World Bulk Wine Truths
As bulk shifts from prejudice to pride, explore its opportunities with the WBWE
Published through Linked in - Online March 19th 2024 - by Sharon Nagel for the WORLD BULK WINE EXHIBITION (WBWE)
This image is not connected to the bulk wine article. It’s just a great image - NZ - Otago - 2024 harvest - Phil from Grasshopper Rock wines
Annually, the WORLD BULK WINE EXHIBITION (WBWE) convenes a global congregation of industry players in Amsterdam, gathering them for a dynamic two-day event that sets the tone for the upcoming year of business. This event serves as a connection for identifying opportunities, nurturing burgeoning brands, and establishing influential trends. Now, with the WBWE transitioning into a full-fledged member of Vinexposium event group, this platform is poised for further elevation.
In our assessment of the current landscape within the bulk wine and spirits market, we discern pivotal insights and provide strategic guidance for stakeholders seeking to capitalize on myriad avenues of growth.
The global wine and spirits market stands at a critical juncture, marked by multifaceted challenges and transformative shifts. From demographic changes, such as an aging consumer base and a dearth of engagement from younger generations, to the profound impacts of climate change, geopolitical tensions, and economic instabilities, the industry faces substantial headwinds as it ventures into 2024 and beyond. While costs have stabilized, lingering repercussions of the pandemic persist, with labour constraints posing persistent obstacles to progress. Although logistical disruptions and freight challenges momentarily abated, recent escalations in conflicts, such as those in the Red Sea, have reignited concerns. However, amidst these complexities, a new focal point emerges: the downturn in consumption emerges as an unprecedented challenge, particularly for the wine sector, necessitating innovative strategies and agile responses from industry stakeholders.
“The current situation is making people more realistic and forcing them to make decisions. The short term will be tough, but in the medium term, we will have a better business”
However, amidst the challenges, there are glimmers of optimism, and the atmosphere at the previous year's exhibition was unexpectedly buoyant. A notable change towards environmental accountability is undeniably bolstering the bulk sector, while the advent of alternative packaging is unlocking a plethora of fresh opportunities. Furthermore, the trend towards premiumization is diversifying the bulk market, drawing in previously untapped segments.
Navigating the 2024 crop dynamics amidst a shifting paradigm
The 2023 harvest in the northern hemisphere served as a stark reminder of nature's capriciousness, with production volumes significantly diminished. Wineries, grappling with plummeting demand, were compelled to adapt, some even seeking assistance from governmental entities. Despite last year's harvest being the lowest in six decades, tanks remain uncomfortably full, predominantly stocked with red wine, prompting urgent calls for measures to alleviate inventory pressure and curtail production in the current year. Spain has already authorized cluster-thinning for the 2024 season in response to this pressing issue.
A similar proactive stance is being adopted in the southern hemisphere, where initial reports present a varied picture in terms of anticipated yields. Several nations, including New Zealand, Chile, and Australia, are bracing for volume reductions that could have an impact on their home and international business. Conversely, Argentina and South Africa anticipate larger crops this year. While this news is greeted with optimism in the latter case, it raises concerns for Argentina, given its economic challenges.
From Ripples to Earth-Shattering Shifts
The wine and spirits industry finds itself at a pivotal juncture as what were once mere tremors have now escalated into seismic shifts. Decades-long trends of declining consumption have intensified, propelled by a confluence of factors including dwindling demand from once-vibrant markets such as the USA and China, alongside the burgeoning influence of neo-prohibitionist sentiments.
The rise of temperance movements globally has catalysed the enactment of stringent anti-alcohol legislation and escalated taxation measures, thrusting moderation into the forefront of public consciousness. This shift towards temperance is not confined to any particular age group but is notably resonating with both younger and older demographics alike.
The industry's attempts to court Millennials, who possess a diverse palate and exhibit markedly different consumption patterns compared to previous generations, have been met with unexpected challenges. Millennials' penchant for variety has created a saturated market landscape, blurring traditional category boundaries and eroding brand loyalty. Moreover, their purchasing decisions are guided by a distinct set of cues, further complicating marketing strategies.
Adding to the industry's woes is the global trend favouring lighter wine variants such as white, rosé, and sparkling wines over traditional reds, posing a significant threat to established business models across the sector.
Embracing Sustainability: A Catalyst for Bulk Trade Advancement
Albert Einstein's timeless wisdom, "In the midst of every crisis, lies great opportunity," resonates profoundly within the bulk wine domain. Positioned uniquely at the nexus of change, the industry stands poised to seize a multitude of emerging prospects. From the proliferation of private labels to the surge in demand for low-alcohol and craft beverages, and the burgeoning popularity of alternative packaging, the landscape is ripe with possibilities. Yet, perhaps the most transformative force propelling this evolution is the widespread embrace of sustainability practices.
Increasingly, sustainability is not merely a choice but a prerequisite for market entry across various sectors. Monumental shifts in legislation underscore the urgency of environmental stewardship, compelling major industry players worldwide to recalibrate their focus towards bulk trade. Barry Dick MW , the esteemed global BWS bulk sourcing manager for Waitrose, aptly encapsulated the zeitgeist at last year's WBWE: " A paradigm shift is occurring and we have to think radically differently about the way we move wine."
The palpable impacts of climate change further amplify the momentum towards sustainable practices, while Corporate Social Responsibility (CSR) strategies increasingly underpin business operations across the spectrum. As the industry navigates this transformative juncture, sustainability emerges not only as a key driver but as the guiding ethos shaping its future trajectory.
“A paradigm shift is occurring and we have to think radically differently about the way we move wine”.
In a period where companies face heightened scrutiny across all facets of their operations, there's a renewed commitment to minimizing carbon footprints. This entails not only reevaluating transportation methods but also embracing novel approaches to packaging. The widespread adoption of innovative packaging solutions is no longer merely anecdotal; it's becoming increasingly evident with major retailers such as Aldi, Whole Foods, Tesco, and Waitrose introducing wines in paper bottles.
Deposit return schemes are gaining momentum, while bag-in-box packaging continues to garner favour. Cans have evolved beyond niche offerings, finding a place in the portfolios of producers worldwide. Kegs are experiencing a resurgence, and materials like aluminium and PET are increasingly integrated into packaging considerations. These developments underscore a shift in mindset from post-Covid "resilience" to "agility" and "versatility," epitomized by the industry's embrace of low and no-alcohol products.
The growing trend towards low-alcohol wine, with consumption increasing by 8% in 2023 across key markets, reflects changing consumer preferences, albeit from a modest base. Additionally, the no-alcohol segment is expanding, attracting new consumers and experiencing a 7% growth in 2023 across these markets. Advancements in technology are democratizing access to low and no-alcohol options, further driving the demand for alternative packaging solutions.
Taking a Page from the Spirits Playbook
The spirits industry has long been a trailblazer in enticing consumers with reduced-alcohol options, captivating them with quality products and a compelling image. This approach could offer valuable insights for rejuvenating a segment of the wine consumer base, particularly through the immensely popular mixology trend.
Spirits have demonstrated resilience in navigating the moderation wave, consistently igniting interest through innovation, an expanded range of premium offerings, and artisanal creations that resonate with consumers' quest for authenticity. Their success has not only revitalized their own category but has also influenced adjacent segments, such as vermouths. Once regarded solely as cocktail ingredients, vermouths have emerged as stars in their own right, embodying Mediterranean elegance and flavours that resonate with aficionados of spirits like gin.
These prevailing trends underscore a fundamental reality of the beverage alcohol industry amidst the backdrop of post-Covid political and economic uncertainty. Nicholas Hammeken from Hammeken Cellars astutely observed at last November's WBWE, “The current situation is making people more realistic and forcing them to make decisions. The short term will be tough, but in the medium term, we will have a better business.”
In this dynamic and rapidly evolving market, the imperative for businesses to remain abreast of emerging developments has never been more pronounced. That's why the WBWE's newsletter serves as an indispensable resource, offering crucial insights throughout the year. Moreover, the annual exhibition in Amsterdam, held every November, provides a prime opportunity for both industry titans and boutique producers to explore potential avenues for growth and enhance their operations.
Sharon Nagel for the WORLD BULK WINE EXHIBITION (WBWE)