To mark its first one hundred years, the OIV released a report last week on 100 years of evolution of the global wine and vine sector. The report’s perspective differs from most studies in that it is both global and long-term. I have selected three figures from the report that I think are useful to consider as the new wine year begins and we think about where wine is headed in the future.
#1 The Rise of the International Wine Trade
Wine was mainly multi-local (not really global) 100 years ago. Most French wine was sold in France. Ditto Spain, Italy, and most other places. Only about 10% of wine crossed a national border on its way from producer to consumer.
Now, as the figure above shows, international trade is a much more important factor in wine. Trade is even more significant than the figure above suggests because these are just shipments of wine. The international movements of equipment and supplies, workers (including flying winemakers and flying interns), and technology add to the global web that is wine today.
The surge in international wine trade started in the 1970s and was accelerated by the combined effects of trade agreements that removed political barriers to wine shipments, transportation technology improvements that made shipping more efficient, and domestic retail liberalization in many markets that stimulated demand for imported wine.
But, as you will see in the next section, there was another and perhaps more important reason for the rise of the international wine trade. As domestic wine consumption fell in many countries, exports became a crucial business strategy. Soon big wine countries like Spain were exporting more than they sold at home.
#2 1984 and All That
Global wine consumption increased starting in the 1950s powered by Europe’s rising post-war economies. But global consumption, measured by volume not value, peaked about 40 years ago. European wine sales fell and were not entirely offset by rising consumption in North America and elsewhere.
There are a number of factors that contributed to the slump in European wine sales. One of them is surely an economic transition where consumers substituted quality for quality as their economic security improved. Health issues may also have become more important. The levels of per capita wine consumption in some European regions 100 years ago were unsustainable by today’s standards.
Rising ROW (rest-of-world) wine consumption offset European decline, but only for a time.
#3 Supply-Side Jitters
It is hard to know exactly what is going on with wine production in real time because cyclical and structural changes tend to happen at the same time, frequently punctuated by wild card events such as freak weather. Looking back, however, this accounts for the jittery pattern seen in the figure above.
It is clear that global wine production by volume actually peaked in 1979. (Global area given to vineyards for all purposes peaked in 1978.) Wine production has its ups and downs, but the overall trend is to lower quantities of wine, albeit at rising average prices. The decrease was especially significant in Europe. Rising production elsewhere is not enough to make up the difference.
Rise and Fall
The OIV report makes fascinating reading with more detail than I have room for here (click here to view the pdf of the presentation).
The overall pattern of rise and fall invites the obvious questions: What about the future? Is wine headed toward further decline? Or is an up-swing around the corner?
The OIV report’s conclusions balance optimisism with realism:
Change is a constant
The wine sector is highly resilient
Science and learning make a huge difference
Production and consumption are in constant evolution
The impacts of climate change are accumulating
International trade is integral to the sector
The wine sector is a long-term sector
It is hard to sum up 100 years of wine industry history in a few words, but I think the OIV has done a good job. Wine and the wine business have always changed and evolved and always will do so. A long-term perspective is needed to successfully navigate the shifting currents.
Maybe this isn’t the detailed recipe for future success that you were hoping to find, but it seems like good advice to me.