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Global wine industry must reassess supply chain assumptions and strategies

Rabobank global beverages strategist Stephen Rannekleiv. Image courtesy Rabobank

The global wine sector is facing significant disruptions in different links of the supply chain and there are increasing signs some of these changes are structural and will require strategic responses, according to a new report by agribusiness banking specialist Rabobank.

For wine producers in Australia, geopolitical factors have had the greatest impact by far, the report says. In 2021, exports to China, Australia’s largest market, fell by 97 per cent, after China imposed tariffs of 166% to 218% on imports of Australian wine.

The recent experience of Australian wine in China highlights the potential downside of having exports concentrated in one market – particularly when the two countries’ geopolitical ambitions are not well aligned, it says.

It its second quarter global Wine Quarterly, titled Is Wine Facing a Tectonic Shift in Supply Chain Assumptions?, Rabobank says since the middle of 2021, at least five aspects of the global wine supply chain – agricultural production, freight, labour, geopolitics, and energy – started to face significant disruption all at once, causing “headaches” for wineries around the world.

Rabobank global beverages strategist Stephen Rannekleiv said while some of these disruptions had been driven by short-term cyclical factors and may see improvements in the near to medium term, “unfortunately, others are starting to appear to be more structural in nature” and industry participants will need to develop strategic solutions.

The global wine industry in its current state has evolved in the context of cheap freight, cheap energy and declining trade barriers, the report says.

“As wineries grapple with so many disruptions, the immediate responses have been more tactical than strategic,” Mr Rannekleiv said.

“However, we would argue that energy prices and geopolitical factors are more structural in nature, and any ‘solutions’ moving forward should take them into account.

“We need to reassess supply chains with a fresh, creative perspective. Old assumptions that have formed the basis of the current operating model – like free trade, cheap fuel, and cheap freight – should be questioned. It is important to rethink how to thrive in a context where the rules of the game are different.”

 

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