Bear markets, chickens and wine

Posted on | July 30, 2008

This is just a short note to highlight what could be an interesting review at the year end, at least as far as the UK wine market is concerned. For the last ten years consumers have benefited from a strong currency vis-a-vis the US dollar and Euro, low rates of interest and low inflation. Their properties have risen to staggering values fueling credit opportunities. Now, this is all changing and it will be interesting to see how the economic circumstances of the current period impact. Living costs are rising, the pound is going down, the tax take is not decreasing, property is going down, and there is a credit crunch. Selling any product to consumers is going to get a lot tougher. It’s worth noting that in the last few months if you’re in the premium or luxury market sales have been good. This doesn’t necessarily transfer to higher market capitalisation as earnings multiples are not being upheld. 45 of the largest 350 companies quoted on the London Stock exchange have lost more than 70% of their value since their peak during the last 18 months. The UK’s Chancellor of the Exchequer described the slowdown in the UK as ‘profound’ whilst a reputable thinktank referred to the UK economy as a ‘horror movie’ (The Ernst & Young Item Club). The outlook for the next year at least is gloomy.

Worse, for those focussed only on on-trade sales (sales through hotels, bars restaurants etc) a recent survey in the Observer newspaper reckoned that people’s top sacrifice was eating out - twice as many giving this up compared to holidays or the gym; even more than donations to charity.

According to a report in the Guardian newspaper (25th July, 2008) allotments are in demand and people wanting to own chickens outstrips supply. Could this also translate to vineyards?

So, let’s lay down a marker and see where we go from here…

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