Posted: Mar 12, 2018
Global production slumps to lowest level since 1961 as major growers hit by freakish weather
It's the kind of bad news best served with a stiff drink: the price of standard supermarket wines such as prosecco and pinot grigio could rise by up to 30% this year as the impact of 2017's disastrous harvest is felt on the high street.
Global wine production slumped to its lowest level in more than 50 years in 2017 after vines in the world’s top three producers – France, Spain and Italy – were ravaged by both freakishly hot and cold weather. Hard-hit regions include those producing Rioja and prosecco, which make large quantities of the affordable wines sold in supermarkets.
“We’ll start to see those  wines coming to the market now and I think for higher volume, lower price wine you will see cost increases,” says Dan Jago, chief executive of high end wine merchant Berry Bros & Rudd.
“Prices for things like pinot grigio or generic Spanish reds will rise by between 10% and 30% and it’s [a question of] how much of that retailers will pass on,” says Jago, who previously headed up the Tesco wine business. “Prosecco was very hard hit by frost, so there will be less of it and the price will go up.”
The International Organisation of Vine and Wine estimates global wine production dropped 8% to 247m hectolitres in 2017 – the worst global harvest since 1961. A hectolitre is the equivalent to 133 standard wine bottles, so the fall in output equates to about 2.9bn fewer bottles.
Last month the Bordeaux wine council said production in what is France’s largest wine growing region was down 40% with vineyards in Saint-Émilion worst affected by the severe frost. But while some chateaux lost up to 90% of their harvest, others escaped unscathed, the council added.
“In Bordeaux the top 150 chateaux have not really been affected but the grand surface – the total acreage of Bordeaux – has been ravaged,” says Jago. “The Bordeaux harvest, like the overall harvest across Italy and Spain, has been decimated but it tends to be the more flat lying, higher volume production land that has been hit.”
The devaluation of sterling in the wake of the Brexit vote has already had an impact on the cost of wine in supermarkets which is up by an average of 4% over the past year, according to research firm Nielsen. French wine cost 5.5% more, while the price tag for Portuguese and Italian varieties increased by 5.1% and 3.5% respectively.
The UK’s still and sparking wine market is worth more than £10bn a year and is the biggest market by volume of EU wine exports. Last year alone Britons got through 81.7m bottles of pinot grigio and 85m bottles of prosecco at home.
“The UK wine industry is facing a range of pressures that has seen the average priced bottle of wine reach an all-time high,” says Miles Beale, chief executive of the Wine and Spirit Trade Association (WSTA). “This includes fall in the value of the pound – compounded by rising inflation and the uncertainty of Brexit.”
The average amount spent on a bottle of wine in the last three months of 2017 was £5.74, according to the WSTA but the wine itself only makes up around a tenth of the price of entry level wines as nearly £3 goes on duty and VAT.
“Once the retailer margin, transport and logistical costs are taken into account on top of this tax burden, there is significant pressure on wine producers and retailers who are looking to provide customers good value for money as well as a quality product,” says Beale.
One senior wine industry source said it had faced a “perfect storm” in 2017 because there had been so many problems in wine producing regions around the world. “There is price pressure in two places: right at the top end, in premium claret, and in entry level wine,” the executive says. In a £5 bottle only 50p is for the wine so you are looking at a small increase of say 12.5p … on a £100 bottle of wine you’ve got a material price change.
“In a good year producers will try and profit and in a bad year they will try and eat some of the losses – it’s in their interests to do so. At some point prices will have to reflect the cost of production but supermarkets will work hard to keep wine affordable because like eggs, milk and a loaf of white bread, people know the price of a bottle of pinot grigio.”
By Zoe Wood
March 9, 2018
Source: The Guardian
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