Rabobank Wine Quarterly Q4 2010
Please find attached, Rabobank’s latest Wine Quarterly report - for quarter 4, 2010.
Contained in this report:
Price versus volume in international wine trade
Nearly all major wine suppliers saw export volumes improve in 2010 compared to 2009, according to the latest Rabobank
Wine Quarterly. But price volatility remains a key challenge for suppliers due to varying foreign exchange rates. Wine
demand from countries like Brazil, Russia and China is supporting volume growth, but many suppliers are facing fierce
price pressure.
Emerging markets as safety valve
The UK, the world's largest wine importer (by value), is facing serious structural issues. Seeing their profitability
threatened in a market they'd come to rely on, major suppliers have turned their attention to finding new markets. And
with some success. The figures in the January 2011 Wine Quarterly show Australia, Argentina, Chile and Spain reporting
double digit growth in wine exports to China, Russia, Brazil and/or Mexico in 2010.
But even with the astounding growth of wine consumption in emerging markets, it will be years before the volumes sold
there match traditional import markets, And in many cases, the prices suppliers receive in emerging markets, especially
Russia, are far below their traditional markets. Although Australia is proving an interesting exception.
Australia reverses pricing trend
In recent years, the pricing power of Australian wine exporters to the U.K. and the U.S. was hurt by continued
discounting to offload overproduction. In contrast, Australian wine now commands much higher prices in emerging markets
than wines from Spain, Chile, Argentina and France. In new markets where consumers have no preconceived ideas about
wine-producing regions, it pays to invest in educating your customers. Suppliers who take the trouble to promote their
region and build their brand will be able to improve pricing in the long run. The Australian example indicates that
using emerging countries simply to offload excess supply at low prices may represent a missed opportunity.
Foreign exchange rates impact prices
The average unit prices of wine sold into developed markets either rose slightly or fell less dramatically in the final
quarter of 2010. According to the Rabobank report, in some cases this is due to favourable exchange rates rather than a
general improvement in prices. European and Argentine suppliers may be deriving price benefits from weak local
currencies. But Australian suppliers are facing export price declines which are largely attributable to exchange rate
variations against the U.S. dollar and the pound sterling.
ENDS