French wine prices fall thanks to rising demand and a lack of production

After four years of rising prices, the local fruit is back to its usual price — 2 to 4 euro cents.

That is a welcome development in France’s wine market. But the reduction in cost might yet prove to be a silver lining for the struggling domestic wine industry. A surge in global demand and an anticipated decrease in costs could reverse the tide of plummeting production and reduce the roughly 12 percent drop in prices since 2013.

In 2017, France’s production dropped to its lowest level since 1995 due to a number of factors, including a lack of sunshine in central France, according to a report from the French Institute of Wine and Agriculture. Many producers, meanwhile, have been changing cultivation to take advantage of changes in climate and now produce higher-value wines in cooler regions.

The decrease in production is also due to more consumers consuming wine with meals, instead of purchasing it on their own, and specifically with spirits. In the fall of 2017, more people chose wine with cocktails instead of cocktails without — which resulted in lower prices. When the trend reverses, of course, France’s market for wines and spirits could dip further.

Despite the increase in global demand, concerns remain over the health of the global wine market. Even as China overtook the United States to become the world’s largest wine market in 2017, the surge in consumer demand resulted in shortages in supply. In November, a major wine and food trade group in Japan issued a warning that the country’s wine market could shrink. In December, France’s alcohol and cosmetic trade groups announced that European producers would be “forced to declare [their] grace” after selling through their most recent collection.

While the global supply remains low and could mean a decrease in prices — due to high demand and reduced supply — that does not necessarily mean that prices will continue to fall. There are other factors at play.

“There’s certainly been a supply increase in France, but I would say that France has a new and improved 2016 vintage, which could be a slightly higher price than prior to it,” says Ted Fargi of Terre Rouge Wines. “But France is still the benchmark of production worldwide.”

France’s average price of wine has fallen 5 percent so far this year, Fargi says, with the final price for March expected to fall about 1 percent. If these price declines continue, a decrease in prices could be expected by September.


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