Unlock Editor’s Digest Lock for Free
FT editor Roula Khalaf will select your favorite stories in this weekly newsletter.
A new report shows that as wine overloads have dipped global consumption, vineyards have fallen by a third in the past year.
In its latest wealth report released Wednesday, Knight Frank said that lower demand for wine “remains of the world’s major vineyard regions remain unharmed,” adding that consumption has fallen by 12% worldwide since its peak in 2007.
After peaking in 2023, New Zealand vineyards’ value is suffering the most, with prices in the Marlborough region falling 33% last year, according to Knight Frank’s local partner, Bailey’s Cart Lindsay.
The value of the Los Carnolos region of the Napa Valley in California fell by 15%, while the prices of the Barossa Valley in Australia and the vineyards in the Côte du Rhone in France fell by 10%.
Wine producers are fighting the taste of the shift, and younger generations are increasingly choosing a variety of drinks and evacuation alcohol. In France, the youngest Generation Z consumes about half of the wines of older millennials, according to Nielsen.
The industry is also tackling a sharp decline in demand from China, one of its major export markets, the effects of climate change, as well as grape gluttony in some regions.
Wine production has been in its fifth year in the last 20 years, according to Knight Frank, but many winemakers still sit in excess stock. This especially dented the prices of bulk wine. The wine is transported in large containers and bottled at destinations.
Lindsay said overstocking in the Marlborough region of New Zealand has led to a drop in large amounts of wine prices from NZ$7 (US$3.90) to $3 per liter.
Eduardo Jordan, winemaker principal for Miguel Torres, told the Financial Times that Chile fell to nine cents per kilometres, as the price of bulk wine grape pie last year was about half the cost of production.
Sinking demand has hurt listed wine producers, including the US-based Constellation brand and the Australian Treasury Wine Estate. In a six-month revenue call to December 2024, the latter CEO Timothy Ford said “our premium and commercial portfolio fell by about 5%,” and the company said “points to continue demand for wine at low prices worldwide.”
In a revenue call in January, Garth Hankinson, Chief Financial Officer of Constellation Brands, said there was weak demand for the “low-priced (wine) segment,” particularly with retailers struggling to shift inventory, fell 16.4% in the year of wine and spirit shipments in the third quarter.
Jordan said some grape producers are switching to fruits and vegetables due to the demand for sinking wine. “It’s very dry in the north so you can switch to olives. In our neighborhood in Culico, cherries are the best option.” Knight Frank said that in the Mendoza region of Argentina, grapes have been replaced by vegetables, and garlic is one of the biggest exports.
The switching of crops to olive and solar panels has also become increasingly common in Bordeaux, where low-rise wine producers have struggled in recent years. To the east, the value of the Cotes du Rhone vineyard fell by a tenth in 12 months.
Despite the decline in value in many global vineyards, premium sites for wine growth retain value, including the French Champagne region.
In the UK, owners of Essex vineyards benefited from the 20% values last year. Knight Frank added that changing weather patterns are driving some areas.
“We see the value of vineyards rising more rapidly… Counties like Essex…. It’s where growers experiment with different grape varieties and still make rosé and red wine,” the report found.
