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And a quick heads up: the news will not air on 8 June because I will be sitting my Master of Wine exam.
On to today’s news!
Brazil’s floods
As I discussed last week, Brazil is South America’s third-largest wine-producing country and since 29 April they’ve been experiencing devastating floods. That continued this week and as of Thursday 16 May, 149 people have died, 108 are still missing and more than half a million have been displaced. Researchers and meteorologists have estimated that it could be another month before flood waters recede. Per the latest from Brasil de Vinhos, EMATER/RS-ASCAR, an organisation that works in areas affected by environmental disasters in Rio Grande do Sul, have estimated that 500 ha (over 1,200 acres) of vineyard have been destroyed, mostly in Serra Gaúcha. That equates to around 2% of the region’s total planted area. While that may not sound like much, this does not take into account the impact of the floods on the remaining vineyards.
In addition, the floods have done immense damage to the supply chain, submerging the stocks of many distributors and retailers. As I said last week, if you’re in Brazil and would like to support the country’s wine economy, you can use the Brasil de Vinhos site to find wineries to buy from directly in Rio Grande do Sul. For those of us in other countries there’s a collaboration between the state and the capital of Porto Alegre which is accepting bank transfers and that will be linked to in the transcript of this newscast.
Gender bias in wine buying
Back in February, the Journal of Wine Economics published a study called ‘Willingness to pay for female-made wine: Evidence from an online experiment’. The study found that a wine label with a man or woman’s signature on the label could command the same price with male drinkers regardless of the gender of the winemaker. However, men were less willing to pay if the wine was labelled with an organisation that represented only female producers versus if it was labelled with a gender-neutral organisation. A few publications have zeroed in on the last bit – the lower willingness to pay for wine made by a female-only producer’s organisation – but I honestly don’t think it’s surprising or damning that men were (theoretically) less willing to pay for wine from a female-only producer group. I think group identification is predictable and that it can be a powerful marketing tool or detractor. I’m satisfied that on an individual level pricing commanded was one to one.
Accolade and Pernod Ricard
I’m going to start by giving some context. In Australia, the top five wine companies by volume are Treasury Wine Estates, Accolade Wines, Australian Vintage, Casella Family and Pernod Ricard. Looking at data from IBIS, the top four companies (I don’t know why they’ve done four and not five) produce 40–70% of the country’s total output of around a billion litres a year. Most of that production is from purchased fruit.
Back in February I told you that Accolade Wines, deeply in debt, had been acquired by Australian Wine Holdco, who took on their debt in exchange for ownership. Right after that acquisition took place Accolade confirmed that they were in negotiations with Australian Vintage that could result in a merger. At this point those discussions have been ongoing since February. Then, on 12 May, the Australian Financial Review (AFR) reported that Accolade Wines is in negotiations to buy Pernod Ricard’s Australia-based wine interests for AU$500 million (£265 million).
So right now, the top five, responsible for more than 50% of the country’s production, has the possibility of becoming the top three! And meanwhile, because of a massive oversupply of bulk wine and declining consumer interest in wine sold for under $10, Treasury announced last month, via AFR, that they are restructuring their portfolio with the thought of selling off entry-level brands and keeping their premium portfolio … which means that in this bizarre scenario, Accolade, which back in February was acquired for the price of its debt, could end up as Australia’s largest producer by a huge margin!
Honestly, the possibility of this level of market consolidation is concerning. There is no way of predicting what will happen and it’s incredibly hard to interpret Accolade’s strategy.
Strong US wine sales
Ending on a high note! On 15 May the inaugural BMO Wine Market Report, a quote ‘comprehensive and holistic examination of the US wine industry’ was released. This new report is a partnership between some pretty heavy hitters: the BMO Financial Group (the money), the Wine Market Council (consumer data), WineBusiness Analytics (US winery data) and BW166 LLC (economic data). And these people say that the US wine industry is doing alright!
While the US is down in terms of volume consumed, total sales by value have been increasing since 2018. And despite the fact that we constantly hear that younger generations are drinking less – and they are in terms of volume – it turns out that Gen X, Millennials and Gen Z actually make up 61% of the US wine-drinking public. And the proportion of US adults who drink wine – around 35% – has been fairly consistent since 2005. Wine priced over $10 is performing best and has seen 34% growth in value since 2019 – though that number does not account for inflation. The report also attributes much of the decline in total volume of wine sold to ‘destocking’ after wholesaler and consumer stockpiling during the pandemic and predicts that wine sales will return to pre-pandemic levels next year before levelling out. So while we can’t expect growth, we can hope for stability.
This is a transcript of our weekly five-minute news broadcast, which you can watch below. You can also listen to it on The JancisRobinson.com Podcast. If you have breaking news in your area, please email [email protected]. And if you enjoy this content and would like to see more like it, please subscribe to our site and our weekly newsletter.
Photo at top courtesy of Brasil de Vinhos
