Wine
predictions for
2009
This time last year I posted some wine
predictions for 2008; this year I'm making some more. It's just a
bit of fun - educated guesswork, really. After all, if I had any real
predictive ability then I'd be considerably richer than I am. And
there's also that wonderful aspect of timing - even a year ago, we
could see a recession coming, but when the big crunch came, we were
still surprised by its scale and timing.
1. The real economic pain is yet to come
The current economic crisis is scary, but it hasn’t really
bitten yet. Many experts suspect that the real pain will kick in
third-quarter 2009. It’s going to be very ugly and have serious
repercussions for the wine industry as people rein in their
non-essential spending.
2. Selling wine below cost will end
One of the controversies of 2008 has been the practice by some
supermarkets of selling wine below cost price. Usually, this involves
popular brands, which are used as a loss leader to get people into the
stores. It damages these brands significantly, because once people
have bought a wine for a certain price, they are reluctant to pay
more, and they no longer see it as exclusive or aspirational. It also
damages sales of wines that aren’t being sold in this way. It’s an
incredible abuse of the retailers’ current strength of position to
trash their suppliers brands like this. It changes the relationship
from one of partnership to one of abuse, although the retailers
justify it by saying that they are looking after their customers’
interests. My hope is that this will end in 2009 as retailers come to
their senses, or are brought their by government intervention (see
below).
3. The strength of the Euro will change the face of
the UK marketplace
The wine merchants are selling now was bought when the pound was
stronger. The strength of the Euro will put huge pressure on prices of
wine from countries such as Italy, France, Spain, Portugal and
Germany. At the most price-sensitive end of the scale consumers
aren’t terribly loyal to country and so they will switch allegiance
to whoever is delivering good tasting wine at the lowest price.
4. Print magazines will suffer; online wine writing
will continue to thrive
Print magazines rely on advertising for their revenue, and usually
they have high costs so they need a lot of advertising to cover these
and turn a profit. In the last few years consumers have been able to
get the sort of information that previously they’ve had to pay for
on the web – and in many instances the quality of material on the
web has exceeded that of the sort of repetitive, stale information in
many consumer magazines. The magazines have relied on a vertical
transfer of information from unaccountable experts to the consumers;
on the web, information transfer is more horizontal and writers are
engaged in a conversation in which they are held accountable for what
they say. Potential advertisers may start to see that there are better
ways to spend their money than expensive print adverts in wine
magazines that aren’t selling all that many copies.
5. Neo-prohibitionism has gathered momentum, and
unless challenged will become a major threat to the wine industry
The UK government clearly sees alcohol as an evil in the same vein
as tobacco. Alcohol is to be tolerated, but only as a scourge on
society that cannot currently be avoided. So the policy is to clamp
down on drinking – not just antisocial binge drinking, but people
enjoying a bottle of wine with their meal each night in their own
homes. This domestic consumption is clearly unacceptable because it
means that we’re exceeding the (absurdly low) recommended maximum
intake levels that equate to just over two bottles of wine each per
week. But who is questioning these limits, and the lack of scientific
evidence behind them? And who is pointing out the weight of evidence
suggesting the protective effects of drinking against a number of
diseases that are well documented in the medical literature? The
answer to abuse is not disuse, but correct use.
Could it be that the government will intervene in more
extreme ways than just by raising duty? We might see an end to price
promotions for wine, or even a minimum selling price for a bottle of
wine (or 75 cl equivalent) of £4 or £5. Studies show that increasing
the price of alcohol makes people drink less and thus reduces deaths
from alcohol-related causes. Such a measure would change the shape of
the wine trade significantly, and it would also stop big retailers
using alcohol promotions to win customers.
6. 2009 is South Africa’s big opportunity: will
they take the chance?
Could this be the year where South African wine makes major
inroads into the UK marketplace? The exchange rate is hugely
favourable. If South Africa can make branded wines that taste good, at
a good price, then they could seize significant ground from the
competition.
7. Finding a route to market will remain the major
challenge for producers: and solving this should be the key focus of
those who want to succeed
There’s a mismatch between the shape of the production side of
the industry and the retail side. This leaves smaller producers
without a real route to market, unless they crack the super-premium
bracket. Too many small/medium sized producers are finding it hard to
connect with customers because of this scale imbalance. The power is
currently in the hands of the major retailers and the producers are
operating from a position of weakness. The message to producers:
concentrate on your route to market.
8. Could this be the year of the co-op?
Co-ops are out of fashion and unloved, because they’ve typically
made bad cheap wine that no-one wants. But with good consultancy
advice in terms of both winemaking and marketing, and a concerted
drive to raise the standards of the grapes received from growers, then
they could be highly successful if they are able to produce good
quality inexpensive brands that meet consumers’ expectations. This
is because with their volumes, they can work well with the modern
retail landscape. This is already happening with some co-ops, and
there’s potential for it to spread.
9. But the good news is that 2009 will see some real
innovation in the wine industry – specifically, lower alcohol wines
that taste good, and a fully recyclable triple-layer PET
bottle/label/closure package.
The wine industry has traditionally been weak in terms of
innovation. But two key innovations that could make waves in 2009 are
lower alcohol wines that taste good because they are made from fully
ripe grapes, and new packaging that could end the dominance of glass,
with real green credentials. Watch this space…
Date posted 02/01/09 - see also: my wine
predictions for 2008
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