Review of the Year 2012 - Part IV: Wine
By Olly Wehring | 21 December 2012
The penultimate part of just-drinks' review of 2012 looks at a tumultuous year for the wine category.
The US this year appeared to be, if not the Great White Hope for the wine industry, then certainly a beacon of optimism for the category. Not only did exports from the country's wine-producing areas hit a record high in 2011, figures released in February showed, but sales also broke new territory. The brewers bore the brunt, losing share to both wine and spirits.
In the UK, long seen as a barometer for the developed wine markets of the world, the trend towards lower abv wines continued, according to figures, yet they still have a long way to go to prop up the category generally. In May, a senior wine buyer in the country bemoaned the lack of innovation in the category, and warned producers that their lack of communication with consumers did not augur well for the future. One ray of light in the country, however, came from a survey in May that suggested that consumers are more alert to brands than they are to gondola ends.
Broader optimism came earlier in the year, with research suggesting that the next four years look very bright indeed for the wine category globally, with the US and Asia promising healthy returns for producers on the road ahead.
Ah, Asia. It's been for quite a while that the east has been seen as the promised land for wine producers burned by the discount-driven markets of the West. While Australia had Asia to thank for propping up its wine exports in 2011, France was also grateful to the region, with wines from Bordeaux faring particularly well. More specifically, China looks like the one to watch in Asia, going forward, while India needs to get its alcohol duty house in order before the wine companies rush in. Reports that a solution would be reached by the end of this year, however, have proved unfounded.
Other regions that made themselves known this year include those in Africa, where Constellation Brands upped its focus this year, and smaller existing markets such as Canada. Keep an eye out, also, for the likes of Mexico, Nigeria, Poland and Brazil in the coming years, one study suggested in November. But, be warned: One size will not fit all in these future growth-drivers.
A wealth of column inches this year dealt with the grape harvests of the northern hemisphere, and the subsequent return to balance of supply and demand globally. As a small harvest in California last year drove wine grape prices to a new high, a run of poor weather this summer saw Nyetimber in the UK call off its harvest altogether and Chateau Yquem in Bordeaux drop its 2012 vintage. Add in a low harvest in New Zealand in 2011 and statistics showing that Australia's long-standing wine glut has come to an end, then throw in claims that global wine stocks this year are at their lowest point in the past decade. Just-drinks' regular wine commentator, Chris Losh, even suggested that “this has not been a managed recalibration, but a sudden tectonic shift that will have a profound short-term effect on the industry”.
The M&A headlines were dominated by two US companies, one upping its presence, the other pulling out altogether. California-based Foley Family Wines bought Napa Valley's Sawyer Cellars in May, teamed up with neighbouring Langtry Estate & Vineyards in July, took a majority stake in Lancaster Estate in November, and bought Ramal East Vineyard a couple of weeks later.
Also, in August, the firm spread its reach to New Zealand through its merger with the New Zealand Wine Company. Meanwhile, Ascentia Wine Estates stepped out of wine through its divestment of Geyser Peak, Atlas Peak and XYZin to Accolade Wines in June and the sale of its remaining Columbia Winery and Covey Run brands to E&J Gallo before the month was out.
Speaking of Gallo, the world's largest family-owned wine firm bought Courtside Cellars' San Miguel winery in California in August, then Snows Lake Vineyard in the state a month later. It also upped its non-wine presence through the purchase of the rights to vodka brand Shakers in October.
As mentioned earlier, the potential offered by Asia was not ignored this year. South Africa-based Distell bought a majority stake in Chinese distribution company CJ Wines & Spirits in September, Moët Hennessy, meanwhile, lined up a partnership with Chinese wine group VATS to build a winery in Yunnan province in south-west China back in February.
In the other direction, the Chinese went shopping in France this year, with a Chinese industrialist, known as Mr Wang, buying Bordeaux's Château de Bellefont-Belcier for around EUR20m (US$26m) in November. Then, just before the year was out, Hong Kong-based retail conglomerate King Power Group bought Bordeaux wine producer Château Bernadotte from the Champagne Louis Roederer group.
A curious battleground this year was in the trade exhibition arena. While, in the east, Vinexpo boasted a record number of attendees at its Asian leg in June, the London International Wine Fair struggled in 2012: the knives came out even before the three-day event took place in May, and were followed by the announcement of two similarly-pitched events in the UK, set to be held next year. 'London 2013', set to take place in September, will target the country's wine buyers, with 'The Beautiful South' bringing together wine producers from Argentina, Chile and South Africa, also in September next year.
There was quite a lot of HR movement within wine this year. South African firm The Company of Wine People saw its MD depart in April, with a replacement entering the fold four months later. The managing director of Treasury Wine Estates' Beringer unit left the company in July and, a week later, the European chief of New Zealand Winegrowers, David Cox, stood down. In the summer, Diageo appointed a new MD for its European wines division, but the biggest story came last month, when the CEO of Accolade Wines, Troy Christensen, confirmed that he will leave the company in the coming weeks.
Champagne hit something of a crossroads this year. As some producers argued that newer markets will bring growth in the future, others maintained that the sub-category's traditional markets remain more critical for its future. Either way, a small harvest this year, forecast to be around one-third down on 2011, may make such an argument moot. And, all the while, be assured that sparkling wine is perfectly poised to step into the fray, both tomorrow and in the medium-term future.
So, what of the future? Two snapshots spring to mind: First up, Amazon returned to the wine fold last month, with the online retailer giving wine a second spin in the US. Can wine and the internet finally stick?
If not, consumers could head to the likes of discount retailers, and not for the cheap stuff. Last month, Aldi launched its own “super premium” wine range in the UK weeks after rival Lidl unveiled its own upmarket line.
Where's your money?
"Still Wine in Asia-Pacific to 2016: Market Guide" provides in-depth detail on the trends and drivers of the Still Wine market in Asia-Pacific. The quantitative data in the report (historic and forecast market values) analyses the dynamics in the Asia-Pacific countries, providing marketers with the essential information to understand their own and their competitors’ position in this market and the information to accurately identify where to compete in the future.
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Review of the Year 2012 - Part III: Bottled Water
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Review of the Year 2012 - Part IV: Wine