A Disruptive Time for the Wine Industry

Nicolas Pellenc is Head of the Wine Purchasing Department at Les Grands Chais de France, overseeing sourcing and procurement strategies for one of France’s leading wine groups. Based in Petersbach, he brings deep industry knowledge and a strong network to support quality, volume, and value across global wine selections.

Through this article, PELLENC highlights that the wine industry is facing a global decline in both consumption and production, leading to significant challenges ahead.

The wine industry is facing two major issues simultaneously on a global scale: a consumption decline and a production decline. Both are linked but not necessarily in phase. While reduced consumption is more obvious, lower production will soon change wine availability worldwide.

A global consumption decline

According to the OIV, annual world consumption declined by 3.6% or 8 million hectoliters, from 222 to 214 million hectoliters in 2024.

World wine consumption was 244 million hectoliters in 2016, meaning that in less than ten years, it would have declined by 30 million hectoliters annually or the combined vintage 2024 production of Australia, Chile and Argentina.

Wine consumption has decreased significantly in the US (and Canada) after more than 25 years of steady growth (1993-2017) and by two-thirds in China since 2018. Wine consumption has also declined in Germany, the UK and the Netherlands in recent years and continues to erode in France.

On the contrary, positive consumption trends can be found in Russia, Mexico, Portugal and, to a lesser extent, Italy and Spain, where consumption growth took place in 2024, according to the OIV. Brazil and South Africa have also had some positive consumption trends over the past five years, although their consumption faced a reset in 2024.

This global decrease of consumption results from different factors: post-covid inflation especially on food (loss of purchasing power worldwide), new generations less inclined to consume wines (due to economic reasons and reduced physical social interaction), WHO lobbying against alcohol, boomers getting older and drinking less as a group, global change in consumption habits (digital products capturing more spending), the trend of sober culture, substantial demographic changes (expansion of the non-drinking population), worries about economic future and geopolitical tensions.

“Disruptions are high; sales instability and consumption uncertainties make markets difficult to read. Uprooting and weather hazards put output at risk worldwide. The international wine industry has entered a new paradigm”

Fierce competition between alcoholic beverages is also taking place, and innovative RTDs (vodka-based, hard seltzers…) are winning over wines in their success of seducing new consumers.

As a result, most wine regions worldwide, all wine categories, from commercial to luxury brands and all companies, including corporate holdings to family estates, are currently facing unseen headwinds and need to adapt to a new reality.

An international production decline

The world wine production has also decreased sharply in the past two years.

2023 was the smallest harvest worldwide since 1961, totaling 237 million hectoliters.

The 2024 crop was even shorter, producing 226 million hectoliters.

As a comparison, the average annual wine production between 2010 and 2023 was 266 million hectoliters, meaning that over two harvests, 70 million hectoliters are “missing” in comparison with a “regular” production. Talking about a collapse does not seem exaggerated.

A combination of factors, mixing weather issues and economic challenges, is the cause of this massive drop.

The 2023 global crop was mainly affected by weather issues in Italy, Spain, Australia and South Africa and was not compensated for by crop volume in France and California.

The 2024 historically low crop results from numerous weather issues in France and lighter crops in Germany, Chile and South Africa. California producers voluntarily crushed fewer grapes, aiming to deplete their inventories.

A few specific regions, such as La Mancha, Extremadura, Rheinhessen, Puglia, Veneto, Emilia Romagna, South Eastern Australia and Mendoza, saved the world’s production from a global shortage in 2024.

These crop variations, in addition to demonstrating amplified weather uncertainties, are also resulting from deep viticulture crises located for now in France (Bordeaux, Languedoc, Southern Rhône), Australia (South East), Chile (Valley Central) and California. This critical situation might extend to some German regions and New Zealand (Marlborough) shortly.

To schematize, many grape growers and bulk wine producers are not covering their production costs in these regions. The squeeze comes from the global increase of costs (energy, fertilizers, wages …) over the years and the pressure on prices due to a depressed demand.

Direct consequences include uprooting vineyards, abandonment of vineyards, insufficient farm management (fewer treatments, fertilization, irrigation), bankruptcy of vintners, non-renewal of vintners’ generations, bottling plants and wineries closing. The industry is simultaneously concentrating and operating on lower volumes.

We estimate that between 100,000 and 140,000 hectares of vineyards will have been deliberately wiped out in 2024 and 2025, mostly in France, California and Chile. In Australia, vineyards are put into dormancy.

This global uprooting to rebalance supply and demand is somehow logical. Still, three factors at least make it less obvious: uprooting is an individual decision often made without a global consultation, weather uncertainties risks are very high, over-inventories are also constituted of old bulk wines that have suffered qualitative decline and therefore lost purchase appeal.

European wine regions have faced droughts and heat waves for several consecutive years. This is the case in Sicily, Southern Puglia, Penedes, Oriental Pyrenees and Aude (Languedoc). The situation in Languedoc is of particular concern, as production will be at risk without rapid investment in capturing rainwater through reservoirs, as in the Southern Hemisphere and California.

In conclusion

Although consumption has declined sharply and might keep declining in the coming years, risks of structural deficits also exist, especially for commodity wines, i.e., dry whites, dry reds and international varietals. In the past two years, we have experienced challenges in South Africa, Spain and Italy. The 2025 world crop will be decisive in gauging the balance between supply and demand.

The world supply and demand equations are complex and depend on many factors, some human and others from Mother Nature. While linked, the simultaneous decline of consumption and production does not follow the same pattern. Disruptions are currently high; sales instability and consumption uncertainties make markets difficult to read. Uprooting and weather hazards put output at risk worldwide. The international wine industry has entered a new paradigm.