Rabobank Wine Quarterly Q3 2018

Rabobank Wine Quarterly Q3 2018: Status Quo Under Pressure in US Route-to-Market

The US has emerged as the largest wine market in the world, and by most measures, the most profitable and attractive. While wineries – both foreign and domestic – recognise the profit potential of the market, it is also widely seen as an exceptionally-difficult market to penetrate (particularly for small wineries), according to the latest RaboResearch Wine Quarterly report.

Route to the US consumer

Major changes are occurring today in how wine reaches the US consumer. “Changes in technology, business models and market structure are disrupting the global wine market and creating new sets of winners and losers among wholesalers, retailers and suppliers,” according to Stephen Rannekleiv, RaboResearch Global Strategist – Beverages. “Responding quickly to these changes will determine who survives, who thrives, and who fades away.”

US imports … and New Zealand

US wine imports rose 14% in value, but declined by 1% in volume, during the first two months of 2018, compared with the same period in 2017. Imports from New Zealand, Italy and France saw double-digit growth in value terms in that period, more than offsetting lower purchases from Germany, Argentina, Australia and Chile. Imports from New Zealand to the US rose by 55% in volume and 65% in value, with both bottled wine (+36%) and bulk wine (+106%) volumes up and average prices in USD somewhat lower than a year earlier.

Global trade reflects 2017 harvest

The tight 2017 global harvest meant higher prices, but also a shift in trade flows: In Q1, exports of bulk wine from Australia, South Africa, and the US increased by 21% to 60%; while Argentina, Chile, and Italy saw declines of 20% to 30%.

M&A: Wine distributors closing deals

The number of deals involving wine distributors is growing. Covering new areas, incorporating other products, or achieving economies of scale are major reasons behind these acquisitions. In the past few months, US and German players were particularly active, but deals for wineries and wine distributors were seen across the globe.

Bulk wine prices remain firm

European wine production is expected to show marked improvement over 2017 levels, which should theoretically lead to easing bulk wine prices. However, growing concerns over exceptionally wet weather in France and Spain are keeping an upward pressure on prices.

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