Silicon Valley Bank: The US wine industry will bound back in 2021

The US wine industry is poised to bounce back in 2021, according to a report by Rob McMillan, Founder, Silicon Valley Bank, with a consumer desire to celebrate set to help drive wine sales this year.

Silicon Valley Bank’s 20th annual review of wine industry prospects predicts that temporary gains will yield to long-term declines. The report raises doubts that this year’s expected sales momentum will carry very far into 2022.

Wineries that have established strong direct-to-consumer sales during the Covid-19 pandemic, as well as online retailers, can expect more gains in 2021, the report says, while bricks-and-mortar retailers, urban-based grocers and restaurants will take years to recover.

Restaurants will drastically need new investment to survive or to re-appear. Yet, the report predicts a quick recovery for the industry as a whole, although the relative importance of individual sales channels will shift dramatically.

Online wine retailers had major growth in sales during 2020, and that is expected to continue into 2021. This channel, and wineries’ own online efforts, “will represent 20% of an average winery’s sales within five years,” the report predicts.

McMillan stressed that wineries, in spite of the loss of tasting room sales, are not in the same financial straits as restaurants. “Wineries seldom go bankrupt,” he said, “even if they are over-leveraged. If they have financial problems, there’s always a willing buyer.”

One problem that was lurking in the US at this time last year, according to the report, was an over-supply of wine. But damage to crops from last year’s fires and smoke, as well as diminished tasting room sales, resulted in supply now being back in balance with demand.

However, one problem that has not gone away is the changing ages of wine drinkers. As Baby Boomers continue to retire, they are being replaced by younger drinkers with different agendas.

While the decrease in demand by Boomers for wine purchases at all price levels has not been as precipitous as once predicted, the decline is not being offset by younger drinkers, who often see better value in craft beers and in spirits.

“The digital world parallels the real world,” McMillan said, “and the new consumer is not one who wants to rely on advice from most current sommeliers. We need to consider the values of younger drinkers, and they value things in the wine world differently.”

Download the full report

https://www.svb.com/trends-insights/reports/wine-report

FIVE LAWS IMPACTING THE DRINKS WORLD IN 2021

Five Laws Impacting the Drinks World in 2021

http://www.spiritedbiz.com/five-laws-impacting-the-drinks-world-in-2021/

#wine #winenews #cocktails #wineeducation #hospitality #beer #Spirits #wineproduction #industrynews #cannabisdrinks #winelovers #wineeconomics #winebusiness #businessofwine #wineexporting  #winewinewine

Why has confidence in fine wine increased in 2020?

Despite the headwinds of 2020 – tariffs, Brexit uncertainty and the global pandemic – the wine market has remained robust. Today’s post examines what has changed and offers an explanation as to why we are seeing greater confidence in the market during these exceptional times.

Increased liquidity

One of the key changes this year is an increase in market liquidity, which is reflected in the rising value of bids and offers on the Liv-ex marketplace. The total exposure (total value of bids and offers) reached a new record high of £81 million last week – a £30 million increase this time last year.

In recent months, both bids and offers have been on the rise. The bid to offer ratio (i.e. the total value of bids divided by the total value of offers) currently stands at 0.6. Traditionally, a bid-offer ratio of 0.5 or higher suggests positive sentiment.

A broadening market

Another noticeable difference is that more wines than ever are attracting buying interest, taking market share from the traditional strongholds of Bordeaux and Burgundy. As the chart below shows, the wine market has undergone considerable broadening in the past decade. Bordeaux’s share has halved from its peak in 2010 when it accounted for 95.7% of secondary market trade by value. As its share declined, others shined. Burgundy was the first and main benefactor; its trade share rising from 0.6% in 2010, to a record high of 19.7% in 2019. It has dipped slightly this year to 17.4%.

This year, Italy has been the big winner. Having reached an annual average of 8.8% in 2019, Italy now accounts for 15.3% of fine wine trade. As recently highlighted, the US wine market is also developing at unprecedented rate. USA accounted for just 0.1% of trade in 2010. Year-to-date, it stands at 7%.

And then, there is the Rest of the World – an increasingly diverse category. Up from 0.8% in 2010 to 5.9% in 2020, RoW trade so far in 2020 has been led by trade for Australia (1.8%), Spain (1.4%) and Germany (1%), though wines from Argentina, Austria, Chile, and Portugal to name but a few are seeing more and more activity.

What has changed?

So, why are we seeing such increased confidence in the wine market? One well-documented explanation is that investors are seeking to put their money into safer assets in these uncertain times. Historically, fine wine has offered steady returns and low volatility.  Another explanation is that there are simply more market participants than ever before. The number of wine businesses trading on Liv-ex has increased 15% in 2020 alone. This increase in members reflects a growing trend since the Covid-19 pandemic took hold – businesses are looking for web-based solutions to grow their sales.

One such solution is trading automation. Trading automation makes it easier for merchants to list stock for sale, exposing their diverse inventory to an ever-growing marketplace. Regions that once struggled to find a secondary market have been benefitting from the shift to online sales, particularly as lockdowns have closed much of the physical retail. Through APIs, stockholders have been able to list and advertise various wines to a far greater audience, as merchants have connected their customers to this ever-broadening market. Subsequently, wine merchants and private collectors have been able to find less well-known wines from a greater range of wine regions.

Despite an early swoon as the first lockdown took place, the fine wine market would seem to be in a relatively healthy place today. As a tangible, finite asset, it offers stability in a volatile world. It also of course offers a great deal of pleasure for imbibers who are locked down and deprived of their usual wining and dining! And importantly technology, as in so many sectors, has helped merchants from across the globe, to adapt, making wine more accessible and more exciting to all with an interest in it. Combined, these three things have put the wine market on a firm footing in 2020.

Source: Liv-ex

 

 

Rob Symington on Climate Change: “We Have To Be Activists”

At an online conference this week, members of the International Wineries for Climate Action (IWCA) spoke of the need to “be activists” in order to bring about real change in the fight against carbon emissions.

Founded last year by Familia Torres and Jackson Family Wines, the IWCA is a small but growing group of wineries dedicated to ‘de-carbonizing’ the wine industry and combatting the effects of climate change.

Crucially, the group requires its members to commit to actively lowering its carbon emissions. The requirements upon joining are:

A complete end-to-end (through Scopes 1-3) Greenhouse Gas emissions inventory (which must be completed six months after joining).

At least 20% of power generated through on-site renewable energy.

Demonstrate a reduction of at least 25% in CO2 emissions for every litre of wine produced after a baseline of emissions has been established.

A commitment to reducing total emissions by 50% by 2030 and ‘climate positive’ by 2050.

Speaking at the conference, Familia Torres’ sustainability manager, Josep-Maria Ribas, explained that all the objectives are, “science based”, to allow members to work towards producing real results in how their companies and wineries operate.

Also speaking was Rob Symington of Symington Family Estates, one of the first wineries to sign up to the IWCA. He said that the big challenge when it came to meaningful change in environmental initiatives was to “avoid greenwashing”.

Not wanting to be criticized and being seen to do something had been the “usual approach” in this area for many years and many sceptics are all too eager to pounce on projects – even good ones – that lack some sort of robustness to their processes.

This is why as well as setting its own goals, Symington said that the family-run group had been, “seeking external frameworks where we’re being held accountable to things we said we would do and that’s the most effective way to avoid falling into the trap of greenwashing”.

And while Symington Family Estates, alongside Torres, Jackson and other members, are able to take control of certain emission hotspots in the vineyards and winery more directly – producing their own energy, cutting energy use, adapting their vineyards to the changing climate, etc – there’s also a strong case for ‘activism’.

As Symington continued: “Over 85% of our emissions are beyond our control – they’re produced by the brandy makers we buy spirit from, glassmakers and transportation and so on,” but, he continued, customers at all points are able to “act as lobbyists to change those emissions from our partners”, and “put positive pressure throughout the chain”.

He added that it sometimes seemed at odd for very traditional wineries to act like activists but countered it was also important to, “stick your neck out and sign up to things like the IWCA. We joined to hold our feet to the fire and to justify the steps we need to take”.

Having goals and being held accountable is vital if not only the structural systems are going to change but the culture behind them that enables those structural systems are going to change too.

But given the challenges and threat posed to vineyards and longstanding family companies by climate change, there is also a (perfectly) legitimate form of “enlightened self-interest” in being a champion for the cause, as Symington admitted.

The IWCA is currently comprised of nine members across the Americas, Europe and Antipodes, with another two apparently close to signing up. Membership is not restricted by size and Ribas added it was currently compiling an emissions calculator that would help smaller wineries be able to join and identify where to focus their efforts to meet the entry requirements without the need to hire expensive consultants.

IWCA website – https://www.iwcawine.org/

Sources:  Drinks Business and IWCA

Wine Review: Louis Pommery NV Brut Sparkling – California

Pommery is closely associated with Champagne; a few years ago, Pommery expanded to the USA under “Louis Pommery”, using California grapes to make a new world style sparkling wine.

After eight years of R & D, Cellar Director, and oenological DevelopmentManager Thierry Gasco refined a revolutionary method to craft wine with encapsulated yeast, which eliminates all deposits from the bottle, gives the wine an unprecedented degree of clarity and brilliance.

Using the methode champenoise principle this wine is made with 96% chardonnay and 4% pinot noir grapes.

Louis Pommery is an ode to the maison’s iconic style, evoking vivacity, freshness and finesse.

Tasting Notes:

Beautiful straw yellow colour with a lively effervescence; soft aromas of toasted baguette, fresh flowers with notes of green apples which flow through to the palate; slight citrusy note; the finish is long and toasty.

A wonderful and well-priced offering.

92 points

Vintages Release Date: September 5, 2020 –  # 15894

Bottle Size: 750 mL bottle

Alcohol/Vol:12.5%

Made In: California, USA

By: Vranken Pommery America

Sugar Content:10 g/L

Style: Medium body

Varietal: Chardonnay Blend

Redefining California cool and set to become a game-changer in the sparkling wine category!

Liz Palmer:  Review October 15 2020