Wine's winners and losers in 2013 and prospects for 2014

By Erin Smith

Published: 14 January, 2014

The wine regions of the world closed out 2013 with some clear winners like South Africa, which reported record exports, and New Zealand, which just entered into a new trade agreement with Taiwan. But countries including Argentina and Australia faced big challenges. We take a look at how the world's major wine regions fared in 2013 and look at their prospects for 2014.

Cloudy skies

Politics, exchange rates and large vintages will be challenges facing several bulk wine producers in 2014 and will most likely result in some downward pressure on pricing in the bulk wine market, according to the most recent report from Ciatti, the global wine brokers. ]

Argentina

Argentina had mid-term elections at the end of October, with President Cristina Fernandez's party taking some losses, but still staying in control of the government. Continued political unrest will most likely translate to more of the same issues that Argentina's wine producers have faced in the past like higher inflation, which is driving up costs within the country. Although the rise in inflation makes for a better exchange rate for exports, producers have to raise prices to compensate for the higher costs they are facing; this is resulting in a decline in exports.

According to Ciatti: "Argentina is experiencing a significant drop in the export sales for both wine and concentrate."

Producers are eager to move stocks prior to the harvest of the 2014 vintage, which is set to begin in the next few weeks and will most likely be dropping prices further in the near future.

Australia

Australia is looking forward to what is predicted as being a large vintage. Despite frost being a concern earlier in the 2014 vintage, several producers are leaning towards leaving some grapes on the vine, to decrease growers and suppliers production levels.

The exchange rate in Australia has been weakening, which should make wine exports more attractive, and yet volume exports are still declining, which is partially due to a shift in consumer preference towards white varietals. Additionally, in 2014, bulk wine shipments which currently account for 54% of all wine coming out of Australia, will face continued discounting and oversupply as wine businesses try to move stocks and weather this economic storm.

IBISWorld, which provides business specific reports, predicts "industry revenue to decrease at an annualised 1.9% over the five years through 2013-14 to reach $5.7 billion" in Australia.

Spain

Spain also starts 2014 facing an uphill battle, with the 2013 harvest coming in at what looks to be a record crop size, with estimates as high as 48 million hectolitres. With a flood of wine ready for market, pricing has seen continued decline throughout 2013. Higher-end wines seemed to be levelling out at year end, however bulk wine pricing seems to still be up for negotiations and possible further reductions, as large volumes are still available.

The middle ground

Chile

Chile is facing a more challenging year, but is not in as bad a position as some other countries at the end of 2013. Chilean bulk wine exports had substantial growth, increasing from 189.4 million litres in 2012 to 310.94 million litres in 2013. The upside is that the amount of bottled wine exported stayed essentially level, indicating that the market was not simply lowering the price of wine exports to move volume. However, with such a massive amount of growth, the price of bulk wine did see a 23% decline over the year.

The price decreases were offset however, as the Chilean peso has closed out the end of the year on a 25-month high against the US dollar. The peso saw some big swings throughout the year, but the upward trend means that producers, despite the decrease in price are getting more buying power for each peso earned.

The sunnyside

It is not all doom and gloom for the end of 2013; there were some definite winners this year as well those steady producing areas that have been able to stabilise their place in the global wine market.

South Africa

South Africa has had a very positive year in the wine trade. Stock levels have seen the lowest level in several years as exports, particularly whites and róse wines, did very well. This was partially due to a very attractive currency exchange rate compared to other exporters in market. Additionally with France having a relatively smaller crop in 2012 than in the past, countries were looking to fill the volume gaps with more imports from South Africa.

Wines of South Africa reported: "The South African wine industry has topped its previous export record, with volumes exported in 2013 reaching 525.7 million litres, a 26% increase on the previous high achieved in 2012, of 417 million litres."

The positive news did not end there, "the UK remains the largest market for South African exports, accounting for just over a fifth of total volumes exported during 2013. Exports to the UK rose 21% to 111.2 million litres".

New Zealand

New Zealand ended 2013 on a high note, with a new trade deal with Taiwan going into effect on December 1, 2013. The deal eliminated tariffs on wine that is being exported to Taiwan, with the expectation that New Zealand food and wine exporters will gain millions in additional revenue as a result.

Taiwan is New Zealand's sixth largest market for agricultural products.

California

Prices will be competitive for California producers as the Golden State has had two consecutive record vintages, which could put downward pressure on pricing. To offset the increase volume, wine exports from California continued to grow at a steady 11% rate.

The one cloud on the Californian horizon in 2014 is water. Currently the state is facing drought conditions, following one of the driest years on record. Without replenishment to water sources in 2014, producers could face big challenges in 2014.

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