Bulk wine, Cabernet Sauvignon, California, France, Italy, Spain, Spirited, Spirits, Wine
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Incredible bulk: The changing nature of the international bulk wine market is creating opportunities

It’s estimated that roughly 25 percent of the world’s wine production is sold as bulk wine, a segment that’s described by one broker as the industry’s “soft underbelly” and exists for most consumers in the form of virtual brands. With the rise in popularity of bulk wine-derived, private label brands (brands developed for retailers, hotel chains, and restaurants, which sell them directly to consumers) and more producers entering the market in recent years, bulk wine has shed its low-rent image and become a hot commodity.

With a healthy 6 percent annual growth rate for the last six years—and no signs of lagging—capitalizing on the continuing growth that’s predicted for the global bulk market depends largely on where you sit in the value chain. Identifying opportunities means navigating between the supply side of producers, brokers, and contract suppliers, and the demand side that includes retailers and on-premise operators.

Short-term supply outlook

Staying one step ahead of expansions and contractions of the bulk wine market is key for short- and long-term planning. Increasingly, brokers and contract suppliers are securing long-term contracts with producers who make wine specifically destined for the bulk market. In doing so, they become the first line of defense for insulating buyers from margin-draining price fluctuations.

With significant back-to-back declines in yield for harvests in South America and the European Union (EU), global market dynamics point to higher prices for bulk wine and opportunity for growers from emerging regions.

As harvests in France and Italy fall to historic, all-time lows, and Spain (which has been the low-price leader for bulk Cabernet Sauvignon) not faring much better, overall wine production for the EU is expected to be 10 percent lower in 2017. The quality of surviving fruit, however, remains high—a compounding factor that ensures prices for open-market bulk wine will increase.

In 2016, the La Niña weather pattern brought rain and hail to South America, which saw 35 percent and 21 percent or more declines in yield, respectively, for Argentina and Chile. Until that time, Chile had been on par with Spain for thrifty Cabernet Sauvignon, a variety that’s in high demand.

At the opposite end of the spectrum, California, which commands the highest prices in the world for bulk Cabernet Sauvignon, suffered a wet spring that brought pressure from rot and a heat wave just prior to the 2017 harvest, resulting in losses too early to predict—but certain to reduce yield and quality, driving prices for bulk even higher.

Read the entire article here – Incredible Bulk

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