Monday, February 13, 2017

At Unified: Wine Economist Mike Veseth on 2017 Global Wine Trends - Australia/China Trade, Brexit Top the List

"The overarching theme of my talk today is change," said wine economist Mike Veseth, in kicking off his talk, the first of five presentations at the State of the Industry panel at Unified Wine and Grape Symposium in Sacramento.

"China's surging ahead in bottled wine," he said, and the Asian nation is consuming so much Australian wine that it has become Australia's number one export market, a title formerly held by the U.S. (Think Yellowtail.)

Another major change? Brexit. "Brexit could be a train wreck. And there is no organized path forward," he said. "The United Kingdom is the second largest import market in the world (after the United States which is #1)." China is #3.

"The UK is #2 in bulk wine after Germany and the UK is the #1 market for exporters," Veseth stated. (The U.S. is less attractive to exporters due to the lack of uniformity in wine laws in 50 different states, he said).

"Brexit is like throwing a huge boulder into a pond," he continued. "Estimates are that the U.K. will have to hire something like 30,000 bureaucrats to replace all the functions performed by the EU."

But luckily, U.S. wine producers will not suffer hugely from Brexit, Veseth said. EU producers will be hit much harder, he stated, displaying a chart showing the biggest losers in terms of U.K. wine imports - France, Italy, Spain, Chile, New Zealand, Australia and Germany. The U.S. ranks 8th on the list.

Champagne sales have already declined dramatically in the U.K.

In addition, Brexit has already had a dramatic effect on the value of the pound, which fell to its lowest point in more than 30 years, thereby increasing the price of wine in the U.K.

Showing his slide titled "Rising UK Prices, Shrinking Margins," Veseth questioned whether Brexit would lead the U.K. to increase wine import taxes.

Veseth also warned that pressures on the U.S. market could come from wine producers who lose sales due to Brexit, leading to increased competition for space on U.S. wine shelves.

Veseth also cautioned that there could be issues for U.S. producers if the Trump administration increases trade barriers.

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