Production fell to a 62-year low
Consumption fell to a 27-year low
The average export price of wine rose to a record high
The world is crazy
"We are in the midst of five years of slowest GDP growth in 30 years", a quote from the World Bank's latest Global Economic Prospects report, has set the tone for the development of all walks of life, and wine as a consumer product for enjoyment is even more deeply felt.
At the end of last month, the International Organization of Vine and Wine (hereinafter referred to as OIV) released the latest report "The State of the World Grape and Wine Industry in 2023", which revealed a gloomy taste around the world, including bottled wine (less than 2L), sparkling wine, boxed wine, bulk wine (more than 10L), the demand and supply are decreasing, and the vineyard area and trade volume are also decreasing.
Over the past year, the world's vineyard surface area, wine production, exports and values, as well as wine consumption, have not been declining. However, the average export price of global wine rose to about 28.1 yuan per liter, a new record high and an increase of 29% compared to three years ago. It seems that inflation has risen except for wages.
For the third year in a row, the vineyard area has declined, down 0.5% in 2023 compared to the previous year, with a total area of 7.2 million hectares. Spain is still the country with the largest area under cultivation, but it is 1% less than in 2022. France, the second largest country by area, saw a decrease of 0.4 percent in vineyard area, while China in third place saw a decrease of 0.3 percent. Of the 25 major winemaking countries, 44 percent have seen a decrease in vineyard area and an increase in 24 percent. The country with the largest decrease was Portugal, followed by Chile. The largest increase in area was in Russia, followed by India.
Wine production is also declining, with global wine production (excluding pre- or fermenting must) estimated at 23.7 billion litres in 2023, the lowest since 1961 (21.4 billion litres) after four consecutive years of steady two-year averages. In the southern hemisphere in particular, after the last two large years, 2021 and 2022, production last year fell by 13.2% compared to the average output of the past five years, the lowest since 2003. Among them, the country with the largest decline in production was Greece, and the largest increase was in Moldova.
Whether it's vineyard size or wine production, it's easy to see that some niche winemaking countries are showing stronger production momentum. The vineyard area has remained within 6% of the growth and decrease, while the fluctuations in production have varied widely, such as China's 2023 production falling by 53.9% compared to the five-year average.
At the same time, both the volume and the price of global wine exports have declined. Exports fell 6.3 percent to 9.93 billion litres, the lowest since 2010. Compared to 2022, the "main culprits" of the decline in world trade volume are mainly Chile (-150 million liters), South Africa (-90 million liters), France (-80 million liters), the United States (-70 million liters), New Zealand (-70 million liters) and Argentina (-70 million liters).
Although the export value in 2023 was also lower than the previous year, the export value in 2022 was the highest value on record. Despite the decline of 4.7%, the overall value still reached about RMB279.1 billion, the second highest ever. In this way, it is reasonable to break the average export value, especially for sparkling wine and boxed wine.
World wine consumption in 2023 is expected to be 22.1 billion litres, down 2.6% compared to 2022. This would be the lowest recorded since 1996. Since 2018, global wine consumption has been declining steadily, and the reasons for this are multiple.
In 2020, the pandemic exacerbated the downward trend in wine consumption, and lockdown measures had a negative impact on major global wine markets. In 2021, the easing of restrictions in many markets, and the resumption of social gatherings and celebrations, led to a rebound in consumption in some countries. In 2022, geopolitical tensions, the conflict in Ukraine, coupled with the energy crisis, and disruptions to global supply chains, led to higher production and distribution costs. Rising wine prices have dampened overall demand. In 2023, the weakness of wine consumption will be even more pronounced by global inflation and a more complex economic environment, with consumers around the world experiencing a decline in their economic capacity.
Last year, 45% of the wine consumed globally was imported, indicating that the global wine market has become highly globalized. However, it seems that in the OIV report, a large part of the decline in global wine data is due to China.
From 2012 to 2020, China's vineyards have been one of the main drivers of global vineyard area growth, and they began to stabilize after 2020. After more than a decade of long-term and significant expansion, China's vineyard area is also not growing this year, and is expected to reach 756,000 hectares in 2023, accounting for 10.5% of the world's total. China remains the largest wine producer in Asia, but in 2023 it is 33.0% lower than the previous year.
The report specifically analyzes the significant impact of the decline in wine consumption in China on the global market. Since 2018, China's wine consumption has decreased by an average of 2 million barrels per year, especially as the pandemic has accelerated the reduction in recent years. Wine consumption in China plummeted 24.7% in 2023 to a total of 6.8 million barrels.
China's wine imports also fell for the sixth year in a row. In 2023, the import volume will be 250 million liters, a decrease of 26.1% compared with 2022, and the import value will be 8.53 billion yuan, a decrease of 21.7%. According to the latest data released by the customs, China's bottled wine imports in the first quarter of 2024 were about 32.0357 million liters, down 7.88% year-on-year, and the import value was about 1.78 billion yuan, down 11.69% year-on-year.
Comparative analysis of the top 10 importers, of which South Africa's imports fell by about a quarter at most, followed by France, Germany, Spain also fell by more than 20%, and France's imports also fell by 22%. On the contrary, Chile's imports increased by more than 20%, Argentina, the United States and New Zealand also increased, and the largest increase in imports was nearly 20% in New Zealand. The most prominent singular data is the Australian wine that has just returned to the market recently, and the import volume and import value of bottled wine increased by 913.37% and 1738.54% year-on-year respectively.
In the financial reports released by several large international wine groups, it is no longer a complete decline. The first quarter revenue of the Wine & Spirits division of the Moët Hennessy-Louis Vuitton Group (LVMH) fell by 12%, the only business decline among all divisions, from 7.099 billion euros in 2022 to 6.602 billion euros in 2023, and it is difficult to predict whether the decline will continue this year. On the other hand, Pernod Ricard's sales increased by 1% in the quarter after four consecutive quarters of decline, while the European and American markets were still declining, but the Asian market India provided a strong boost to growth.
The Liv-ex 100 index on the London International Wine Exchange, an investment barometer of the secondary market, fell at a slower pace than the previous quarter's decline of 4.2%, although it was still down 1% in the first quarter of this year. In particular, the month of March saw a slight increase of 0.4%, driven by wines from California, Tuscany and the Rhône Valley.
Many reports have focused on the second quarter of the Bordeaux en primeur, in today's market environment, the price of Bordeaux en primeur has become a high probability event, but this year's en primeur week activities are less Chinese wine merchants, perhaps for the Chinese market, the second quarter can look forward to the performance of Australian wines.