Tough(er) Times Ahead

A piece originally published by Meininger’s Wine Business International

Sooner or later, what goes up, usually comes down.

Historically, the US has had 14 recessions since the crash of 1929 and, between 1960 and 2007, according to the International Monetary Fund, 21 advanced economies were in recession 10% of the time, often as a result of local conditions.

Over the last half century, there have been global recessions in 1975, 1982, 1991, 2009 and 2020, a frequency pattern suggesting that we were overdue for a downturn in 2020, even if a pesky little virus hadn’t showed up. 

The Covid Recession differed from others in having little upside. Unlike wartime, for example, when the population is kept busy and defence spending can temporarily boost an economy, the pandemic simply turned off the taps, while costing unthinkable amounts of cash.

Then came Putin’s war with Ukraine.

The question today is not just whether the world can avoid another global recession or set of local ones, but how it is to handle low growth with levels of inflation to which nearly two generations are unused. Prices are rising by over 10% in Germany and the UK. The last time that was happening in Britain was in 1981. In the US, the figure is 8.3%. Better, but still painful.

Worse still, the rise in the cost of essentials - heat, light and food - is higher. Food inflation in Germany in September 2022 was 17.7%. In Britain the equivalent figure was 14.6%.

The wine industry is caught in a double bind here. Its own rising costs - energy, raw materials, logistics - are forcing producers to put up prices at precisely the time when customers will have less money to spend on their product.

Middle-Income Feeling the Pinch

There’s another problem that is particularly acute in the UK, historically a vitally important market for wine. More