Europe is likely to have a significantly reduced harvest, which will further tighten supplies but may also allow the market to eliminate unsustainable sales.
This shift towards a more balanced-and potentially tight-supply position is changing the dynamics of the global wine industry. Many wine companies have recently begun to implement strategies in the UK to sacrifice volumes in order to recover margins.
This decision was driven in part by the fact that wine companies no longer had any margins left to sacrifice, but the tighter supply situation has since eliminated much of the unsustainable competition that had been undercutting pricing. This is allowing wine companies to focus on more sustainable brand development.
Markets that currently pay the lowest average prices for bulk wine will be outbid by those that pay higher prices, and their volumes can be expected to decline, according to the company.
Western Europe, Russia and some of the emerging markets are likely to see declines in imports (and therefore consumption).Western European wine exports should see declining volumes in 2013.
Current bulk wine pricing trends reflect the expectation of a larger harvest in the US, as well as the economic uncertainty in Europe.
Looking forward, the significant declines forecast for European production will likely help to keep bulk prices strong across most regions, and may lead to incremental price increases across some regions.
Source: Rabobank
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