Comment - Damp UK Awaits Sunnier Forecast
UK vineyards have seen decreased volumes
It has been a banner year for ducks in the UK, less so for drinks. The country's soft drinks makers such as AG Barr and Britvic have spent most of their results announcements throughout the year blaming heavy rainfall for drop offs in demand, while brewers were only saved by an unprecedented summer of sport and national celebration.
Now, however, it is the supply side feeling the squeeze from record rainfalls. Today (10 October), English sparkling wine maker Nyetimber said it is to skip this year's grape harvest because the bad weather has compromised quality.
It will not be the only one.
“A lot of people will have made the decision not to pick if the quality is not there,” said Christopher White, GM & owner of Denbies Wine Estate, the UK's biggest winery. “That's the thing with the English wine industry - quality is essential. We have built up a reputation for producing some of the finest wines in the world.”
Denbies is luckier than Nyetimber because it mostly makes still wine, which can be picked earlier than sparkling. It is still picking this year, however, volumes are down and like many wineries will have to dip into previous vintages to make up the shortfall, White said. He added that smaller growers are likely to feel the pinch if the bad weather continues next year.
But, even large estates like Denbies will have to consider price increases because of constricted supplies. In fact, White said, that's what the whole agricultural sector is talking about.
As if to prove his point, the National Union of Farmers in Scotland today warned that the region's wheat harvest is down 20% this year, exacerbating pressures already tightened by droughts in Russia and the US.
“We’re going to have fewer tonnes of grain in Scotland, I think all those tonnes will be needed,” NFU Scotland said. The UK alcohol industry relies heavily on Scottish grain, especially whisky, which takes 75% of the crop, according to a Scottish grain expert.
So far, the whisky industry has put a brave face on the weather woes, which White said have been the worst since 1997, when severe frost added to the damage caused by rain.
“It is still early days when it comes to this year’s harvest,” the Scottish Whisky Association said, adding that the crops being harvested now won't be drunk for about five or ten years.
Beverage executives have been similarly quick to push the problem down the line. PepsiCo, for example, has said the US drought is not an issue for 2012. But, while modern drinks companies are adept at hedging commodity prices to offset unforeseen problems such as rain, the increased costs do eventually leak into the system.
For smaller UK companies getting squeezed by both supply and demand falls, it can be especially tough. “With things outside your control there's nothing you can do about it,” said White, who has made sure his company has diversified into hospitality and weddings.
No doubt all beverage firms in the country will be hoping for a sunnier outlook.
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