global wine output slowing - esp from europe, page-5

First 5 Last

Share
Profile

Follow
Chewy5

247 Posts.

1

27/10/17

09:34

Post #: 28242270
Share

Originally posted by googoogaga ↑

Shortage.....from another angle...

Global Consumer Correction:

Tightening Wine Cycle to Drive Luxury Wine Profits Global wine authority OIV is reporting an 8% reduction in 2017 global wine production based on Italy (-23%), France (19%) and Spain (-15%). We believe that a further tightening of the wine cycle should strengthen pricing power for branded/luxury wine players (TWE / STZ). Exceptional weather events reduces EU wine production by 15% in 2017: The EU's three largest wine producers (Italy, France and Spain), which collectively produce 50% of wine globally, including a significant portion of luxury wine are set to have a significantly smaller crop in 2017. The combination of frost and droughts have reduced yields. In the EU, area under vine has reduced by 16% since 2006 which has added to the supply shortage. For background on the global wine industry, please see The Global Wine Industry: Slowly moving from balance to shortage (22 Oct 2013).

Why is this important?
Lower production and the reduced quality of grapes likely means an even greater reduction in the amount of luxury wine that is produced. Since luxury wine is already scarce, it affords luxury wine producers greater pricing power and ultimately higher margins and profitability. We think weak EU production is especially timely since demand from China is strong currently, especially in the luxury wine market.

Who are the beneficiaries?
TWE: We estimate that TWE generates c.50% of earnings from its luxury wine portfolio of which it owns or leases over 50% (Australia 41%, US 67%, New Zealand 86% and Italy 100%) - hence we think TWE is a direct beneficiary of the tighter cycle. Pressure on its commercial portfolio will be more than offset by growth in its luxury portfolio, in our view. TWE is the No. 2 (behind LVMH) exporter by value to the Chinese market. Treasury Wine Estates: TWE's Stars Are Aligning (22 Oct 2017).

STZ: STZ sources less than 5% of its wine business from Europe, and is thus mostly immune to any grape supply or grape pricing pressure from lower EU yields, but should benefit from a competitive standpoint, with 15-20% of US wine industry volume coming from European wines (which is ~50% of imported volume into the US), which will likely be pressured both in terms of supply and pricing, benefiting STZ competitively. We expect this situation will augment STZ's already pronounced turnaround in market share results with momentum in its high-end (and high margin) focus brands, and could further improve US wine industry pricing, providing a greater category halo for STZ.

Expand

I can see how it would be a positive for their current inventory and in the short term it would be good for margins, but after that in the medium term, how could the increase cost of sourcing equal more profitability ?
Do competitor luxury brands without the scale of TWE stop producing product or something ?

TWE Price at posting: $15.17 Sentiment: Sell Disclosure: Not Held
Upvote

0 Great analysis

Reply

Top Stories

Listen: HotCopper Wire Podcast 015 – Yeah, we're thinking the IPO market is back

AII

NATO’s 5% target: Why Almonty Industries’ mega mine and NASDAQ listing are a perfect fit for investors

BPH

Australia’s gas crisis is here – and dying coal plants aren’t helping

MTM

MTM Crit Metals now Metallium Ltd – leading with REEs, not gold

BM8

'Lead role in European tech metals' beckons for BM8 as Bleiberg drills rumble to life

First 5 Last

Add to My Watchlist

What is My Watchlist?

A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.

(20min delay)
Last $7.74		Change -0.075(0.96%)		Mkt cap ! $6.276B

Open	High	Low	Value	Volume
$7.79	$7.85	$7.72	$17.72M	2.276M

Buyers (Bids)

No.	Vol.	Price($)
17	11734	$7.73

Sellers (Offers)

Price($)	Vol.	No.
$7.74	30849	26

View Market Depth

No.	Vol.	Price($)
41	36593	7.730
26	34216	7.720
31	59619	7.710
42	83023	7.700
16	65572	7.690

Price($)	Vol.	No.
7.740	41403	51
7.750	38157	24
7.760	40354	17
7.770	27690	14
7.780	18185	11

Last trade - 12.57pm 30/06/2025 (20 minute delay)

TWE (ASX) Chart

global wine output slowing - esp from europe, page-5

Listen: HotCopper Wire Podcast 015 – Yeah, we're thinking the IPO market is back

NATO’s 5% target: Why Almonty Industries’ mega mine and NASDAQ listing are a perfect fit for investors

Australia’s gas crisis is here – and dying coal plants aren’t helping

MTM Crit Metals now Metallium Ltd – leading with REEs, not gold

'Lead role in European tech metals' beckons for BM8 as Bleiberg drills rumble to life

Featured News

Buyers (Bids)

Sellers (Offers)

Featured News

global wine output slowing - esp from europe, page-5

Top Stories

Listen: HotCopper Wire Podcast 015 – Yeah, we're thinking the IPO market is back

NATO’s 5% target: Why Almonty Industries’ mega mine and NASDAQ listing are a perfect fit for investors

Australia’s gas crisis is here – and dying coal plants aren’t helping

MTM Crit Metals now Metallium Ltd – leading with REEs, not gold

'Lead role in European tech metals' beckons for BM8 as Bleiberg drills rumble to life

Featured News

Buyers (Bids)

Sellers (Offers)

Featured News