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Rabobank Wine Quarterly: Covid creating favourable conditions for industry consolidation

Fuseworks Media
Fuseworks Media

The global pandemic made 2020 a challenging year for the wine industry and, while on-premise consumption is forecast to start to recover later in 2021, developments over the past year are expected to have a lasting impact on the structure of the global wine industry and what it takes for future success, according to Rabobank’s latest global Wine Quarterly report.

"After years of increasing fragmentation in the industry, we see a context forming that will create additional advantages for larger wineries and support industry consolidation," US-based Rabobank Global Strategist Beverages Stephen Rannekleiv said.

The quarter one report says changes to the global wine industry structure will be driven by several key factors.

"Small, independent restaurants are a critical sales channel for small wineries in most major markets. Sales in this channel will improve dramatically when social-distancing measures are lifted, but it will likely take years before they return to pre-pandemic levels. From a structural perspective, we believe that the prolonged recovery of the independent on-premise channel will create challenges for the small wineries that depended on them for access to the market. Larger wineries will have an advantage in the increased share of off-premise sales and will likely also gain share in the on-premise, due to the rising influence of restaurant chains," Mr Rannekleiv said.

"The improving e-commerce capabilities of larger wineries also look set to provide them with an advantage over smaller competitors. Looking forward, we anticipate small wineries will likely find innovative ways to connect with the market, however, they’ll find it difficult to compete with large wineries that are investing heavily to improve in this area and building increasingly sophisticated e-commerce teams."

Mr Rannekleiv said the recent increase in liquidity among private equity (PE) firms was another factor which could fuel wine industry consolidation.

"This could create an increase in PE funds looking to acquire and roll up wineries to attempt to create efficiencies, but Rabobank also believes PE funds could drive consolidation in the wine industry in a more indirect way," he said.

"With the number of independent restaurants struggling in the wake of the pandemic, PE funds may be well-positioned to acquire restaurants and small local chains and roll them up into larger, better-funded chains."

Sustainability updates

A new section in the quarterly report highlights several relevant sustainability initiatives taking place across the global wine industry.

Initiatives featured in the quarter 1 report include the new do-it-yourself Emissions inventory Tool which has been developed by the International Wineries for Climate Action (IWCA) working group and the sustainability report developed by Chilean winery Vina Concha y Toro which was ranked among the top three overall in the world across all categories (not just wine) at the Hallbar awards in late 2020.

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