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Wine predictions for 2009  

This time last year I posted some wine predictions for 2008; this year I'm making some more. It's just a bit of fun - educated guesswork, really. After all, if I had any real predictive ability then I'd be considerably richer than I am. And there's also that wonderful aspect of timing - even a year ago, we could see a recession coming, but when the big crunch came, we were still surprised by its scale and timing. 

1. The real economic pain is yet to come
The current economic crisis is scary, but it hasn’t really bitten yet. Many experts suspect that the real pain will kick in third-quarter 2009. It’s going to be very ugly and have serious repercussions for the wine industry as people rein in their non-essential spending.

2. Selling wine below cost will end
One of the controversies of 2008 has been the practice by some supermarkets of selling wine below cost price. Usually, this involves popular brands, which are used as a loss leader to get people into the stores. It damages these brands significantly, because once people have bought a wine for a certain price, they are reluctant to pay more, and they no longer see it as exclusive or aspirational. It also damages sales of wines that aren’t being sold in this way. It’s an incredible abuse of the retailers’ current strength of position to trash their suppliers brands like this. It changes the relationship from one of partnership to one of abuse, although the retailers justify it by saying that they are looking after their customers’ interests. My hope is that this will end in 2009 as retailers come to their senses, or are brought their by government intervention (see below).

3. The strength of the Euro will change the face of the UK marketplace
The wine merchants are selling now was bought when the pound was stronger. The strength of the Euro will put huge pressure on prices of wine from countries such as Italy, France, Spain, Portugal and Germany. At the most price-sensitive end of the scale consumers aren’t terribly loyal to country and so they will switch allegiance to whoever is delivering good tasting wine at the lowest price.

4. Print magazines will suffer; online wine writing will continue to thrive
Print magazines rely on advertising for their revenue, and usually they have high costs so they need a lot of advertising to cover these and turn a profit. In the last few years consumers have been able to get the sort of information that previously they’ve had to pay for on the web – and in many instances the quality of material on the web has exceeded that of the sort of repetitive, stale information in many consumer magazines. The magazines have relied on a vertical transfer of information from unaccountable experts to the consumers; on the web, information transfer is more horizontal and writers are engaged in a conversation in which they are held accountable for what they say. Potential advertisers may start to see that there are better ways to spend their money than expensive print adverts in wine magazines that aren’t selling all that many copies.

5. Neo-prohibitionism has gathered momentum, and unless challenged will become a major threat to the wine industry
The UK government clearly sees alcohol as an evil in the same vein as tobacco. Alcohol is to be tolerated, but only as a scourge on society that cannot currently be avoided. So the policy is to clamp down on drinking – not just antisocial binge drinking, but people enjoying a bottle of wine with their meal each night in their own homes. This domestic consumption is clearly unacceptable because it means that we’re exceeding the (absurdly low) recommended maximum intake levels that equate to just over two bottles of wine each per week. But who is questioning these limits, and the lack of scientific evidence behind them? And who is pointing out the weight of evidence suggesting the protective effects of drinking against a number of diseases that are well documented in the medical literature? The answer to abuse is not disuse, but correct use.

Could it be that the government will intervene in more extreme ways than just by raising duty? We might see an end to price promotions for wine, or even a minimum selling price for a bottle of wine (or 75 cl equivalent) of £4 or £5. Studies show that increasing the price of alcohol makes people drink less and thus reduces deaths from alcohol-related causes. Such a measure would change the shape of the wine trade significantly, and it would also stop big retailers using alcohol promotions to win customers.

6. 2009 is South Africa’s big opportunity: will they take the chance?
Could this be the year where South African wine makes major inroads into the UK marketplace? The exchange rate is hugely favourable. If South Africa can make branded wines that taste good, at a good price, then they could seize significant ground from the competition.

7. Finding a route to market will remain the major challenge for producers: and solving this should be the key focus of those who want to succeed
There’s a mismatch between the shape of the production side of the industry and the retail side. This leaves smaller producers without a real route to market, unless they crack the super-premium bracket. Too many small/medium sized producers are finding it hard to connect with customers because of this scale imbalance. The power is currently in the hands of the major retailers and the producers are operating from a position of weakness. The message to producers: concentrate on your route to market.

8. Could this be the year of the co-op?
Co-ops are out of fashion and unloved, because they’ve typically made bad cheap wine that no-one wants. But with good consultancy advice in terms of both winemaking and marketing, and a concerted drive to raise the standards of the grapes received from growers, then they could be highly successful if they are able to produce good quality inexpensive brands that meet consumers’ expectations. This is because with their volumes, they can work well with the modern retail landscape. This is already happening with some co-ops, and there’s potential for it to spread.

9. But the good news is that 2009 will see some real innovation in the wine industry – specifically, lower alcohol wines that taste good, and a fully recyclable triple-layer PET bottle/label/closure package.
The wine industry has traditionally been weak in terms of innovation. But two key innovations that could make waves in 2009 are lower alcohol wines that taste good because they are made from fully ripe grapes, and new packaging that could end the dominance of glass, with real green credentials. Watch this space…

Date posted 02/01/09 - see also: my wine predictions for 2008

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