One of the interesting parts about the wine market is that although it changes from year to year and country to country, we do have a few hundred years of very real, hard data. So there was a report from JP Morgan this morning showing that consumer spending had fallen 6.5% in the beginning of September. The logical question in this space, if that continues, what is the end result for the wine industry?
So we know that two things absolutely happen when consumer spending is falling.
- Consumers choose cheaper wine.
- That choice for cheaper wine means that winemakers will pay less for grapes and the price for bulk wine will drop.
Additionally, we’ll see a retrenching of the industry. First, some small wineries are going to go out of business. Plus, Covid is an extinction level event for restaurants and small wine shops. As small wineries close, two things tend to happen. First, those wineries are no longer taking grapes from growers, so those same growers need to find a place to buy their grapes. Since they just got burned by a small winery, they tend to look for security, so large wineries and wine conglomerates step in to buy those same grapes. In essence, small wineries close, but large wineries get better grapes, at better prices.
But, that doesn’t happen for every grape and not in every region. Two years from now, you’ll find me writing about people that make outstanding wine and only could do so, because they found some cheap grapes and a custom crush had enough space to take them in, for only a few tons. So there will be new wineries. There will, as always, continue to be larger and larger wineries.
Other than that, it’s hard to say how the industry will change as there are an entirely new set of restaurants, wine shops and wine bars to sell to.