OIV: Wine producers ‘face post-war solutions’
Director of the OIV, Pau Roca, said that some wine producers are facing conditions similar to a post-war environment, as he warns that there could be a potential 50% reduction in value sales in Europe.
In a recorded statement marking the release of new OIV data, Roca warned that the shutdown of the HoReCa channel had the potential to reduce wine sales in Europe by 35% in volume and more than 50% in value.
He said that while the impact of the pandemic on grape and wine production volume had so far “been limited”, social distancing and other measures, including the use of machines to conclude harvest, “has a cost”.
He said that while information remains insufficient to make an accurate forecast, he predicts that Mediterranean countries will be most affected by the fall in wine sales, owing to having the “highest incidence” of bars, restaurants and coffee shops and also the most “radical suppression” of the “highly-developed” tourism industry.
He said that while off-trade sales have risen, which was “good news”, this “does not compensate at all” for the losses caused by the reduction in on-trade sales.
He explained that the off-trade offer is normally “quite limited, low-priced and homogeneous” in comparison to the on-trade. He added that once the issue of over-demand on logistical and delivery services is resolved, direct-to-home sales and e-commerce “will certainly increase in the future”. He added that while this channel will help to provide more consumer choice, both in terms of the number of products and the prices at which they are sold, he still estimates a fall in overall consumption, a reduction in the average price of wine and therefore a decrease in total sales values.
He added: “At this moment, everybody agrees that the lockdown has had a destructive effect, [which is] probably irreversible. The growth reduction is comparable to that of the end of World War Two.
“Under these conditions, some of the governments, especially in the countries where the impact of Covid-19 is greatest, are facing solutions similar to a post-war environment.
“European producers are seeking extraordinary measures, like distillation or equivalents, in order to maintain minimum vital subsidies given to farmers.”
He added that while commerce and economies may recover, he warned that “some permanent shifts could happen”. In particular he named the possibility that Europe and US may reduce the quantity of imported goods.
He also addressed a number of “public declarations” made by different bodies.
“Nothing in this environment of fear and grief justifies messages of health-related issues in any direction,” he said. He said unsubstantiated messages promoting the positive effects of wine consumption was “unacceptable and irresponsible”, but that the “same needs to be said” for general claims and “biased messages that follow ideological concerns about wine consumption, such as abstinence”.
OIV’s new data for 2019 found that the world vineyard area is estimated to cover 7.4 million hectares, a figure which has remained stable since 2016.
In particular, the data indicated that EU vineyards remained stable, while the surface area of vines in China (the country with the second highest vine surface area) appears to be slowing. Both the US and South America continued a downward trend, South Africa and Australia remained stable, while New Zealand grew by 1.6%.
Wine production fell last year to 259mhl, but this must be viewed against the historically high 2018 levels. It can therefore be seen as a year which brought production down to average levels. Most countries in Europe experienced a decrease compared with 2018 with the notable exceptions of Russia and the Ukraine. Production in the US, Asia and South America also decreased. South Africa noted an increase, but this again must be seen in relation to the low volume achieved in 2018. Both Australia and New Zealand also posted a decline.
World wine consumption increased by 0.1% to 244mhl, while export volume and value also rose by 1.7% (to 105.8mhl) and 0.9% (to €31.8 billion) respectively.
Strong increases in export volume increases were seen in Italy (+2.0 mhl), Spain (+1.3 mhl), Canada (+0.4 mhl) and Chile (+0.3 mhl). However, significant reductions were noted in Australia (-1.1 mhl), South Africa (-1.0 mhl), Ukraine (-0.4 mhl) and Hungary (-0.3 mhl).
2019 recorded a new export value high, after a sustained period of growth since 2010. France retained its crown as the largest exporter in terms of value, with €9.8bn in 2019. In terms of volume, Italy, Spain, and France together exported 57.1 mhl, accounting for 54% of the world market.
Finally, early indications for the harvest in the southern hemisphere suggest volumes are low, with exception of South Africa and Uruguay.
Production is expected to fall in Argentina to 11.6 mhl (-11%), in Chile to 10.5 mhl (-12%) and in Brazil to 2.0 mhl (-1%).
Uruguay is set to produce 0.65 mhl (+11%) while South Africa is expecting to make 10.2mhl, up 5% on 2019.
Australia predicts a fall to 11.5 mhl (-4%) due to drought and bushfires, while New Zealand estimates a reduction to 2.9 mhl (-2%).