Supply concerns and tax increases have left the wine market facing a fresh wave of cost hikes - even if minimum pricing isn’t introduced.

Poor grape harvests in several regions - a result of factors including poor weather and changes to agricultural practices - have prompted industry insiders to raise fears of a global supply shortage.

The US had been hit by cool weather and a drop in vine area, while Italy had suffered from a poor harvest and EU incentives for producers to remove vines. Analysts Mintec said exchange rate shifts had hit export prospects for Australia and South Africa.

In the wake of the duty escalator increase - and with demand for bulk wine rising as consumers trade down - cost hikes brought about by supply issues are one of several factors that could inflate retail prices. Some observers warned that, inflation in the supply chain could translate into a £1 price hike if round pound deals persist.

“Retailers always want buyers to trade up,” said Mintec analyst Robert Miles. “I expect wines from South Africa, Australia and Italy to move up the scale.”

Bulk wine prices would go up in short markets, warned Greg Wilkins, joint UK director at Brand Phoenix. A spokesman for supplier Concha y Toro agreed: “There have been cost pressures on bulk wine and this is set to continue.”

One region that could benefit was France, suggested Miles. “France had a good 2011, so the price could come down, particularly at the value end.”

Topics