Brexit And The Strong Dollar Favor Usa As A World Importer

Posted: Jan 19, 2017

The future health of the US and world wine market is a top priority for those of us in the sales, marketing and consumption of our favorite beverage. The factors influencing the health of the wine market are several. Vintage quality, supplier mergers and acquisitions, demand, political conditions and currency strength all contribute to the potential success of our marketplace.

Vintage quality affects the amount of supply available throughout the world. It varies by hemisphere and region. According to the 2016 OIV Statistical report on World Vitiviniculture, the Northern Hemisphere experienced a roughly 6% decline in grape supply. Europe, responsible for 40% of the world's grape production, impacted the total world output negatively due to a 12% decline in output in France. This is equivalent to 40% of the total decline in world production2.

The Southern Hemisphere experienced mixed results. New Zealand led the charge with a "bumper crop".Chile, Argentina and South Africa experienced a drop in production.2,3

Trends in world wine production (excluding juice & musts)

Supplier Mergers and Aquisitions3
"Spirits companies continue to exit the wine space, while wine companies continue to build exposure to spirits." 

Some Key Mergers and Aquistions in 20163
Constellation Brands:
Acquires High West Distillers, and Charles Smith Wines in October of 2016.
Sells Vincor in October of 2016.

Jackson Family Wines:
Acquires WillaKenzie Estate in Willamette Valley, Oregon in October of 2016.

Accolade Wines:
Acquires Lion's Australian wine business in November of 2016.

Kobrand Wine & Spirits:
Acquires Joto Sake in December of 2016.
Wine consumption seems to be decreasing in the traditional wine countries of southern Europe. Progressive increase of the “international wine” (wine traded internationally) versus wine consumed domestically. Wine is more and more consumed outside its producing country.

Political Conditions
Every major media outlet is expressing varying views on the upcoming changes around the world for 2017.

The US and British political landscape has changed dramatically in 2016 suggesting a far reaching impact on the worldwide market behavior for consumer product goods. Once Brexit is completed and the new American President takes his position, will there be higher tariffs on imported goods which will impact an otherwise favorable import market in the US? Will Brexit impact Britain's demand on spirits and wine imports? There are some clear indicators pointing to some critical changes. 

Currency strength2
The currency landscape has changed already. Brexit has had a direct effect on weakening the British pound. At the time of writing this article 1 GBP = 1.23 US. 

The lowered demand in Europe is directly correlated to changing consumer habits, a drop in the UK's and other key market's consumption and a change in the economic climate. The US on the other hand is experiencing a possible advantage as an import destination due to the stronger dollar and increased demand on international brands.

Source 1. OIV World Vitiviniculture Report

Source 2.
Source 3:
by Luis Torres 
January 19, 2017

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