W36: Wine Update

In W36 in the wine landscape, in Jul-23 Russia raised import customs duties on wine imports from unfriendly countries from 12.5% to 20%. Russian winemaking has benefited from this, with an 18% increase in grape harvest and an 8% increase in wine production in 2023. Russian wine products now constitute 58.3% of the assortment in stores, restaurants, and cafes, a significant increase from before the development of the viticulture and winemaking laws.

France and the European Union (EU) are allocating USD 214.96 million from their budgets for wine disposal and vineyard removal. Additionally, the European Commission introduced an aid package in the summer of 2023 to assist farmers in 22 member states (excluding those bordering Ukraine) facing economic difficulties. Germany is set to receive approximately USD 38.69 million out of a total of USD 354.69 million. These funds aim to compensate farmers in severely affected sectors for their financial losses, with viticulture notably impacted by declining sales. An allocation of USD 6.99 million has been made for temporary crisis distillation to address regional market disruptions in the wine sector. This support amounts to USD 0.70/liter of wine, enabling up to 10 million liters of surplus wine to be converted into industrial alcohol.

Moreover, the Association of European Wine Industries (AIVE) has outlined its objectives for 2023, focusing on active participation in Spanish and European negotiations, raising public awareness about the significance of the wine industry, and maintaining a positive image of wine in national and international markets. To achieve these goals, AIVE encourages various associations, entities, industries, and wineries to join their efforts and strengthen the sector. A prominent demand from AIVE is crisis distillation, emphasizing the need for obtaining high-quality alcohol for wine instead of using industrial alcohols for other purposes. They have urged the European Parliament to consider this request and provide financial support to distill millions of liters of wine.

Recent floods in central Chile, particularly affecting vineyards near rivers and streams, pose a significant threat to the country's wine production. The impact of these floods is expected to be felt in 2024. In the 2023 season, wine production has already seen a notable decline of 11.4% year-on-year (YoY), as the Agricultural and Livestock Service (SAG) reported. This decline is attributed to adverse weather conditions affecting yields and shifts in foreign trade patterns, continuing a negative trend that began in 2022 with a 7.4% YoY decrease.

The total Chilean wine production in 2023 reached 1.1 billion liters, with the majority (83.8%) being wines with a designation of origin. The regions of Maule, O'Higgins, and Metropolitana were the primary producers, accounting for 90.2% of the total volume. In the Maule region, one of the hardest-hit areas, it is estimated that up to 10 thousand hectares (ha) of vineyards have been severely affected, posing significant challenges for wine producers relying on high-quality grapes from these regions.