Impact of Inflation on Wallets: World Wine Consumption at 27-Year Low

By | 29 April 2024

The wine sector faced another challenging year in 2023 as rising inflation hiked up prices and dwindled household budgets, leading to a decrease in bottle purchases by customers.

The overall intake of wine declined by approximately 2.6% to a projected 221 million hl the previous year, plummeting for a consecutive year reaching the lowest ever since 1996, as per the data stated in the annual report by the International Organisation of Vine and Wine (OIV). This reduction equates to nearly 800 million fewer bottles being opened globally.

The inflation rate has played a predominant role in the past couple of years. It’s significantly raised the production and distribution costs and concurrently diminished the purchasing power of consumers,” revealed John Barker, OIV’s Director General, during a virtual press meet.

The consumption of wine has seen a decline among the top five markets, led by the United States and France, though Barker advised to be cautious while interpreting this preliminary data. The OIV has been noticing reports that show distributors in prime markets have been importing less, opting to sell out stocks to deal with inflationary constraints. This fact may impact the computation of apparent consumption, Barker added.

Global consumption has been heavily impacted by a drastic reduction in China’s wine consumption in recent years. By 2023, intake volumes were less than half of those seen a mere four years prior. This information was provided by the OIV. Increasingly, demographic and lifestyle changes are leading to a overall decrease in global wine consumption.

“Given the complex nature of forces currently affecting global demand, it’s challenging to confirm whether this drop in consumption is a temporary or lasting market feature,” stated Barker.

In 2023, global wine production decreased by 9.6% to 237.3 million hl. This reduction fell below the OIV’s November estimate following significant output cuts in Italy and Spain. This was the smallest annual vintage since 1961, due to severe weather conditions that drastically cut grape harvests across the globe.

These challenging harvest conditions may ensure that the discrepancy between global supply and demand is not significant, according to Barker. He added that it might be “a little bit too soon” to predict the potential impact on wine prices and consumption rates in 2024, even though inflationary pressures are decreasing.

‘The biggest driver of the price increase appears to have been inflation in 2023, which seems to be easing off this year,’ the director general remarked. ‘The impact of the smaller 2023 vintage on the equilibrium of supply and demand, as well as prices, likely hinges somewhat on the scope of global stock holdings.’

The worth of global wine exports decreased by 4.7% to €36bn, representing the second-highest figure on record as higher prices somewhat compensated for lower shipments. The OIV reported a 2% increase in the average price of wine exports to €3.62 per litre, setting a new record, with inflation likely being the primary driver.

‘The market has largely not felt the effects of the small 2023 harvest in the Northern Hemisphere,’ Barker noted. ‘In light of the current destocking and the average to smaller sizes of recent global vintages, it will be intriguing to see how a small harvest influences global trade in terms of both volume and pricing.’

The export performance of sparkling wines like Champagne and Prosecco was quite resilient, with shipment values increasing by 1% even as volumes decreased by 4%.

The entire category of sparkling wines has seen ‘incredible growth’, with production and consumption tripling since 2002 said Giorgio Delgrosso, the OIV’s head of statistics. While Italy’s Prosecco has led the surge, Champagne, Cava and Germany’s Sekt are all doing extremely well, he said.

‘All the data highlights that sparkling wine is by far the category that is most successful in the market,’ Delgrosso said. ‘It’s certainly a category that is performing extremely well, and it is something that can help the industry navigate these turbulent times.’

In addition to sparkling wines, some premium, high-priced products continue to do well, particularly high-end reds, Barker said.

France remains the leading wine exporter by value, boosted by its shipments of Champagne, even as Italy and Spain exported more by volume. All of the world’s biggest wine suppliers reported lower export volumes last year.

The OIV also reported its first estimates for Southern Hemisphere wine production, which may rise around 5% in 2024, based on early data. Australia may lift volumes 21% on favourable growing conditions, while initial estimates for Argentina are for a 27% bigger vintage, according to Barker, who said the figures are subject to revision in the coming weeks or months.

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