones who love bourbon — and, in the US, there are lots of them.
This year will see more developments of this kind: beverages based on wine but including a range of ingredients that have little or nothing to do with grapes.
The low and no-alcohol train will not slow down. Quite the reverse: 2024 will see a growing number of launches in a wide range of styles including, I’ll predict, a super-premium effort from LVMH. Beer and spirits giants have already planted their flags, with products like 0.0 Guinness and Gordon’s 0.0%. Wine is set to follow, with some leaps in the quality of what is on offer, but it will face growing competition from sparkling tea and clever non-alcoholic cocktails made from ingredients including vinegars.
This is the year when wine sold in Europe will have to come with a list of ingredients and nutritional information on its back label or accessible via a QR code. Most consumers will almost certainly pay little or no attention to this change, which will not apply to bottles outside the EU. But, like the European legislation that was introduced to protect online privacy, there’s a strong likelihood that producers elsewhere will begin to use these same QR codes in their domestic markets. And, perhaps more importantly, that opinion formers will go looking for information that wineries might prefer to have gone unnoticed. Sugar content, in particular, may become more of an issue, with lifestyle writers revealing that many of the bottles that might previously have been treated as ‘dry white wine’ are actually full of carbs and calories.
While professionals have obsessed over the essentially empty question of whether Artificial Intelligence bots can ever replace wine critics or sommeliers, AI will steadily become a genuinely useful tool for wineries. Much of this may pass unnoticed. Producers who invest in self-driving tractors or drones or satellite analysis of their vineyards may not be aware of the role algorithms are playing in any of these. But they will be aware that the press releases and newsletters they are creating and the images and videos they are posting on their websites and social media are no longer the work of human beings.
Even those who’ve had little interest in this kind of marketing are going to learn how crucial it is becoming in the future of SEO. Where businesses had to focus on keywords and phrases that would be picked up by Google search engines, these bots are now looking for ‘content’ and lots of it. And one of the best ways of satisfying their hunger is to use a bot of one’s own.
Over a fifth of France’s vineyards are now certified as organic, the largest percentage in Europe, and 37,357 producers have joined the country’s HVE – Haute Valeur Environmentale – sustainable programme. But 2024 could see this trend slow or even reverse. Growing conditions last year were exceptionally challenging, and especially so for organic producers, As Frédéric Bernard, a producer with 6.6ha in Condrieu and Côte Rotie, told Vitisphere “In 2021 we wanted to convert to 100% organic but finally took a step back. This was fortunate because… we had big crop losses in the organic vines… When organic treatments are possible, we do them, but years like this, it’s conventional treatments that save us. So, we did six treatments, three organic and three conventional, and we were ok”.
Sustainable registrations have fallen from 23% to 3% - are we witnessing a dramatic slowdown in France’s move towards sustainable wine production?
A year earlier – before the tricky 2023 season – a number of other growers told the same French publication about the difficulties they were having in finding buyers for their organic wine. Among them was Frederic Saccoman, director of la Cave d’Héraclès cooperative in Languedoc, ‘the biggest organic estate in France’, with 1,250 ha of certified vineyards. Saccoman, who sells most of the wine in bulk, reported that “the price of organic wines is getting dangerously close to conventional. As organic leaders, we have to remain firm; if we accept a cut in price, others will be forced to follow. If the worst comes to the worst, we’ll declassify the organic wine and sell it as conventional.”
If it becomes harder to produce and to profitably sell organic wines, calls for a revision of the rules are certain to grow.
Meanwhile, Vitisphere also reports a dramatic slowdown in France’s move towards sustainable wine production. Over the first six months of 2022, numbers of HVE registrations grew by 23%. A year later the figure for the equivalent period was just 3%, with producers complaining that the hurdles – including new rules covering biodiversity and fertiliser use - are too high and public recognition too low.
Will this year reinvigorate the trend towards greenness, or see it losing momentum?
It is a year since the WHO moved to saying that all wine consumption is unhealthy. At the end of 2023, we began to see the beginnings of a fightback by the industry, in the form of presentations by Argentina’s most famous winemaker, the medically-qualified Laura Catena, and the sessions at the Lifestyle, Diet, Wine & Health Congress on which Felicity Carter reported for Meininger’s. Unlike tobacco, alcohol is less of an obvious villain. Its role in increasing the risk of cancer needs to be set against ways in which it may reduce heart disease. As Catena and Carter point out, however, the medical fraternity is being very selective in the data it uses when talking about the dangers of alcohol.
Countering this zero-alcohol message will not be easy, if only because of the challenge in financing a serious informational campaign. If the money comes from the alcohol industry, it will be as tainted as the efforts of the big tobacco companies, but what are the alternatives?
Another problem will be the nature of the message. Should it include positive news about how moderate consumption is ‘good for you’ — a dangerous battlefield on which to meet medical professionals — or focus on its cultural and social role? Should wine fight by itself, or as part of a broader alcohol industry campaign?
The way these questions are answered will be crucially important to the future of this industry.