Loire Valley: The wine show becomes a focal point for challenging sales negotiations

Wednesday February 17 2016 by Vitisphere

Prices have been rising for four years now. Admittedly, they are dictated by supply and demand after four short crops but the situation has now become very complicated”. This comment by one of the Loire’s largest marketers is unanimously shared by his colleagues. At the Salon des vins de Loire – from February 1 to 3 – both merchants and co-operatives had the same perspective on sales negotiations currently underway, particularly with multiple retailers. Supermarket buyers have issued clear instructions: there is to be no increase this year. Negotiations are therefore set to continue for at least another month whereas normally, when things run smoothly, they end in January.

The reason for this is the dramatic increase in prices of bulk wines. “It’s good news for the wine growers”, said one marketer, “but we have to strike a balance between prices that provide a decent income for growers and sales development”. Prices have surged by approximately 20 euros per hectolitre compared with last year in a few major appellation areas. Crémant de Loire has risen from €160 to €180/hl, Cabernet d’Anjou from €171 to €184/hl and Touraine Sauvignon from €196 to €205/hl.

It’s difficult”, admitted Bruno Prévot, sales director with co-operative group Loire Propriétés, “particularly because our sales have not grown. How can you ask distributors to increase their prices when volumes are down?” Declining volumes are due to two main factors according to local companies: lack of availabilities for some appellations but also the surge in prices. “In some markets, I’m afraid we might go spiralling downwards”, said Jean-Marc Fontaine, director of Alliance Loire which saw turnover increase by 3% in 2015 yet did not sell a litre more wine than in the previous year. The group sells 65% of its wines by volume to supermarkets. “We have noticed declining sales of buyers’ own brands”. Bruno Prévot expounded further: “What is true in France, is also true of export markets. In the Netherlands, some distributors have delisted Rosé d’Anjou”.

In an attempt to avoid this, profit margins have been slashed. “We have cut our profit margins for two or three years”, commented Fabrice Thuia, manager of the Collégiale des Domaines de Loire, a producers’ group with 400 products in its portfolio. Although the group sells bottled wines, the price of bulk has an impact on that of bottled consignments. “But we have also had trouble with yields and therefore production costs for the past three vintages”.

Everybody is pinning their hopes on increased production volumes. Although officially, overall figures for 2015 have yet to be released, producers know the amount of wine they have in their cellars. “We should see a new increase in rosé wines”, predicted Bruno Prévot. “Prices should readjust”, said one marketer. It will be essential to ensure, though, that prices do not drop too much or too quickly, otherwise the entire region may be destabilised.

 

Source: Vitisphere; Photo: La Vigne.

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