The situation on the wine market is not optimistic. There are many indications that the industry is facing a difficult period, even in the long term.
Current economic situation (09'2023),
It is no longer just about the current economic situation, much higher inflation than slowing down the development of many countries, which is increasingly called a recession. In many European countries, we are directly dealing with stagflation. The reason for this economic situation is the negative demand constraint resulting from a sharp increase in prices and the supply shock that follows it, which results both from the increase in prices (which was significantly influenced by energy prices and the economic situation in many countries) and, as a consequence, from the reduction of production. These mechanisms affect more those industries that offer goods that are not the first basic need of the buyer, which is including the wine industry.
Demographic and cultural changes
In addition to these negative trends resulting from periodic economic trends, there is another much more serious challenge for the industry on the event horizon. Europe is changing demographically, and with this evolution, researchers are observing increasingly clear changes in consumer behaviour. Reducing wine consumption in many countries is also part of this. This is a more long-term trend that may have a more serious impact on production and changes in individual markets.
Drop in consumption, on European “wine drinking countries”, for the ongoing marketing year are estimated at: 7% in Italy, 10% in Spain, 15% in France, 22% in Germany, 34% in Portugal.
Actions, although painful, must be taken
The government of France, which is the third largest wine-producing country in the world, has already reacted to these processes.
French Agriculture Minister Marc Fesneau has announced that the government has decided to destroy some of the wines that were pressed in 2022. More than 300 million liters of wine will be destroyed. As a compensation, he provided for this purpose approx. EUR 216 million. What is more in France 9.500 hectares of vineyards will be cleared.
In such a complex situation resulting from the decline in consumption and overproduction of wines, producers should take care to find new solutions that will result in building new competitive advantages.
A benchmark from many businesses shows that those who want to be market leaders have to do things differently to achieve a purpose in different way.
It is best in such situations to refer to unquestionable scientific authorities, e.g. Prof. M.E. Porter, whose value chain is a great example of how to build such competitive advantages.
- Build a competitive advantage on the value that the buyer is willing to pay for,
- Your activities in the value chain should fit together and reinforce each other
- Build a distinctive value chain tailored to the expectations of your customers, creating additional value for them
- Offer a unique value proposition compared to other market players.
How to increase your position on the market?
It seems that the key to increasing the position on the market may be quality and customer service focused on a competitive price. In the case of wines, where the guarantee of repurchase is its taste, its availability and prevalence still play a decisive role.
A wide variety of choices allows to satisfy different tastes, but also increases the multitude of assortments which builds complexity with its supply chains
It is highly difficult to deliver from other continents goods and maintain the availability of all products in all distribution networks which are currently concentrate in each country separately.
This means that each of the distributors must maintain stock separately, and they usually focus only on selected products depending on the distribution channel they serve.
How to break the pattern?
An alternative to such a solution may be to concentrate stock, especially for premium goods, in one place for macro-region and supply the network of distributors from this place. This will make it possible to increase the efficiency and availability of service on the entire market (e.g. European for producers from the new world) and to increase the interest of distributors in those groups of goods that, due to their most frequent focus on mass sales, are not in their sales target.
The Wine-EuroHub solution offered by Partner Logistic gives such an opportunity to implement a new look at building a competitive advantage. If you want to know more, please contact us.