Rabobank: Pricing Management to Optimise Wine Marketers Profits

Pricing is becoming a greater challenge in the US market, according to Raboabnk’s Wine Quarterly Q4 report. Alongside improving sales volumes, the average price of wines sold in the US is rising, with the high-end of the market gaining share at the expense of lower priced wines. However, the US wine market is littered with once-profitable brands that were seduced by the short-term benefits of discounting and subsequently degraded their brand equity. In this increasingly challenging environment, wine companies with more sophisticated price management tools will see direct results to their bottom line.

“Improving wine sales and rising average prices are good news for the market, but what often receives less attention is the role that pricing has played in these trends.”, explains Rabobank analyst Stephen Rannekleiv.

Regional Outlook

  • US: Estimates suggest the 2014 crop will be between 5% and 10% below last year, but still larger than most crops prior to 2012. Large crops of recent years means most US wineries are carrying relatively high inventory levels and exports grew 2% by volume in the first seven months of 2014.
  • EU: European production looks set to register a significant decline in 2014, particularly in Spain and Italy. Italian sparkling wine production remains strong, with exports broadening beyond the traditional markets of Germany and Russia. Challenges in the French Champagne market were mainly the result of Chinese market challenges, while Spanish wine exports are showing signs of recovery.
  • Australia: The Australian market has seen a 7% decline in YoY harvest, with only modest exports recorded. Exports to China stabilised in volume, but fell back in value.
  • New Zealand: A new harvest record, up 29% on the prior record year, saw all major export markets recording solid growth. German exports grew strongest by over 41%.
  • Chile: YoY wine production fell 22.8% as a result of exceptionally hard frost at the early stages of the growing season. Strong inventories are meeting current demand, while total exports were down 11.2% by volume.
  • Argentina: 2014 has seen a reasonably healthy sized crop, despite an 8% production decline. Export growth was strongest in varietal (+16.2%) and sparkling wine (+23.5%), although offset by a 53.9% decline in wines without varietal specificiation. 
  • South Africa: South African exports for the last 12 months were down 19.1%. The decline likely reflects tighter inventories, following strong export in 2013, but also the increased availability of bulk wine at reasonable prices in other markets, most notably Spain.

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Koos Verheul
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