While the wine market is pounding the table on value created by volatility and the ongoing drop in the pound, I think there are wider market implications we should consider.
Much like the insurance market, the wine market has a special historical relationship with the United Kingdom dating back thousands of years. The global wine industry has deep roots in the UK and for many major producers and regions the market is one of the most important to be in. Relatively easy to operate in with tremendous support from the trade and consumers, the UK has historically been the heart of the global wine market. The British have had a strong relationship with the wines of Europe and in particular Bordeaux. The bonded warehouse system provides a unique inventory management system by allowing for a built in provenance check through wines that are duty paid or still in bond. The bonded warehouse system has also provided a technology platform for innovation with no less than six wine exchanges evolving over the past three years. The UK market also provides unrivaled access to hard to find wines, back vintages and obscure producers and offers liquidity.
Will Brexit change the special relationship between wine, and particularly fine wine, and the UK?
Surely there will be some consolidation in the market as volatility and costs make it more challenging for merchants and distributors to manage inventory. Economic slowdown will certainly not help disposable incomes and trading up the wine curve (as desperate as one might be for a glass of wine). The fine wine market has been under tremendous pressure for years with the Bordeaux market struggling to find global demand and the right price for its en primeur wines, while at the same time testing their historical relationship with the UK trade. As the UK relationship with the market evolves, now is the time for the United States to step up and take a more active role in supporting the global wine market.
Now is the time for the United States to step up and take a more active role in supporting the global wine market.
While the US is now the largest consumer of wine in the world, the market is highly concentrated in the hands of a few large companies. The sheer size of the country means the distribution system dominates how brands come into a market and are supported and seen by the consumer. I would like to see the United States step up and support the global wine market given the strength of the dollar and the need for a wider audience and understanding of artisinal wines as well as wines at various price points. If it takes a disruption like Brexit to shift the conversation to the larger role the US can play in the global wine market then so be it. I for one expect third party marketers, niche importers and distributors and the consumer to come closer together over the next six to twelve months.
Market disruptions like Brexit apparently now happen every 8 to 10 years and as half of an American British family running a business with some UK sourcing, the last few days have been thought provoking to say the least. Having worked on Wall Street through the recession of 90-91, the tech bubble of 00-01 and the financial crisis of 2008, I have seen first hand what happens when you don’t look crisis in the eye and take it head on. These opportunities should not be missed.
I have seen first hand what happens when you don’t look crisis in the eye and take it head on.
I intend to capitalize on the opportunity to support the widening centers of wine influence as well as my wine colleagues in the UK and Europe.
Now stay calm and go have a a glass of wine….or maybe buy a few bottles in the UK you’ll be glad you did.
No wine to zero...