Spain: Coronavirus and more threats: wine sector challenges in 2020

It is not yet possible to have figures and statistics on what is happening in the midst of a global pandemic. We will have to wait a little longer. In spite of this, the Spanish Wine Market Observatory (OeMv) assesses the challenges and possible threats that the wine sector will have to face.

The current crisis generated by the coronavirus is part of a global trade where the volume has been very stable for several years over 104 million hectoliters, but the value in euros has been rising steadily and already exceeds 31,700 million euros in 2019. Thus the OeMv highlights that not much more wine is sold, but at better average prices (above 3 euros/liter in 2018 and 2019).

The effects of the coronavirus are added to other commercial problems that, with different intensity, are harming the wine sector and other products, according to the OeMv and are broken down below.

1. Brexit

The Brexit, whose worse effects, due to the pound depreciation, took place after the referendum, and whose effect on wine trade, especially in Europe, will depend on how the trade negotiations end at the end of this year.

If there is a trade agreement, there will be no major problems for the wine sector, even if competition with wines from other origins increases. If there is no trade agreement, facilitating transactions, administration and logistics, as well as recognition of winemaking techniques and labelling details, it could be somewhat more damaging; but always something, that companies can adapt to.

2. US tariffs on wine (and other products)

The tariffs imposed by the Trump Administration are particularly worrying for Spanish still (non-sparkling and non-generous) wines. They are already suffering in November and December exports, despite the fact that it was not bad at the 2019 close. French wines are suffering more than the Spanish. The fact that they are being imposed on some countries (France, Germany, the UK and Spain) and not on others (Italy, Portugal and others) is particularly harmful and may affect Spanish exports in such an important market as the US.

3. China, a slowing down market and damaged by the pandemic

China had already been slowing down its imports over the last two years. The coronavirus has already had terrible economic consequences.

A significant proportion of consumption in the catering industry has been lost, especially during the Chinese New Year celebration. And a very important part of these sales will not be recovered during the second part of the year. China imports wine worth 2,180 million euros and 613 million liters, of which Spain sells 10% of the value and 6% of the volume.

The loss of 18-20% of this market in 2020 (depending largely on how the rest of the year goes) would mean a total drop in the Chinese market of around 400 million euros and some 110 million liters, of which Spain could account for some 40 million euros.

4. Potential slowdown in the Japanese market

The OeMv takes note of the announcement of a potential slowdown in the Japanese market, which is one of the best performing ones in 2019.

5. The new Russian wine law

There is a new wine law in Russia, effective from June 2020, which could negatively affect the sales of bulk wines worldwide and especially Spanish wines, which are the most imported in that market.

Too early to draw any conclusions

The outlook for world wine trade in 2020 is not too promising, the OeMv explains: although it is still too early to draw conclusions, it seems clear that the commercial consequences generated by the coronavirus crisis could be catastrophic, as the transactions carried out during the first months of the year already show.

In the words of the OeMv report: "how much the combined effect of all these factors may add up to in the world wine trade in 2020 is something that cannot be known, but we do know that it is affecting sales, orders and logistics, with less transport between countries. And we have yet to see what the expansion of these effects may be in other markets such as the North American one".

They add, "Everything will depend to a great extent on the duration of the crisis and the possibilities of having a notably better second half of the year. There are effects that will not be able to be recovered, but perhaps the whole problem will be seen in November and December with different eyes".

Italy overtakes Spain as the world's leading wine exporter in 2019

After five years of Spanish leadership, Italy exported 2,162 million liters of wine during 2019 (+201 million), compared to 2,154 million in Spain (+123 million), although both grew more than the world average. France is the leading seller in value with 9,795 million euros.

World wine exports reached 10,357 million liters (+1.5%) and 31,771 million euros (+0.7%) in 2019, at an average price of 3.07 euros/liter (-2 cents). It has beaten a historical maximum in value, with volume still far from that exported in 2017.

The value of sparkling and bottled wines is increasing, with a drop in bag-in-box and especially in bulk.

Australia and South Africa, which are losing more liters, in a great year for New Zealand, the supplier that has grown proportionally more since 2000.

Source: tecnovino.com