Turbulent Conditions Shift The Global Flow, And The Price, Of Wine (Part Two)

Food & Drink

Yesterday’s post, Part One of this mini-series looking behind the scenes and under the screwcaps in the wine aisle, took a closer view of a few of the forces in 2020 that are influencing the selection and availability of wines in our shops and on our tables at home. To recap briefly:

  • At the start of the year, the threat of high tariffs impacted decisions to expedite shipments into the US, especially trans-Atlantically. For some importers, that meant increased inventory which turned out to be a fortuitous development.
  • From from March to June, as the Shelter In Place and Work From Home realities of COVID settled in, consumers turned largely to established brands that were comfortable and familiar to them. In turn, some of those brands have sucked up an excess supply of juice from the bulk market in order to keep meeting demand.
  • The past few weeks, as wildfires ravaged vineyards and wineries in the western US, decisions around the flow of wine have shifted once again. “Everything came off the market because producers didn’t know if they’d have anything to sell” next year, said Brett Vankoski of Latitude Beverage Co. “They’re holding on to more inventory, at least until they can determine how much of the 2020 vintage they can actually use.

The themes discussed in this series may not be top-of-mind as consumers drop by their local wine shop or buy some bottles online. They may very well just want a decent bottle at a decent price to open at the dinner table, and enough said.

Yet that in itself is a behavior worth considering for a moment, and it’s where today’s Part Two begins: now that we’re well into COVID-era wine consumption, how will Shelter In Place practices continue impact the wines we choose on a regular basis? How much we are willing to pay for those wines also opens the conversation to a reconsideration of bulk wine.

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COVID’s Impact on the Wines on Our Table, and Their Price Point

A certainty of COVID’s impact on the wine industry is how it changed producer’s distribution channels. Some have redirected sales efforts toward the retail channel, while others work to establish more direct wine business online. Both options are related, of course, to the closures and limited openings of restaurants.

“There are not enough seats in restaurants anymore to drive the on-premise [restaurant] business,” Vankoski said. “But people aren’t necessarily going to give up drinking. It will be interesting to see if the average price per bottle increases. If they aren’t spending a hundred dollars a bottle dining out, maybe the price at retail will increase a little this holiday season because of that.”

Holiday season gifting is another factor that could affect the price consumers will be asked to pay for their wine.

Reconsidering the Bulk Market

“Bulk wine” is often seen as a negative term for what’s seen as generic filler for large commercial wine brands. But the bulk market encompasses all the wine that’s made in the world that does not yet have a home in a bottle or box or other package. A producer’s grape yield needs to be turned into wine, whether or not those grapes are contracted to be sold.

Bulk wine can come from any winery, Vankoski points out, producing wine at any quality, including if a premium winery already knows that the juice isn’t going to make it into their premium blend. “The winery may have planted new vineyards, for example, and are waiting for their vines to mature,” Vankoski said. “Or if the winery feels that their sales have slowed, they aren’t going to bottle what they don’t think they can sell. The bulk market also includes very, very good wines that were actually meant for premium or luxury bottling.”

Bulk wines are sourced globally, and that diversification of their portfolio protects the business of Latitude Beverage Co. and others like them.

Vankoski recognizes that Latitude has benefited strategically because they are not, in fact, tied to the “terroir” of one specific place that’s been affected by fires or hail or drought. That business model is one way wine companies to stay on course when, in a year like 2020, every curve ball imaginable has been thrown their way.

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