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Allegrini 2018
THE STATE OF WINE

2020 for Italian wine: turnover -10% to -20%, and very few exceptions

WineNews survey on 35 of the topmost Italian wineries (total turnover over 2.5 billion euros). Many are worried about the future
2020, italian wineries, ITALY, TURNOVER, WINE, News
2020: turnover is down (with few exceptions) while Italian wine is suffering but resisting

It has not been a defeat, as everyone had feared between April and May 2020, when many wine producers from all over Italy hypothesized that 2020 would close at less than 40% in turnover. However, this year of the pandemic has been very tough on Italian wineries. The WineNews Survey 2020 included over 35 of the topmost Italian wineries for strength of their brand, size, turnover, history and presence around the world, which together totaled a turnover of more than 2.5 billion euros (2019 data), and here are the results. For the most part, the end-of-year balance sheets that are being drawn up in these hours, at first glance, register declines ranging from -10% to -20%, with very few exceptions, both better (some wineries registered a decline of -8%, while there were some companies fluctuating a lot abroad and a historical presence on multiple channels, including modern distribution, which are declaring a maximum growth of + 7%,). Then, there are the worst ones (in very few, extreme cases, reaching -30%, especially for those companies focused on HORECA, hospitality in the winery and catering concentrated in the big art cities, which have seen a collapse in both international and Italian tourism). Consumption, overall, in volume, has been stable, to the detriment of values. Further, the survey deliberately did not include the fundamental world of cooperation, which, as we have written about recently, appears to have held up well from the impact of Covid-19. Many companies have continued to grow, even though their budgets consider two years, as usual in the cooperative world, and therefore take into account a good part of 2019, which had been of overall growth for Italian wine. Plus, the beginning of 2020 started off very well, too, especially in January and February, before the pandemic from China would actually become global.
Testimonies of wine companies have indicated rather the same trends. Above all, and in the vast majority of cases, exports “saved” the balance of Italian wine. This was true, moreover, in monopoly markets, such as Canada or Scandinavia, for instance, as well as all those where the difference between the HORECA channel and modern distribution, in terms of overall offer, is definitely less manifest and polarized than in Italy. What really made the difference, especially in markets such as the United States of America and the United Kingdom, which are very important for Italian wine, and where catering has suffered at least as much as in Italy, was the ability of importers and distributors to move part of the sales from restaurants and bars to liquor stores and supermarkets. Another critical element that has emerged clear and strong is the multi-channel approach. This had been an organic and historicized strategy for only a few, and has become an obligatory choice for many, on a path that will not stop after Covid-19. It will lead many wine companies to rethink a less clear-cut and polarized division between out-of-house channels and those for domestic consumption. Furthermore, the damage to wine producers has been limited since traveling and events were forced to stop. Of course, on the one hand, selling wine, (and any other business) is a very complicated job that is made up of meetings, contacts, visits, tastings, fairs and so on. On the other, it has led to considerable savings in this very challenging year, which, in many cases, has eased the damaging effect of lower sales.
The chapter on the E-commerce channel. There has been an obvious boom, as increases have gone up to +300% in some cases. Online sales are still managed directly by the winery, and through specialized portals, and in advanced cases, it is worth only a few percentage points in turnover (around 2-3% on average, and peaks of 5%). Many have pointed out that this channel, not only in Italy, but also abroad, will be more and more important in the future, because of consumer habits. Therefore, it will have to be rethought in strategic terms, as a structural channel, such as HORECA and mass retail, and no longer as an accessory.
The brands of wine companies will always be essential to maintaining budgets. Studies on the subject, in addition to testimonies from wine producers have emphasized that wineries in Italy and around the world, which have resisted the best, are those that have historical brands, are well positioned, well-known and above all, reassuring. They are capable of intercepting consumer trust, an aspect that especially over recent months has more than ever made a difference. The catering crisis, in Italy and globally, has done the most damage, as we know. It is still far from over, together with tourism in all its forms, from purely pleasure to business. It was very limited at the national level, if not for a short, but very important summer break. The trade business was practically eliminated, just like the entire channel represented by airport and rail station duty free shops, cruises and banquets, which for some companies represent key items on their financial statements. Although the damage is evident (according to many it is even more substantial for many small producers, as well as for large companies that do not have as established or strong brands), it has so far been absorbed quite well by a sector that, once again has proven to be more resilient than others. However, most are worried about the future, even if many try to take a moderately optimistic look at things. The first great uncertainty, of course, is related to the management of the health emergency, including all the strict limitations to travel and consumption outside the home that we know. But, the vaccination campaigns have begun almost everywhere, which bodes well. According to the vast majority of companies, this situation will characterize at least the first half of the year 2021. Many are hoping to return to something similar to normality in the second half of the year, trusting in a sprint in catering like the one registered in Italy after the first lockdown phase, especially in the summer. It seems that the desire to go back to eating in restaurants and visiting territories will certainly not fail; however, it is clear that the real economic possibilities in the pockets of consumers will have to be evaluated. There are purely economic issues to consider as well. In the US, for instance, besides the pandemic and domestic political issues, the weakness of the dollar is disturbing, as it could slow down any type of recovery. As far as Brexit is concerned, at the moment, due to the agreement between the UK and the EU, the introduction of duties has been averted. It will definitely be necessary to understand how the UK economy will be affected by the country’s new status. There is a bit more confidence in Asia, which seems to have substantially overcome the pandemic and returned to almost complete normality. In general, though, apart from exceptional cases, it still weighs little on the balance sheets of wine companies. There is an aspect on the other hand, though, that does give confidence to many. It is that while in general orders in the world have dropped in 2020, the reason is that many importers and distributors have chosen to use stocks in stock rather than make new orders, which in perspective, should guarantee a cleaner and more dynamic market, at least in the first post-pandemic phase. According to most, a return to pre-Covid-19 levels, on the whole, will only really begin to materialize starting from 2022.

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