topics
Russia gives preference to its own production and doubles duties on imported wine
International Organisation of Vine and Wine (OIV) is sounding the alarm: in 2023, global wine production will fall to the lowest level ever recorded since 1961.
Based on information collected by the OIV for 29 countries that account for 94% of world production, world wine production (excluding juices and must) is estimated at 241.7 million hectoliters (hl; one hectoliter is equivalent to 133 bottles of standard 0.75 wine liters) to 246.6 million hectoliters, with an average estimate of 244.1 million. This is 7% less than last year. The data is compared with data from as far back as 1961, when production fell to 214 million hectoliters.
As explained by Giorgio DelGrosso, the head of the OIV research office, this negative scenario can be explained by a significant decline in the main wine-producing countries in both hemispheres of the planet. While countries in the southern hemisphere such as Australia, Argentina, Chile, South Africa, and Brazil recorded declines of 10% to 30%, in the northern hemisphere Italy, Spain, and Greece suffered the most due to poor climate conditions, from early frosts to heavy rains, drought, as well as mold and plant diseases. Only the US and some EU countries such as Germany, Portugal, and Romania recorded favorable climate conditions in 2023 and managed to increase production.
A complex of negative climate events, concentrated in crucial months, combined with production factors, starting with a shortage of agricultural workers, caused a sharp decline in Italian and Spanish production and, as a consequence, a 7% decline in total production in the European Union. This year the figure will be 150 million hectoliters, the third lowest level since the beginning of the century.
Wine production in the United States, the world’s fourth-largest producer, is expected to reach 25.2 million hectoliters this year, up 12% from 2022.
The global recession is accompanied by a decline in demand. According to Wine Observatory, a publication of the Italian Wine Union (UIV), stocks of unsold wine in cellars have now risen to 45.5 million hectoliters, equivalent to more than 6 billion potential 0.75 liter bottles. This figure reflects a surplus of 4.5% compared to last year, due to an unprecedented increase in stocks of top quality wines, with PDOs (Protected Designations of Origin) underselling by 9.9%.
Another worrying fact for Italian wine companies is the further decline in demand from non-EU countries. Among the 10 largest importing countries, which together account for approximately 85% of the market outside the EU, export volumes are rising only towards Russia, with “double-digit” quantitative declines in the US, Canada, Japan, Norway, China, and South Korea.
But even the outlet called Russia for Italian wineries is about to close. Italian wine producers, who have always looked to Moscow as one of the world’s most promising new markets, are now forced to change their export plans following the Russian government’s decision to “impose a 20% customs duty on all wines and vermouths” (compared to the previous tariff 12.5% for wines and 10% for vermouth). In fact, on average, this is almost a doubling of the duty, which applies starting at a value of 1.5 dollars per liter and therefore affects almost all Italian exports. Russia is the ninth largest market for Italian wine, and for sparkling wines it is the fifth largest importer in the world.
According to the main Italian economic and financial newspaper Il Sole 24 Ore, “in 2022, Italy supplied sparkling wines to Russia worth 91 million euros (+28% compared to previous year) with a turnover of 80 million still wines (+5.1%). Overall, Italian wine exports to Russia last year amounted to more than 170 million euros.”
The Russian customs ban is part of the Kremlin’s agricultural policy, which has greatly contributed to the domestic development of the wine industry in recent years. Russia is implementing a federal program that provides government funding in the amount of $270 million and an increase in vineyard area by 35% by 2030. In 2022, Russian wine production increased by 13% compared to the previous year. According to Rosselkhozbank analyst Natalya Khudzhakova, “in 2023, wine consumption in Russia should reach 900 million liters per year.” Domestic sales of “made in Russia” wines, which now account for 55% of the total range on store shelves, have more than tripled.
In the first half of 2023, exports of Italian wines and sparkling wines to Russia recorded a turnover of 67 million euros, with an increase of 65% in six months (+64% for still wines and +66% for sparkling wines). According to Il Sole 24 Ore, “the magnitude of the progress could assume that Moscow importers were trying to stock up even before the new duties came into force. The trends over the next few months will make it clear whether anyone’s suspicions turn out to be justified.”
