In its newly released report, ‘The Incredible Bulk: the Rise in Global Bulk Wine Trade’, financial services provider Rabobank noted that bulk wine exports had soared from 558.5m litres to 1.237bn litres over the past decade.
Examining factors underpinning this growth, the firm attributed strong bulk growth to, “the democratisation, commoditisation, innovation, and over-supply of wine, along with currency rates and changing trade flows, which have changed both the conventional supply chain model and the distribution of value along that chain.”
In its report, Rabobank noted that the biggest suppliers of bulk wine were Australia and Chile, while principal demand came from the UK, Germany, the US and China.
Stephen Rannekleiv, executive director of Food & AgriBusiness Research Advisory at Rabobank, told BeverageDaily.com that plentiful supplies had fuelled bulk wine growth.
Branded margins under threat
“Bulk wine is allowing retailers to create private label programmes that can put pressure on pricing for branded products and cuts into margins” Rannekleiv said.
Moreover, by exporting bulk wine and bottling it in the country of sale, big brands are cutting their costs by half, if not more, he added.
For instance, Rannekleiv said, Chilean producers now sell bottled wine at prices varying from $10 to $20 a case, but when switching over to bulk wine exports and bottling locally, it can afford to sell cases at a mere $1.50 to $3 each.
“Those numbers make sense when you have enough volume to justify it. A source told us that you need 15,000 cases for this to make sense” Rannekleiv added.
Not only was it cost effective, it also strengthened the brand’s green credentials, as bulk transport allowed it to reduce its carbon footprint, he said.
Discussing the current state of the bulk wine market, Rannekleiv said it was being affected by two conflicting factors.
“One is that inventories have been tighter that they’ve been in the past. There is not that extra supply floating around that just needs to find a home at any price” he said.
“But on the other hand, the global consumer is probably in the tightest position he’s been in for a long time, and that’s putting pressure on pricing” Rannekleiv added.
Can bottled wine beat bulk?
Given the rise in bulk wine exports, would wine despatched in bottles be able to compete in future?
“It depends on the price segment. I think it is becoming very hard to ship wine from abroad in bottles when we are discussing low price wine” Rannekleiv said.
As for the quality of bulk wine itself, Rannekleiv said there were arguments ongoing in the industry.
Some people argued that shipping wine in bulk had an adverse effect on quality, while others said the quality wasn’t affected, he explained, but there was not sufficient evidence yet to support either standpoint.
Rabobank forecasts that bulk wine will grow still further in forthcoming months, and Rannekleiv said: “Although the supply situation is certainly tightening up, I think there is enough there to convince us that companies should continue to grow, although perhaps the growth rate will start to slow pretty soon.”