Supply Chain Research

Global wine production in 2017 may drop to a level not seen since 1963, according to industry association OIV data. That follows a poor harvest in Europe due to poor weather conditions that slashed 15% from the grape have after a mixture of frost and drought damage. Production in the U.S. is expected to be unchanged vs. a year earlier, though that includes estimates made before the California wildfires became established. Latin America meanwhile is expected to see a rebound after El Nino.

U.S. wine imports have yet to reflect the new production reality. Panjiva data shows that imports from the big five European countries having risen 14.5% in the past three months to August 31 on a year earlier, while “new world” shipments increased by only 0.8%. That partly reflects the slow-cycle nature of the supply chain in the wine industry, as well as potential stockpiling by American buyers.

Chart segments U.S. wine imports by country of origin. Source: Panjiva

The strength in demand for French wines relative to those from Italy can also be seen among the major shippers. Giorgio Gori, the largest supplier in shipment terms, has seen a 6.0% drop in its U.S. seaborne imports in the third quarter on a year earlier from its predominantly Italian portfolio. French-focussed JF Hillebrand, the second largest supplier, saw volumes expand by 7.4% over the same period.

Another supplier that saw a downturn was Freixenet, which experienced a 9.6% slide in volumes and may be exposed to unrest in the Spanish region of Catalonia as outlined in Panjiva research of October 11.

Chart segments U.S. wine imports by shipper in the period to September 30. Source: Panjiva

The U.S. can ill-afford the California wildfires’ impact on exports, with 27 wineries damaged according to local press reports. Total exports already fell 8.8% in the quarter to August 31 including an 18.3% drop in the month of August specifically.

That was largely the result of a 21.7% drop in shipments to the U.K. related to the stronger dollar vs. the pound. There was also a 13.1% slide in sales to China likely linked to the ongoing anti-extravagance push by the government.

Chart segments U.S. wine exports by destination market. Source: Panjiva

The $1.43 billion of annual exports already lagged the $5.75 billion of imports for the U.S., while the “wine deficit” in August set a new one month high of $429 million.

Chart shows balance of U.S. exports and imports (positive number means imports exceed exports. Dotted line shows monthly figures, solid line the 12 month average. Source: Panjiva