Demand and supply analysis of global wine wars

A continued tightening of wine supply could see price rises. Brooke Neindorf Does an overall shortage of wine lead to empty shelves?

Demand and supply analysis of global wine wars

Risk and uncertainty were my forecast for Bernie, Donald, Zika, Brexit. Anything can happen, I told the audience, although I ended with a Frank Sinatra theme. Four speakers in a session on wine industry investment were asked about their expectations for All four said that the prospects for the U.

We are halfway through the year and the cautious optimism expressed earlier seems justified. The June jobs report offered evidence of further recovery. But confidence in economic growth seems very fragile and the Federal Reserve has hesitated repeatedly to raise key interest rates. One worrisome indicator is the yield curve, which tracks the difference between short- and long-term interest rates.

Demand and supply analysis of global wine wars

The yield curve has become unusually flat recently, a pattern that is sometimes associated with economic slowdowns. Interest rates around the world are so low and sometimes even negative that policy makers are worried.

What if something goes wrong? How can we push interest rates even lower? Would it make any difference if we did? With fiscal policy handcuffed by political chaos in many countries and monetary policy seemingly out of ammunition, there is concern that a crisis in one country could easily spread to others.

Off-premise wine sales increased by a rate of just 1. Brexit is at the top of most lists.

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What does Brexit mean to the wine business? The answer is that it is too soon to be sure, but here is a quick guide to what to look out for and the impact on wine.

Since British tax policy has been a significant burden on wine sales there in recent years, the uncertainty about the who will lead and where she Theresa May will take over as Prime Minister in the next day or so will want to go is significant for wine.

Sturgeon has taken strong anti-alcohol positions, which could affect wine policy, although this is way down the list of things to worry about if Scotland breaks away and the U. The Pound has tumbled dramatically as the graph above show and some observers believe that it will continue its descent although this is far from certain.

The falling Pound makes imports from the U. Australia, South Africa and of course European wine producers will take a bigger hit. The problem is compounded by the fact that supermarkets are a critical sales vector in the U. Supermarket margins are likely to be squeezed as they attempt to pass on higher costs to consumers with uncertain economic prospects.

That is an incentive to develop alternative markets … such as the U. The margin wars are just getting started.

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So the wine news is not very good in the U. Bad news for the British who drink wine and bad news for others including U.

The Vultures Circle But the biggest impacts are likely to be the long-term structural changes that will be required if and when Britain or England or whoever is left leaves the European Union and the single market.

It is too soon to know how this will change for wine, but it is instructive to watch other sectors to get a sense of the dynamic.

Demand and supply analysis of global wine wars

There is already concern about disinvestment in British steel and automobile manufacturing, for example, if resources are shifted into other E.Available both as Web pages (click the title) and, in a few cases) as PDF files for easier printing (click PDF).

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Bert Dohmen, founder of Dohmen Capital Research, is known as a Contrarian and leader in the investment research business. Read his latest views here. SWOT ANALYSIS Opportunity ThreatThe capacity and regulation Emerging sign of saturation infreedom to plant new varieties several major grupobittia.com new vineyards and couldrespond Declining demand at home and a loss of share, Shifting demand of mature market Regulation, restriction from government Global oversupply wine production Change in wine.

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