SMALL COMPANIES PUSH FOR “MADE IN ITALY” IN THE WINE WORLD. THE RESULTS OF A MEDIOBANCA SURVEY: “IN 2006, EXPORTS WERE GOOD. ENTREPRENEURS POSITIVE ABOUT 2007”

Small companies, cooperatives, and family run businesses have managed to withstand international competition and increase earnings (+5.1%), profits and exports in 2006. And their prospects for 2007 are optimistic.

This is the positive result that has come out of the survey conducted by the Studies Office of Mediobanca (its 8th edition), which questions 85 of the most important Italian winemaking enterprises with an earning of over 25 million euros (representing 36% of national production in 2005, equaling 9.7 billion, and 53% of total exports, equaling 3 billion), and the nine biggest companies quoted internationally.

In 2006, Italian companies received increasing favor towards their wines, to the detriment of other alcoholic drinks (above-all beer) in Anglo-Saxon countries and emerging countries like China.
And there has been an upswing in internal consumption as well after a fall of 1.6% in 2005.
In 2006, the companies that were surveyed, registered an increase in earnings of 5.1% at over 3.6 billion euros, compared with a substantially stable 2005 (0.3%), thanks to a growth of 7% in exports in terms of value, while the national market increased by 3.3%.

The export quota in 2006 rose by 45.5% (versus 44.6% in 2005), aided by a weak euro throughout the majority of last year. And the profitability of Italian enterprises has grown decidedly over the past year. In 2005, net profits (+26%) represented 3.7% of earnings, the highest earnings of the past five years and which can be considered a defect given that the proprietary structure of Italian companies (cooperatives and family run) are traditionally less predisposed to maximizing their profits when compared to large foreign, stock-quoted companies. Earnings on invested capital (ROI) however, stable at 7.7% in 2005, were better for Italian controlled companies (9.7%) compared to cooperatives (3.4%), which lack some productive phases, and are made up of over 20,000 associate members.

The panorama of Italian companies remains, in large part, that of small and very small realities (the cooperative Caviro, with 280 million euros in earnings, is at the top of the Italian classification, while the American equivalent, Constellation, earns 3.9 billion) and mostly family run. And though they receive sufficient credit from the financial system, they remain reluctant to grow or have market shares.

The sector manages to defend itself and improve its position by increasing the labels produced (+31% between 1996 and 2007) and that of “important” wines, costing over 25 euros (+10%), and even diversifying production in different regions.
There has been a notable increase in attention towards advertising (+12% in spending for 2005). And technical investments remain high at 228 million euros, while the property structure remains solid with a rapport between net capital and financial debts at 91%. The biggest sales channel remains large-scale distribution, which absorbs 44% of national sales and 51% of cooperative sales. Hotels, restaurants and wine bars sell most of the expensive wines (71% of total).

In 2006 the foreign wine market “giants” (which make up the global index of Mediobanca) registered a consolidation with the acquisition of Canadian company Vincor by the American company Constellation. Market value between 2001 and 2007 has witnessed an increase of 91% which, in 2006 alone, was equal to 21.5% compared to a stock increase of 16%.