France: distillation prices fixed
Distillation prices have been agreed – though not yet officially announced – in southern France, establishing the market floor. The programme’s pricing is separated into three tiers as expected: EUR0.75/litre for 1.4 million hectolitres of AOP wine; EUR0.65/litre for 1.428 million hectolitres of IGP wine; and EUR0.45/litre for 400,000 hectolitres of Vin de France. The greater clarity this and the passing of the frost risk – without major incident – have brought to the pricing picture has led to a rebound in demand for 2022 IGP/Vin de France varietal and generic rosés, and for the remaining unsold IGP white varietals including Chardonnay and Sauvignon Blanc.
Spain: heat and drought
The stimulant for market activity in Spain has been the reverse, conditions-wise: increased fears for the growing season. Late April brought an extreme, summer-like heatwave to Spain, with temperatures reaching as high as 38.8°C in the south – the highest April temperature ever recorded in Europe – and deepening the pre-existing drought. Price-sensitive buyers from across Europe have been coming onto the market to secure what they need in case prices trend upward.
South Africa: late selling
Meanwhile, December-February activity in South Africa, delayed while buyers sought extra time to gain visibility on future need, is now taking place. This buy late, ship quick approach has been assisted by noticeable improvements around the world in container availability and shipping efficiency – symptoms, possibly, of a global economic slowdown.
Consumption decline
Since its peak in 2007, when some 250 million hectolitres of wine was consumed, global wine consumption has trended downward in the face of successive headwinds: the 2007-08 financial crisis and its long aftermath, China’s 2018-19 economic slowdown, then the end of a post-pandemic rally. The International Organisation of Vine & Wine (OIV) provisionally estimates 2022 consumption at 232 million hectolitres, in line with 2020 and, before that, 2002. In short, the consumption gains made this century have been lost.
Chinese restraint
A considerable factor in this contraction is China. The OIV estimates Chinese consumption of wine has declined by two million hectolitres every year since 2018, so that it consumed in 2022 less than half of what it did four years before. It was hoped the lifting of strict COVID-19 measures in January would unleash pent-up Chinese demand for imports, but while exports have returned to growth and there has been solid domestic consumption of services, imports have stumbled in and out of negative territory.
Western hope?
Until such times as China’s burgeoning middle classes rediscover their love for imported wine, the onus is all the more on the already mature markets of Europe and North America to grow. This is a tough ask, considering the present economic circumstances and the long-term decline in consumption among younger drinkers who can choose from an ever-increasing range of alternative alcoholic beverages.
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