Most of our members would know that global wine consumption has been declining but if you’re not right across that yet, a recent article by Wine Australia’s Market Insights team paints a pretty clear picture. The lowlights are that in the five years to 2023, global consumption of wine fell by 3.1 billion litres which was well below the five year average. And IWSR forecasts say it will continue on this downward trajectory. If forecasts prove accurate, the global wine market will shrink 20% in total compared to its 2018 levels over the decade to 2028.
The full article can be accessed here. It is highly recommended reading, particularly for anyone who views today’s circumstances as a short-term ‘blip’ or those wanting to know why the decline is occuring, what markets are most impacted and what we might do about it.
In a publication released last month, the global wine organisation International Organisation of Wine and Vine (OIV), stated that adverse climatic conditions across much of the world’s grape and wine producing area last vintage has resulted in historically low production levels in the last 12 months. Consecutively, pressures relating to social and economic factors in key markets fueled the declining consumption trend. However unlike Australia, on balance, the world saw higher average prices as supply constraints mitigated some of the impact of reduced volumes. The global vineyard surface area continued its decline in 2024, but it was only a fairly small contraction equating to 0.6% by area to 7.1 million hectares. It will mark the fourth consecutive year of decline.
But, it would seem that declining consumption is outpacing vineyard contraction by a concerning amount The OIV reports on changes in vineyard surface area of major wine growing countries since 2019. On Australian soils, despite the severe hardships facing growers, the OIV concludes that vineyard area has remained consistent over the five year period to 2024 (although the truth is that until we have our vineyard register, no one knows for sure). That report can be accessed here.
It’s not easy to find out exactly what is going on in all of our competitor wine producing nations as the world of wine responds to tough times. Governments around the world, including those in countries such as the Chile, United States and France provide various forms of support to their industry, usually towards research, sustainability or growing exports, but in some cases to stabilise the market through supply side interventions. We have repetitively asked the Australian Government for more targeted support to help growers facing economic hardship and associated mental health problems, but to no avail! A summary of the most significant supportive action being taken by some of the largest players in the wine supply market is below:
Europe
In Europe where over half of the world’s wine (and close to half is also consumed), claim is laid to the world’s three largest producers, Italy, France, and then Spain. Collectively EU countries saw an overall decrease in vineyard area of nearly 50k ha in 2024 alone, which is 0.8% of their total footprint gone.
Their strategy to deal with the threats facing the global wine industry include emergency distillation and incentives to remove unwanted vines. Agricultural subsidisation is synonymous with the EU’s rural policy approach and some of the key policies are summarised by Beverage Daily in an article that can be accessed here. The French government for example has reportedly allocated €120 million in subsidies aimed at funding the permanent removal of vineyards.
USA
USA is the fourth biggest producer of wine after Italy, France and Spain responsible for approximately 10% of wine production. Their industry saw a 17% decline in production in 2024 compared to 2023 which is15.5% below their five-year average. This was due primarily to the challenging season and, to a lesser extent, to their ongoing decline in vineyard area. Although there is no evidence of direct subsidising having been provided to the industry in response to over-supply, the Trump Government’s threat to impose broad-reaching tariffs on competitor wine producing nations is protecting their domestic industry by making their local wines cheaper than those that are imported into the USA including Australia. The impact that this will have for Australian wine producers is uncertain but will become more evident pending what happens once Trump’s 90 day pause on its tariff threat lapses. For individual producers, it will depend on several factors – their exposure to the US market, by how much they are advantaged over competitor nations who are likely to face even higher tariffs, and to what degree they are impacted if the EU and others redirect products into other markets. In any event, producers will need to be flexible to adapt and divert product as the competitiveness of Australian wine in its various export markets adjusts to a dramatically changing global trade environment.
Others
In the Southern hemisphere, by all accounts many producers are facing hardships but perhaps not so severe as Australia. There is no public information to suggest subsidies to support producers exit the industry. In South America, Argentina’s vineyard area reduced by 2.4% in 2024, and similarly Chile saw a significant drop of 3.2%. In South Africa surface area diminished by 1.5% in 2024. Again, although significant, those reductions alone are a drop in the wine ocean if the market continues on a long term trajectory downward.
