Many independent specialist wine businesses are expecting to see an uplift in sales during the course of 2024, following a ‘grumpy’ period of market adjustment (as Wine Owners’ CEO Nick Martin calls it); the post-post Covid hangover and after decades of cheap money. Recovery might not be immediate, but instead a gradual strengthening.
We take a look at why this wine market downturn is ‘no surprise’, as industry expert Simon Farr puts it, and we offer advice as to the essential work that wine businesses can be doing right now to position their business ready for when a healthier market returns.
The state of the current wine market
Simon Farr has been in the wine trade for 50 years – he was one of the original founders of Majestic, co-founded Bibendum and more recently Cru World Wine (where he is Chairman), and drives a portfolio of other wine businesses. Watch below for his invaluable perspective on the current wine market and what he predicts is around the corner.
Analysing the economic conditions and externalities affecting trading behaviour and wine prices, Simon explains the post-Covid high interest rates did spook a lot of people, who had not experienced both high interest rates and market volatility before, but actually it is ‘no surprise’ we are where we are as we enter 2024. Simon confirms that, in his opinion, there are structural, long-term reasons as to why a recovery for the wine industry is on the way.
‘It’s good that we had a correction because it is cathartic and tends to flush out some bad behaviours. I think we’re entering a phase of opportunity to buy back into the best wines that are now more reasonably priced.’
Simon explains a cocktail of lowering interest rates and easier credit will push money back into risk assets through 2024 and the now more reasonably priced wines on the market will be a big draw for investment.
It is therefore prudent to consider what a wine business could be doing in preparation for this auspicious future.
What should a wine business be doing now?
Number one of course is to avoid short term thinking and instead, take action. Nick Martin’s perspective is that ‘it is important for wine businesses to use the breathing space they may be experiencing now, to really look at their business and consider, are they in the best position for when the market returns?’
Wise would be to use this time to address issues and tidy databases, to look at consistency of workflows and find where money and time can be saved, wine inventory mastered, process steps automated, logistics simplified – all of which contributes to delivering improved customer service pre and (importantly) post sales. These improvements create a virtuous cycle and lay the groundwork for future growth and stronger margins when the market wakes up.
Now is the time to research software, book demos, review pricing and return on investment assumptions, chat with peers to see what works for them and implement the changes whilst you’ve got more time to do so.