The Prowein Business Report 2022, which was published earlier this year, casts its eye on the post-COVID wine industry.
The report, conducted by Getisenheim University, featured almost 2,500 wine industry experts along the entire wine supply chain. While the report was built on data from (mostly) Old World Producers and European and North American retail markets, the findings will certainly be of interest to those in Asia.
We take a look at some of the most striking takeaways, trends to look out for and as usual, our take on these topics.
Most people would have guessed as much that the industry’s concerns are rooted in economics. Inevitably, rising costs top the list: 85% cited the rising costs of energy, glass, paper, etc. as a challenge. And even though the world has largely returned to some form of normality, 66% still face disruption in their supply chains. And slightly more than half polled (55%) are sweating at the challenges offered by the global economic downturn.
While economic conditions have deteriorated slightly, many of the Old World producers have extremely low expectations for 2023, with the German and French producers displaying the most pessimism. This sentiment is shared by intermediaries, wholesalers, speciality retailers and the On-trade.
Both producers and tradesmen are feeling the effects of the rising costs, with only a small percentage saying that they are only experiencing minor effects (less than 13%). Most companies (72% of producers and 64% of trade) aim to pass on costs to consumers, on top of adapting processes to save energy. only 24% of businesses in the wine sector expect energy shortages to be resolved in 2023.
In general, supply shortages resulted in increased costs as producers scrambled to adapt to the situation. And almost all producers faced supply issues with glass bottles. Many of those polled said that they wound up increasing their stock of supplies, spending more time communicating and coordinating with all parties, and racked up higher costs for increased inventories.
In the meantime, suppliers had a little more leeway to manage supplies, often pivoting to other products or producers to fill gaps and maintain a larger stock to mitigate unpredictable delivery schedules.
While reactions vary–some respondents will focus on local markets and some will not change course–over half are aiming to reduce costs and look for new export markets while almost half are adapting their portfolio in line with market trends.
They are, however, in agreement that consumers will generally adjust their wine spending by trading down on price and reducing their spending on wine. The industry is anticipating that luxury and premium products will not be as affected while the mid-range market will suffer the most.
While the USA is seen as the most attractive market for the top three wine-producing countries in the world, France, Italy and Spain, Asia is also on their radar. Japan is of particular interest to Spain; Italy has China, Japan, South Korea and Singapore in their sights, while France is looking at Japan, Singapore and South Korea. In fact, for France, Singapore ranks fourth on their list of most attractive export markets.
With the downturn in Europe, it’s only inevitable that producers look eastward. Unlike Europe, the outlook is far more positive in Asia. Statista’s aggregator shows that wine revenue in South East Asia is expected to grow annually by 6.28% (CAGR 2023-2027), while revenue in Singapore is expected to grow annually by 5.32% (CAGR 2023-2027). The spirits category, on the other hand, is expected to grow annually by 4.56% (CAGR 2023-2027).
Wine and Whisky – a shared future?
Whiskies and other premium spirits have featured prominently in previous editions of ProWine Singapore, which only serves to underscore the current state of interest and demand. Wine and whisky have more in common than one would think, and through cask finishes, I think that they are increasingly joined at the hip.
Cask finishing is something that we hardly bat an eyelid at, but it is the most popular way of creating new whisky experiences without creating a recipe entirely from scratch. For many years, we’ve grown accustomed to the usual comforts of whiskies finished in rum, port and sherry casks, just to name a few, but we’re seeing more exotic cask finishes like Mezcal (Dewars ILegal Smooth) as the days go by.
In that sense, the diversity of wine is perfect for experimentation (and marketing) and we’re also seeing ‘non-traditional’ wine casks that we would never have imagined five years ago. You can count among them GlenAllachie’s Grattamacco finish; Green Spot’s Château Léoville Barton (Saint Julien) finish; Penelope’s Rosé finished Bourbon; and Arran’s Amarone finish–the list is endless.
The bigger implication is this: for distilleries that do not have a long-standing tradition and mindshare, secondary maturation and cask finishes can be a great equaliser. It’s also a great way to reach out to drinkers on the other side of the pond.
The ugly truth about recycling or transitioning to ‘greener’, non-traditional materials is that often there is no financial incentive to do so. In that regard, can global supply chain disruption and rising costs be the perfect catalyst for change?
The Ukrainian war created a perfect storm of rising costs, as mentioned in Prowein’s study. Rising energy costs also affect the energy-intensive production of glass bottles and prices have risen anywhere from 30% to over 100%.
Glassless packaging is no longer a fad–in this case, it might be in everyone’s interests, from producer to consumer, to let go of the venerable glass bottle.
Premium offerings with higher margins are unlikely to waver from tradition, but for everything else in the catalogue, alternatives like the bag-in-box may finally gain acceptance. Once jokingly regarded as the vessel of choice for degenerate alcoholics, this humble packaging may well have the last laugh–it has the moral high ground where sustainability is concerned.
Winemaker Jason Haas of Tablas Creek had switched to bag-in-box packaging for his three entry-level wines, and realised that his customers were generally open to the idea, which went against the long-standing industry belief.
He also found that the 3-litre pack reduces carbon footprint by 84% compared to four standard 750ml glass bottles, the CO2 footprint from shipping can be reduced by 60%, and it all translates to a product that is 15% cheaper.
He’s not the only one; countries like Scandinavia have actually taken to bag-in-box wine as the top German producers like Dönnhoff (Nahe), Maximin Grünhaus (Mosel) and Leitz (Rheingau), and suppliers such as the wine specialists MEJS have adopted this practice.
A smaller 1.5-litre wine bag (without the box) has also started gaining popularity and its CO2 footprint is also 90% lower than regular 750ml glass bottles. Wildmark’s unfiltered organic Riesling and an unfiltered organic rosé come packaged this way–you tell me this isn’t marketing gold if you’re targeting an audience with a green mentality.
Other alternatives include recyclable aluminium cans, flat Packamama 100% recycled PET bottles that’s perfect for efficient shipping (e.g. Rio Claro Organic Carmenère) and stainless steel kegs to serve wine by the glass in bars and restaurants.
Closer to home, we already have something similar: ecoSPIRITS and Pernod Ricard are working together to create a closed-loop distribution system (by reusing glass containers) that has been estimated to reduce 4,400kg of glass waste and save more than 3,400kg of carbon emissions in the first six months. You can also check out the ecoSPIRITS system (Proof & Co booth) at the upcoming ProWine Singapore trade show taking place from 25th April to 28th April.
When one door closes, another opens, as they say. Despite the tough times, pockets of opportunity open up where you may least expect it. It’s all about placing yourself in a position to readily accept when the moment arrives.
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