WineSleuth 8: Prices Outlook 2013

Post image for WineSleuth 8: Prices Outlook 2013

Supply Side outlook for 2013 pt. 1: Prices

We expect to see the general price stability of imported wine over the last 3 years will largely continue in 2013 with some variation according to price point. Over the period of the last 4 years there have been some interesting developments in oversupply and consolidation against a backdrop of ‘double dip’ recession, European financial woes, greater production and a scramble to join the perceived party in China.

Recent history

The major price hikes around late 2009/2010 (resultant from the global financial calamity, as importers protected themselves against currency fluctuations and uncertainty), were almost entirely across the board. This step up was followed by almost 2 years of sustained strong pricing. By December 2011, however annual increases had slowed; prices showed on average a 7% up-tick 12 months ago after a period of calm. We managed to hold off passing on the 2011 rise for 4 months and had held that position to date (almost 10 months at the time of writing). Most of the rises since 2011 can be put down to inflationary pressures.

Across 2012 much of the pressure was relieved as Inflation in mainland China fell and imported food and beverage prices saw downward movement on that wave. Prices for imported wines via proper channels generally held firm, although there was a notable influx of cheaper (dumped) wines onto the market around Spring/Summer 2012 leading to a widespread increase in the supply of bottom end wines. And some rises which had been previously overdone allowed room for prices to actually fall on some of the medium priced wines available too. There has been some trickling up since last summer but it has been fairly flat.

Here’s another perspective from the US situation:

The explosion of wine prices during the last five years is reflective of the fact that around the world, during an international depression, the rich are getting richer and the middle and working class are getting poorer. Many inexpensive wines have fallen in price, particularly those from Australia, South America, and Spain. Taxes on the excessive earnings of the upper classes would do a lot to restrain the ridiculous prices of the upper tier wines. I think this is especially true for Napa wines sold in CA.

Read more at US Wine info site Snooth

A mixed picture

Mid to high end prices are expected to come under pressure later this year. A general review is taking place right now in that segment. As part of any price review we regularly look to reduce wine prices where possible, and shop around for the best deals, subject to ethical standards. Also, we are always on the lookout for better value, yet well made, proper wines. There are a lot of crooks out there pedalling rubbish on the unsuspecting and or uncaring. More on that here.

The Supply side: Low end wines have seen some reductions already this last 8 months. Oversupply and heightened attrition between distributors might see a little more downside at the lower end of the market over the year. Whenever those conditions occur together (oversupply & Price competition) we would eventually expect price rises to rebound back up (as the industry consolidates and recoups losses caused by that competitive struggle). It’s unclear to what degree that rise may be tempered by any continuing oversupply of the low end wines.

Conversely, the upper echelons outside Bordeaux can expect a sharp price upturn as Chinese consumers spread their ‘taste bud wings’ to new regions. The mid-range (tiers 2 to 6) will continue to be the place where the best values can be found as this level represents the proving ground and birthplace (like astronomical nebulae) of tomorrows stars. It is also the place where the majority of new players are positioning themselves and seeking market share in a part of the market largely ignored by consumers.

The Wine Man

edited February 2013

Next time: The supply side explosion and consolidation.

NB: A number of our top selling wines have recently reduced in price for the long-term (if the supply chain enables it) in line with our aim of seeking to bring down the cost of Wine in SH. Here are the more popular of the reduced wines:

Fernway Sauvignon Blanc (now RMB120),

Cotes Du Ventoux (now 65),

Tempranillo La Manza (now 40),

Veuve Pelletier Champagne (now 315)

Previous post:

Next post: