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Price Hikes Likely For Imported Wine Amid E.U. Supply Squeeze

December 14, 2012

With European Union wine production expected to fall 10% to 144 million hectoliters this year, producers are warning that price hikes on exports to the U.S. are likely in 2013, especially at the lowest and highest ends of the market.

“France, Italy and Spain are all in similar situations. With the very short harvest—down 20% or 25% in some places—lower-end export wines will have to go up in price,” says Felipe Gonzalez-Gordon, president of Gonzalez-Byass USA, whose portfolio includes Rioja label Beronia and the Viñas del Vero label from Somontano. “That scenario will close the gap between the lower end and the premium segment.”

Luca Sabatini, export director for Italy’s Cantina di Soave, says the light harvest is already impacting prices on lower-end wines across his region. “Prices of quality bulk-wines have risen by about 20% from last year for DOC wines like Soave and Valpolicella, as well as for IGT Pinot Grigio and Chardonnay—and over 30% for other IGT wines like Merlot and VDT wines,” he says.

Portugal also has seen a smaller harvest this year—down 10%-20%, depending on the varietal. “The good news is that while production is low, quality held up very well,” says João Roquette, CEO of Alentejo-based producer Esporão, which sells 50,000 cases annually in the U.S. (up 11% last year). Esporão will increase prices by 3%-5% across much of its portfolio next year, but Roquette says the move isn’t only a reaction to supply issues. “We haven’t raised prices since 2006, so it’s about time,” he says, adding that while some pricing inevitably will rise as production drops, the better course is to align quality to value and promote price stability long-term.

Lower quantity and higher quality is also the theme in France. In Burgundy, the Bureau Interprofessionnel des Vins de Bourgogne (BIVB) has already warned that pricing will rise on the 2012 vintage, whose harvest was down by as much as 40%. The BIVB added that Burgundy’s rising popularity in markets like Japan and the U.S. (where sales were up 10% in 2011) is also a significant factor.

Elsewhere in France, with as much as 30% of Champagne’s grape crop destroyed by heavy rains and mildew, producers are likely to follow this year’s mid-single-digit price increases with further hikes in 2013.

The Languedoc also saw a “historically low harvest,” according to Gérard Bertrand, whose namesake company saw volumes down 25%-30% in the Corbieres and La Clape areas. Bertrand says that while Languedoc varietal wines will see small price increases, the region’s strong 2011 harvest will help blunt the effects of 2012’s short crop, especially on red wines. Still, because the shortage extends throughout Europe’s top wine producing nations, Bertrand believes conditions point to “quite a tense market worldwide over the next two years.”

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