This month sees just-drinks let its category commentators loose on the year ahead. Here, Chris Losh tells us how he sees 2018 panning out for the global wine category.
Living with the frostquake
With all due respect to the beleaguered growers of parts of California and their horrific wildfires of early autumn, the big global wine story of 2017 took place in April last year when a cold snap blanketed vast swathes of Europe's vineyards in frost. Pretty much every country in Europe recorded double-digit falls in harvest size and not one of the Big Three - France, Spain and Italy - escaped. 2017 was the smallest vintage for 50 years and demand this year may well outstrip supply.
We are, in short, looking at a severely (indeed, uniquely) altered landscape for the business of wine over the next 12 months.
Frostquake I - Prices to Rise
For starters, prices are certain to rise. Margaret Thatcher's famous phrase that "you can't buck the market" is doubtless already being borne out in negotiations between producers, importers and wine buyers all around the world. It's simply not going to happen that wineries sell off short-supply stock at oversupply prices, particularly after years of gritting their teeth and being told that if they can't sell at the prices demanded, the buyer will go elsewhere. This year, more than ever, there are far fewer places to turn for a bargain. It's a sellers', not a buyers' market.
Frostquake II - Consumer Behaviour
If we are to assume that price rises are inevitable, the key question, is how will they affect consumers? The answer, in short, is likely to be "badly". Few mature wine markets are in growth at all at the moment - the US being an honourable exception - and, those that are, are barely in the black. Consumer confidence and economic indicators remain sluggish across much of Europe and wine is struggling against cocktails.
A 10% price rise (not unlikely, given the noises coming from producers at the moment) will see consumers cut back. The industry will probably try to dress this up as a positive – the usual "consumers are drinking less, but better" mantra. But it's not true. They will just be drinking less.
Frostquake III - Whither Prosecco?
Arguably the most interesting crunch point over the next year is northern Italy. The north-east corner is home to two of the biggest performing wine styles of the last ten years; Pinot Grigio and Prosecco. Indeed, the latter has more or less single-handedly kept the UK wine market from recording negative figures for the last five years.
But, this part of the world - and especially the lower-lying lands that produce the cheaper versions of the ubiquitous fizz - was particularly hard-hit by the weather. Prosecco's appeal has always been partly its price, though the Champenois tend - conveniently - to overlook the fact that most consumers also actually like what it tastes like as well.
The question is, having made it such a part of their drink repertoire for the last decade, will consumers stick with it when it gets more expensive, or default to something else? It's hard to see too many wine products of a similar style that might pick up the baton (cava represents a real long shot and New World fizz is generally more expensive anyway), which might mean a potential mass-migration out of wine altogether. Can Prosecco keep them? And, if it loses them this year, will it get them back in 2019?
These are huge questions for the health of the wine category as a whole.
Frostquake IV - Australia and Eastern Europe benefit
Every cold snap, of course, has a warm spot. In this case, it's Australia.
The country has spent most of the years since the Millennium over-producing and having to off-load its wines for next to nothing. Last year, however, it was the only large wine-producing country to have a normal-sized harvest, putting it in a strong bargaining position for probably the first time in 20 years.
Since it's likely that buyers will be forced to cherry-pick from the fringes of the wine world in search of well-priced replacements for that Veneto white or La Manchan red, we can probably also expect to see a reappearance of wines from Eastern Europe. Decent volumes, low prices and improved quality point to an auspicious opportunity for some long-forgotten regions.
Less scrupulous European producers may well be tempted to truck Feteasca Neagra et al across borders and tip them into their own vats to make up depleted volumes. But, we should also expect to see a growing number of bottled Romanian, Bulgarian and Hungarian wines on the world's shelves/wine lists as well.
China's rise continues
The rate of wine consumption in China might have slowed a bit between 2012 and 2014, but reports of the category's demise have proved to be grossly exaggerated. The blip of a few years ago was largely down to the plummeting in consumption of locally-produced wine. This continues to decline, but strong growth from foreign imports (which never fell) has seen consumption back in the black again.
In 2017, imports grew by a staggering 10m cases - a year-on-year jump of 23%. Figures from market research group Wine Intelligence suggest why this might be: The urban middle class is growing, and an ever-larger number of them (52m) can now be considered 'imported wine drinkers' - up from 19m in 2011. No other market on Earth is showing growth potential like this, and it explains why wine groups are working hard to get the gist of the market's many vagaries.
The growth of 'normal' as opposed to 'prestige' consumption means opportunities for wine styles that ordinary Chinese consumers like. Softness of fruit is important in reds, but tannin is unpopular, while acidity is handled with equanimity. All of which suggests opportunities for aromatic whites and New World reds.
Wine Intelligence also highlights Asti as a style to watch. Its sweeter profile and lower alcohol, the research body suggests, make it very popular with younger female drinkers, in particular. Although, whether there's any left to export after the frosts is open to question. Young Chinese women might need to wait until 2019.
Health on the up
It's striking nowadays how many producers are following 'sustainable' viticultural practices. But, it's equally obvious how much of a hot-button issue health is, particularly for the Millennials and Generation Z. Highly health-driven, they often look for the word 'organic' before they do 'vintage', 'producer' or grape variety.
The wine trade is catching on to this and many vineyards are in the slow process of conversion and certification. We'll see more organic wines launched in the next year, with even more wineries set to start the process of conversion.
Tap it up
The other big trend that's starting to take off in the UK – and will doubtless do so elsewhere for very good reasons – is the dispensing of wine on tap in bars and restaurants. New, key-keg technology means that the wines are cheap to buy, easy to store and reliably pristine when poured.
Successful operators are not using it as a way of lowering prices, but of getting customers better wines for the money. Green, cheap and modern, it's a trend that's got a real buzz around it, with one restaurateur likening it to the excitement around screwcaps 15 years ago.
And, we all know where that trend went.
By Chris Losh
January 11, 2018
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