Prowein 2024: Wine industry needs to professionalise to survive
Economic sustainability is the big topic at Prowein this year, as the global cost of living crisis chafes against the challenges of decreasing consumption rates and an overabundance of supply.
Harpers met up with professor Simone Loose, head of the institute of wine & beverage at Geisenheim University and author of Prowein’s annual business report, in Dusseldorf yesterday (11 March), where she spoke about the issue of declining profitability across the wine sector.
Across the globe, wine businesses are struggling. According to the most recent Prowein report, the most prevalent economic challenges impacted more wine businesses in 2023 versus 2022: a total of 48% said decreasing wine consumption is having a ‘strong’ or ‘very strong’ effect on their business, up from 30% the year prior. Meanwhile, 47% said low profitability is impacting their business versus 38% in 2022. The figure is 45% for climate change in 2023, versus 40% in 2022.
The outlook is slightly more positive when it comes to 2024. While most companies expect costs to rise further, the majority expect the increase to be moderate as inflation steadies.
There is plenty of upbeat energy to be found on the floor of the world’s biggest wine fair. One of Prowein’s more recent additions, the ‘zero’ zone, sits alongside the urban gastronomy and packaging & design zones as examples of the more forward-thinking areas of the fair.
Loose believes the wine industry must lean into this entrepreneurial spirit. This is true for smaller producers in particular. In a highly fragmented industry, she stresses how wineries must, in terms of sales and engagement at least, become more ‘corporate’ and embrace technology to a greater degree in order to survive.
She said: “The wine industry is years behind other sectors in terms of technological advancement. Two-thirds of producers aren’t even using Excel, which means they’re not analysing their commercial business. This is a big problem, because consumption per household of wine is declining globally, and there are huge issues around the decline in demand and oversupply. Prices are too low, and the wine industry isn’t like the retail [clothing] industry where shops can just close and a new one reopen. In California and France, producers are starting to pull up vines, so they’re adapting the supply to the demand.”
She continued: “So how are wine businesses going to reach the consumer? If they’re not profitable as a business, how are they going to pay for marketing strategies? The ones who will survive are those who are the most professional.”
She went on to describe how AI (artificial intelligence) can help boost productivity, particularly when it comes to smaller producers who have yet to properly commercialise or strategise engagement with customers.
AI is currently cost-prohibitive across the supply chain for most, save for the larger producers. Yet, utilising AI in more focused areas could help make a big difference to smaller producers’ sales. For example, linguistic tools such as Chat GPT have the capability to convert information on a producer’s inventory and brand into marketing or ecommerce strategies.
Economic sustainability and return on investment is a big theme at Wines of South Africa too, where the promotional body is now turning its attention to replanting strategies. Looking to international markets such as the UK (South Africa’s top export market), the organisation’s advice to producers is to now look at single-varietal wines which chime with modern tastes. This means more Chardonnay, Sauvignon Blanc and Cabernet Sauvignon in place of Chenin and Colombard – varieties which were planted widely to support the country’s once booming brandy sector.
“Our history has made us imbalanced in terms of mass plantings,” Siobhan Thompson, Wines of South Africa’s CEO, told Harpers. “We have a long-term plan in place now to unpack what is working for us and what isn’t. As part of that, we’re looking closely at what we need to plant, which is more single varietals versus what we’re often known for (dry white or red blends).
She added: “We want to build up that image of being able to produce top quality wines and that means looking at all aspects of the value chain. This also includes looking closely at research, innovation and incubating areas for development, while uplifting disadvantaged communities and upskilling winemakers… building a future across all groups, regardless of race or background.”
Return on investment is undoubtedly one of this year’s biggest themes. The Prowein business report shows how wineries have become a lot less profitable over the past ten years, due to a combination of diminishing consumption patterns and rising costs.
Wine might not neatly align with modern health agendas, and that has hurt its popularity in recent times. It is also behind when it comes to tech. However, the wine industry very much has environmental sustainability in its corner. Wine, by its nature, requires long-term investment. Now, more than ever before, vineyard management is also focused on the long haul, with regenerative viticulture and diversity projects all very much part of the long-term plan.
This connection to nature and by extension, the people behind the vines, remains one of wine’s strongest weapons in its search for sustainable success. Technology has its ironies. Social media for example has demonstrated its ability to disconnect and separate audiences, rather than bring them close together. However, technology also shows the power to connect winemakers to consumers more so than ever before, including improving the ability of wine businesses to personalise the customer experience in terms of discovery and taste.
As disposable income continues to contract, the message from Prowein’s seminars, including one hosted this morning by Cathy Huyghe (pictured), of AI specialist Enolytics, is that businesses need to be looking to new ways of connecting with their customers.
“AI won’t replace people, but people who don’t embrace AI will be replaced,” she concluded.
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