SOUTHERN HEMISPHERE WINES

MARK PROFIT OPPORTUNITIES

By Dan Berger


If you love to sell $7 to $9 wines because of their excellent price-value relationship, the coming year should provide greater opportunities for profits than ever, but a bit of creativity is required.


To begin with, you must look to the southern hemisphere.


It is true that California now has an oversupply of chardonnay and merlot, and that the good-sized crops of 1999 and 2000 loom as important indicators that prices of domestic wines will be stable for the coming year at the very least.


However, dynamic forces overseas have conspired to create a potential windfall for retailer outlets that plan now and are creative in their buying and marketing strategies.


The news that kicked off this potential bonanza was embedded in a cold, dreary press release that crossed the wire services of South America in late last year. It said simply, “Spanish wine production will increase about 11.8% this season to 41.1 million hectoliters (10.7 billion gallons) due to favorable weather and increased production area, according to preliminary Agriculture Ministry figures.”


The press release added that more than half the nationwide production, will come from the Castilla-La Mancha region south of Madrid, an area known for moderate-quality red wine. It was followed by a statement by the head of the wine industry of Spain that prices would come down an average of 10% to accommodate for this oversupply of wine.


Now, as a retailer you may be wondering how this can affect the price of California wine in the United States. And the thinking requires domino-effect logic.


Spain sells most of its exported wine to the Economic Union (EU), the rest of Europe. This makes perfect sense because Spain has trade benefits throughout the EU. And since a vast amount of this wine will be inexpensive, in the $5 per bottle equivalent range, it will seriously challenge existing wine brands.


In particular, it will hit directly at the heart of $5 wines that now sell well on the continent, namely those from Chile and Argentina.


“Yes, we heard about Spain’s large supply,” said the West Coast importer of a very successful line of Chilean wines. “Our people are very aware that a lot more Spanish wine will be going to England and France,” he said, and he added that the move will necessitate changes in how Chilean brands, which don’t enjoy the trade benefits of being in the EU, market their wines in Europe.


“We have been told we will have a lot more wine to sell in the United States in 2001,” said the importer. And he noted that with more wine to sell, prices will clearly be soft.


Since the already successful brands of Concha y Toro and Walnut Crest now have strong competition from brands like Vi

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