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Scorched vineyards in Europe add to inflationary woes

Published:  15 August, 2022

Inflation has reached boiling point for the wine sector – with climate change adding to a melting pot of pressures which are placing increasing strain on the industry. 

The current issues facing the industry are plentiful, including Brexit, alcohol duty reform, rising energy prices and the cost of goods for businesses.

As a result, many businesses are increasing prices, and consumers are likely to bear the brunt in the midst of a cost-of-living crisis.

According to David Gates, chief executive of Direct Wines, soaring temperatures across Europe will cause the price of wine to increase by 10%, as reported by The Telegraph

Gates said: “Hot weather and low rain tend to lead to lower yields which lead to increased prices. On top of that, costs of all the dry goods, so items such as bottles and cardboard, are significantly up due to supply chain and energy cost issues.”

For many vineyards, it is already a case of damage limitations. In Spain, for example, the grape collection has been brought forward to August to savour what healthy grapes they have left. 

As a result, the yield will be -25% in some regions of Spain, thus driving up the demand and price of the wine.

Meanwhile, France has recorded its worst drought on record, following numerous heatwaves across the country. 

According to the French Agricultural Sector, the arid and warm weather has led to an early start to the grape harvest in many regions, including Alsace, Languedoc-Roussillon and Burgundy.

Of course, agricultural products are always susceptible to unfavourable weather, but new legislation is set to provide a fresh challenge to the wine sector specifically.

The plans for alcohol duty reform that come into effect in February 2023 will introduce 27 bands (as opposed to three) for alcohol across wine categories.

According to the Wine & Spirit Trade Association (WSTA), if wine is taxed according to its alcoholic strength in this way, 70% of all wine, still and sparkling, will go up in price, as will 80% of all still wine, 95% of red wine and 100% of fortified wines. 

The inflationary issues of 2022 are putting severe pressure on the drinks trade and are forcing retailers to increase their prices across the board. However, the impact of rising prices and cost pressures goes back much further.

Following the fallout from Brexit and added costs of getting goods across the border, Philip Cox, owner of Romanian winery Cramele Recas told Harpers: “Thanks to Brexit, we are probably looking at an average 50-75p added to a bottle of wine in retail, which is hugely significant. As a result, the smaller producers and importers, for which the costs will be significantly higher, will struggle."

In May this year Dan Farrell-Wright, director of independent online wine and spirit merchant Wickhams said many of his costs have increased over the past year, mainly with respect to the cost of dry goods: "Cardboard has more than doubled, courier networks have added fuel surcharges to our expenses, and the wine we buy has increased.

“So far, we have absorbed as much of this as possible, but we will inevitably have to pass some of this on to our customers. We are looking at increasing prices and increasing the level at which customers qualify for free delivery.”

For information on Harpers Sustainability Charter and how to sign up for the initiative click here.