Wine sector improving, a bit, says Rabobank

Wine sector improving, a bit, says Rabobank

There are signs that the pricing rot on the world wine market is slowing, according to analysts at Rabobank.

Prices are falling less steeply and have begun to rise for some producers in the world's major wine producing nations, Rabobank said in its quarterly wine sector review. It said that a better balance between supply and demand is driving the improved outlook.

"The light global crop of 2010, the improving global economy and the unloading of excess stocks over the past year appear to be taking some of the pricing pressure off major suppliers," said Rabobank today (21 January).

Its relatively upbeat assessment is in contrast to its earlier report, published in November last year, which warned that problems in the key UK market threatened to sour world wine industry profits.

Chief among Rabobank's reasons for optimism heading into 2011 is that consumer demand in emerging markets has helped to drain a global oversupply of wine. It said that China, Russia, Brazil and Mexico, in particular, have acted as an "escape valve" for the likes of Australia, Chile and Spain.  

Figures published jointly by Vinexpo and IWSR last week forecast that the world wine surplus will fall over the next four years. In 2009, 8% more wine was produced than consumed, but this is expected to fall to 6% in 2014. "This is a good level," said the CEO of Vinexpo, Robert Beynat. "It shows that there is no ocean of wine," he said.

Still, the situation remains challenging, according to Rabobank. In the US, which is the world's most valuable wine market, the average price for a bottle of wine fell by 4% in the first nine months of 2010, even though this marks an improvement from a 15% drop in the same period of 2009.

Currency is also playing havoc with some producers' profits, most notably for those in Australia, who saw the AUD rise by 8% against the US$ and by 11% against the GBP in the first nine months of last year.