Wine exports recover but greater UK pricing pressure looms

By Guy Montague-Jones

- Last updated on GMT

Related tags: International trade, Rabobank

Export volumes of wine have recovered well from the lows of early 2009 but suppliers are under pressure from lower margins in the UK market, according to a new Rabobank report.

The quarterly wine report found that export volumes for most major supplying countries in the first half of 2010 are up significantly on the previous year. Much of this improvement is down to the major declines reported last year.

Recovery

For example, exports in the first half of the year from Burgundy in France are up 13 per cent compared to 2009 but this is still16 per cent below the equivalent figure from 2008.

So there is still some way to go before the market returns to pre-recession levels. In addition, wine exporters face the additional headache of increased pricing pressure, especially in the UK.

“As the world’s largest market for imported wines, the UK has seen supplier profitability deteriorate for the last several years, and it appears set to intensify,”​ said Stephen Rannekleiv, executive director at Rabobank Food & Agribusiness Research and Advisory.

UK squeeze

In its new report on the wine market, Rabobank estimates that the return on a bottle of wine retailing at £4 in the UK has fallen by 46 per cent from 2002 to 2010 due to increases in excise taxes. The fall in the value of the pound against the euro has also put the squeeze on for many EU suppliers.

With plans for increases in value-added taxes and major cuts in public sector employment (500,000 jobs to go over four years), Rabobank said the negative pricing trend looks set to continue.

The bank said this could have important implications for the global wine sector, not only because of the size of the UK market but because it has traditionally offered some of the highest average unit prices. Suppliers of high value wines may find it difficult to make up for declines in the UK market with higher sales in emerging markets like China.

Related topics: Markets, Beer, Wine, Spirits, Cider

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