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Get ready to pay more for wine, as global production hits 60-year low

MarketWatch logo MarketWatch 4/25/2018 Mike Murphy
a hand holding a glass of wine: It may be time to say adieu to low wine prices.© Provided by Dow Jones & Company, Inc. It may be time to say adieu to low wine prices.

The price of wine is likely to go up, as global wine production crashed to a 60-year low in 2017.

The Paris-based International Organization of Vine and Wine said Tuesday that the world’s wine production fell to 250 million hectoliters last year, down 8.6% from 2016, and the lowest level since 1957. Global wine consumption, on the other hand, rose slightly to 243 million hectoliters. A hectoliter is 100 liters, or about 133 standard bottles of wine.

The group blamed the production slump on poor weather conditions in Europe in 2017, including a late-winter frost that hampered the harvest. European wine production dropped 15% overall in 2017, the group said. Spain’s wine production fell 20% last year, while France’s dropped 19% and Italy’s declined 17%, according to Reuters calculations.

Europe makes up about 65% of global wine production.

Other regions fared better. U.S. wine production was largely stable, despite last year’s wildfires in California, which ended up doing less damage to vineyards than originally feared. Australian production also remained about even, while South American harvests largely recovered from 2016’s disastrous El Niño and South African output gained despite a lingering drought.

Experts said consumers will really feel the pinch with cheaper bottles. “The wine companies that are targeting very low prices ... will be hit the worst, because their margins are very low,” Stephen Rannekleiv, a global beverages strategist at Rabobank, told CNN. “When prices go up, it puts a lot of strain on them.”

Mid-priced bottles will likely rise as well. “There will be, in some cases, lower quality wines getting blended into slightly higher value products, so everyone kind of goes down a tier in quality,” Rannekleiv told CNN.

Shares of wine, beer and spirits producer Constellation Brands Inc. (STZ)  fell slightly Tuesday.


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