{"id":40778,"date":"2025-11-09T23:40:06","date_gmt":"2025-11-09T22:40:06","guid":{"rendered":"https:\/\/www.vinexposium.com\/?p=40778"},"modified":"2026-01-11T17:54:18","modified_gmt":"2026-01-11T16:54:18","slug":"40778","status":"publish","type":"post","link":"https:\/\/www.vinexposium.com\/en\/industry\/turning-surplus-into-strategy\/","title":{"rendered":"Turning surplus into strategy"},"content":{"rendered":"

Surplus strategy: Why full tanks are a unique opportunity to innovate and recalibrate the industry<\/span><\/strong><\/h2>\n

It\u2019s tempting to view the current global oversupply as a shortcut to winning back consumers through lower prices. But this moment offers a longer-term opportunity to rethink how wine is made, packaged and positioned \u2014 to turn necessity into lasting innovation and reinvention.<\/p>\n

It\u2019s an open secret that as tanks around the world brim with unsold inventories, wine prices \u2013 particularly in on-premise venues \u2013 remain stubbornly high, potentially fuelling continued market contraction. Californian marketing expert Paul Tincknell<\/strong><\/a><\/span> is still waiting to see a new wave of creativity that should come under current market conditions. \u201cIn the past, with most of these downturns, we usually see a cycle of innovation happen where new entrepreneurs see all this wonderful and expensive wine they can play with and create new brands. And we are not seeing that happen, at least not to any major degree yet.\u201d<\/p>\n

Same oversupply, new dynamics<\/span><\/strong><\/h2>\n

This is not the first major imbalance of supply and demand the industry has known, though its global scale sets a new precedent. \u201cThe oversupply of 2000 to 2008 drove millions of gallons of wine to be exported at extremely low prices, creating an opportunity to develop brands internationally,\u201d recalls Californian consultant winemaker Nicholas M. Karavidas<\/strong><\/a><\/span>. \u201cI remember shipping a million gallons of dry white wine to Vincor in Canada for $1.10 a gallon to basically just dump oversupplied wine.\u201d
\nStill, Karavidas acknowledges that \u201cthe dynamics, balances and driving factors are all different than they were in the previous ups and downs.\u201d Inflation, for one, has pushed overheads so high that many producers around the world will have harvested this year at below cost, or left fruit on the vine, removing any leeway for marketing investment. Aside from the cost issues, there are obvious long-term implications of releasing large volumes of lower-priced wine into the market \u2013 margin erosion, brand devaluation and placing a strain on already fragile grower and distributor networks.<\/p>\n

Doing the maths<\/span><\/strong><\/h2>\n

There are also short-term financial implications: \u201cI’m going to venture to say that up to 30% and more of the 50 million gallons of bulk wine that’s on the market in the United States is never going to go anywhere. The wine in tanks is the foundation for wineries\u2019 loan structures and credit lines. So they can’t sell what\u2019s an $8 value or a $12 value on their books for their bank for $2, which is the offer on that wine.\u201d<\/p>\n

There is also the realisation among market players that whilst double-digit percentage margins may look good on paper, they are only as profitable as the price of the wine: \u201cAt a 35% margin, a $36 FOB is a different dollar value, mathematically, than a $75 or $100 FOB. Retailers especially were lured into very low pricing with great margins, but it didn’t balance out to dollar value and spendable revenue. By the time they realised it, they were losing money on their profit per square foot of retail merchandising. And now everyone\u2019s in trouble.\u201d<\/p>\n

\"9 Photo : JV 2024 No Vintage Lineup 6up (C) The Wonderful compagny<\/p>\n

Premiumisation, too, which has been high on the industry\u2019s agenda for many years, becomes vulnerable. \u201cThe big corporations, brands and distributors realise that if they come in with a killer $20 Chardonnay, it might collapse the market for their $35 Chardonnay and the margin is much better on the $35 Chardonnay,\u201d says Tincknell, who also feels that \u201ccorporatisation\u201d of the industry is stifling innovation.<\/p>\n

\u201cThe big companies such as Gallo or Constellation are very focused on the bottom line, and look at cost-cutting measures and divesting themselves of brands that are not performing well, then pouring more and more money into existing and performing brands, rather than cycling through and using the extra juice to, say, create a $30 box wine that will fill a strong market need.\u201d<\/p>\n

Birth of a behemoth<\/span><\/strong><\/h2>\n

Despite consolidation at every level of the supply chain, oversupply remains fertile ground for innovation. Karavidas cautions, however, that new ideas must come with \u201cpre-emptive forethought on how to get to daylight and profitability when you\u2019re selling wines extremely cheaply.\u201d There are multiple examples of brand blockbusters born out of oversupply, probably the best known of which in the U.S. is Bronco\u2019s Charles Shaw or \u2018Two Buck Chuck.\u2019 \u201cIt was a product of that oversupply between 2000 and 2008. I remember seeing nine-page contracts to purchase 250,000 gallons of Napa Valley Chardonnay for 50 cents a gallon.\u201d The brand remains as relevant today \u2013 even though 20 years on it would be fairer to call it \u2018Four Buck Chuck.\u2019
\nBuyers can find whatever they want and start a private label. But if you\u2019re capitalising on the amazing deals available, there\u2019s the need to maintain a consistent product if you\u2019re going to find commercial success.<\/p>\n

Bulk wine broker Adam Schulz<\/strong><\/a><\/span> of the Incredible Bulk Wine Company in Washington State has similar recollections: \u201cThere\u2019s a famous buttery named Chardonnay in the U.S. which started out when they just bought lots of bulk wines available on the grower market, gave it a buttery name and it took off like wild fire,\u201d he recalled. \u201cSo they hired a winemaker and viticulture consultant, had a pre-harvest plan the following year and grape contracts to build it from the ground up to ensure a consistent style.\u201d
\nSchulz says in the current buyers\u2019 market, there could be similar opportunities, but also potential pitfalls. \u201cOpportunistically, buyers can find whatever they want and start a private label. But if you\u2019re capitalising on the amazing deals available, there\u2019s the need to maintain a consistent product if you\u2019re going to find commercial success. The greatest risk of the death of a private label is if you\u2019re not able to keep the juice consistent in the bottle.\u201d<\/p>\n

Private label edge<\/span><\/strong><\/h2>\n

Private label is undeniably one of the most promising opportunities for absorbing the current oversupply of wine, ticking many boxes including the preservation of brand integrity. \u201cSomewhere between 50% and 60% of the European Union\u2019s retail wine is private label into the major chains, the Tescos and the Asdas,\u201d explains Karavidas. \u201cWe\u2019re roughly 10-12% in the United States, but we\u2019re going to move very quickly. Private label is going to be a big swath of this inventory as retailers in the U.S. very much embrace their control.\u201d<\/p>\n

Schulz concurs: \u201cPrivate label is a good way to siphon off oversupply and develop stronger retail relationships, perhaps in a stronger sense than with your own label.\u201d<\/p>\n

The current dynamics of the U.S. market make European suppliers particularly well positioned to leverage the private label business. The share of imports since the last major oversupply period has surged from around 12-15% to as much as 40%, with pre-tariff stockpiling compounding this trend. \u201cThere\u2019s upwards of 70,000 to 100,000 acres of vines that have been removed out of California now. That\u2019s potentially 700,000 tons of grapes that don\u2019t exist anymore, which is roughly 25% of the grape market for wine,\u201d says Karavidas. \u201cWhat\u2019s key is that most of the vineyards are in the Central Valley and Northern Interior \u2013 that\u2019s where the $6 to $15 price point comes from in California. We cannot replace those grapes for that price point out of the coastal regions, so those wines are going to come from importing, and this is still going to be mainly France and Italy, despite the tariffs.\u201d<\/p>\n

Fresh money, new perspectives<\/span><\/strong><\/h2>\n

The categories where many see opportunity to capitalise on the oversupply include niche varietals, white wines, specialty wines, RTDs, no-lows and different packaging formats, particularly single-serve in an era of moderation and a growing need for responsibility within the industry. But Karavidas says there are caveats: \u201cThere is a chasm between market demands and supplies. What the market is demanding and what is actually available are slightly, if not completely, different.\u201d<\/p>\n

Also, leveraging those opportunities requires capital. Aside from the large players \u201calways ready to jump in where there\u2019s an opportunity to move inventory,\u201d Karavidas says some of the funding may well need to come from outside the industry. Among the potential sources, he cites companies like the Californian food giant Wonderful, which owns the Justin Winery in Paso Robles and is looking to add other wine producers to its portfolio.<\/p>\n

\"Plusieurs Photo : Waitrose \u00ab Loved and Found \u00bb (c) Waitrose<\/p>\n

Schulz shares a similar view: \u201cIt feels like the companies that are growing and are successful in this upside-down wine market tend to be from outside the wine industry. They have a unique viewpoint on what the packaging should look like or what the message should be. They\u2019re not stuck on the traditional model and they\u2019re able to capitalise on private label or new label development or new concept packaging development and are finding quite a few suppliers willing to help them.\u201d<\/p>\n

Celebrity brands are one piece of this puzzle. But within the industry itself, companies are scrambling to grasp opportunities which Karavidas says may not happen again for decades. \u201cRussian River Pinot Noir producers selling for $4 a gallon aren\u2019t just going to make wine again and look to sell it on the bulk market when pricing is that low. I\u2019m saying we\u2019ve got a window of 18 to 24 months when we\u2019re going to skid along the bottom and then be faced with reality: What does it cost to grow grapes and make wine? And then we\u2019re all going to get a lot smarter.\u201d<\/p>\n

Turning flexibility into opportunity<\/span><\/strong><\/h2>\n

In the UK, supermarket chain Waitrose launched its \u2018Loved and Found\u2019 range based on the concept of one-off parcels. Its former global bulk wine sourcing buyer, Barry Dick MW, comments that \u201cIncreasingly you will see retailers set up ranges like this. I don\u2019t think the oversupply of wine is going to go away any time soon, especially at entry-level.\u201d<\/p>\n

Fellow British wine importer and distributor Boutinot is also scrutinising potential opportunities afforded by excess inventories: \u201cWe are independent and can pivot quickly,\u201d explains marketing director Deborah Brooks. Whilst recognising that achieving consistency over time can be a challenge, her solution in a risk-averse climate is to \u201cmarket it slightly differently, as a selected edition for example. If we present something that is quite different, it will go outside the tender process. And if it\u2019s good, and if it\u2019s right for their company, buyers will find a way of getting it into their selection.\u201d<\/p>\n

These examples point to what may prove to be the defining test of this cycle \u2013 the ability to remain agile, inventive and commercially grounded in the face of surplus. Discounted prices may clear tanks, but those who succeed will be the ones who view oversupply not as a burden but as a catalyst to reconnect with consumers and restore balance.<\/p>\n

About the author<\/span><\/strong><\/h3>\n

British-born Sharon Nagel<\/strong><\/a><\/span> has been a journalist and translator specialising in wine for 35 years. She writes for leading French online publication Vitisphere and also contributes to corporate communications.<\/p>\n","protected":false},"excerpt":{"rendered":"

Surplus strategy: Why full tanks are a unique opportunity to innovate and recalibrate the industry It\u2019s tempting to view the current global oversupply as a shortcut to winning back consumers through lower prices. 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