Rabobank, the Dutch multinational banking and financial services company, expects that the decline in global production and rising prices are likely to affect wine consumption–especially at the lower end of the market.
Written before the California wildfires erupted, the report released Thursday said that between frosts, heat, hail, drought, and rain at the wrong time, harvests in Italy and Spain are down between 20 and 30 percent. Some places in Spain—the Rioja Alta region in particular—losses were estimated at more than 50 percent, according to El País newspaper.
Marchesi Piero Antinori told Wine Enthusiast earlier this week that his operations in Italy “have completed the harvest. We can say the harvest is very weak, very small compared to a normal harvest; probably 30 to 35 percent less than a normal year.” He added that he “has good reason to believe that the quality will be very good.”
Mother Nature wasn’t too fond of France either. Bordeaux also saw significantly lower harvests this year. Most Bordeaux producers surveyed were expecting harvests that were between 50 and 70 percent lower than normal levels.
The European wine grape crop for 2017 appears to be one of the smallest in decades. Stephen Rannekleiv, RaboResearch Global Sector Strategist Beverages, warned in his report: “Global inventories, which were already tight, will tighten dramatically… Wineries will face higher input costs and declining volumes.”
Given the limited availability and the pressure on margins for wine, Rannekleiv expects exports to suffer. On the other hand, those same detriments may spur further gains in market share by beer.
Rabobank, a leader in food and agriculture financing, also sees mergers and acquisitions continuing in the fourth quarter. “There is still money available and the adverse harvest may eventually result in some investment opportunities,” Rabobank said.
From July to September, consolidation rolled on in Italy with Frescobaldi and Santa Margherita as buyers, Rabobank said. Antinori also took full control and ownership of Chilean Haras de Pirque. He called the sole ownership “a great responsibility and very exciting.”
Among the purchases already completed, Rabobank highlighted Louis Jadot’s purchase of Domaine Prieur-Brunet and Guigal’s buying Domaine de Nalys from insurer Groupama. Canadian Andrew Peller’s acquisition of Black Hills and Gray Monk. Rabobank expects more deals as Constellation Brands has already expressed a desire for more assets.
The bank also said US exports declined 8 percent by volume and 13 percent in value. The steepest decline was in the European Union where bottle sales plunged 28 percent by volume and 32 percent in value.
Rabobank’s Rannekleiv’s also expects U.S. wine imports to continue to rise, with value growth outpacing volume growth. France and New Zealand maintain their strong momentum both in volume and value. For Australian wines, there has been a clear shift from bottled to bulk wines, bringing down the average price per liter.