Slowed production and rebounding demand have enabled wine producers to buoy prices
Los Angeles, CA (PRWEB) December 23, 2012
Oversupply conditions have characterized the $102.2-billion Global Wine Manufacturing industry during the past five years due in part to consumer spending's first decline in 30 years. “Prior to the Great Recession, high production volumes resulted in a global glut of wine,” says IBISWorld industry analyst Agata Kaczanowska. “As a result, wine prices dropped and industry profitability declined.” In response, wine producers began manufacturing less wine; total volume slid during the past five years at an estimated 1.8% annualized rate to 248.2 million hectoliters in 2012. Much of this production decline occurred in Europe because the EU offered incentives for vintners to reduce winery acreage. This reduction in supply and rebounding demand have enabled wine producers to buoy prices, leveling the mismatched market and resulting in flat industry revenue since 2007.
Although the majority of wineries are small local operations, weakening consumption in traditional wine-growing regions is leading to a shift in ownership. Consequently, “many wine regions are undergoing consolidation in the face of heightening regional competition,” says Kaczanowska, “especially because wine consumption in emerging markets, such as in China and India, is growing quickly.” Due to consolidation, the number of wine makers decreased at a 2.2% five-year annualized rate to 21,183 in 2012. On top of that, some vineyards closed completely or halted production in underperforming locations, which depressed the number of industry establishments. Vineyard closures also contributed to the aforementioned decrease in wine production volume.
IBISWorld expects that the number of industry participants will diminish during the next five years due to consolidation. Global Wine Manufacturing industry concentration will increase as major brands merge or acquire smaller producers. Small companies that rely on estate-produced wines of limited availability and with inconsistent taste will lose or struggle to gain key retail or wholesale contracts. As wine continues to sell to supermarkets and other wholesale clubs, a wine maker's bargaining power will diminish (this process started some years ago), and independent producers will lose shelf space to mass-produced, unlimited availability, consistent-tasting and heavily advertised brand wines. Changes to the EU Common Market Organization for wine will also stimulate some consolidation as certain assistance is withdrawn and the industry becomes more market oriented.
Lower production volumes will enable vintners to raise product prices and drive revenue growth. An improving global economic climate and rising wine consumption in Asia and other emerging markets are projected to lead to stronger sales of higher-value, premium wines. Due to its large consumer base, China's presence in the industry is projected to explode during the next five years as domestic vintners vie to compete with importers. For more information, visit IBISWorld’s Global Wine Manufacturing industry report page.
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IBISWorld industry Report Key Topics
The industry is engaged in growing grapes and then manufacturing wine and brandies out of them, manufacturing wine and brandies from grapes and other fruits grown elsewhere, and blending wines.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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