Between large-scale distribution (gdo) and on-line, the crisis seen by the Italian wineries

With the on-trade stationary for more than a month - since the beginning of the lockdown decided by the Government to overcome the Covid-19 health emergency - and with the certainty that it will be for a long time yet, Italian wine on the domestic market relies on the large-scale distribution (GDO), which is showing comforting numbers, substantially holding up if not growth, and e-commerce, which is registering an impressive evolution in percentage terms, but starting from a decidedly marginal share. In a framework that, obviously, does not compensate for the forced closure of restaurants and bars, which are fundamental consumption channels, especially for the most valuable wines. A situation never seen before, which now affects to the same extent the vast majority of markets around the world, where, however, something continues to move, at least until now, in important markets such as the USA and Germany, but especially in the Scandinavian countries and Canada, where the Monopoly regime guarantees a solid, active and growing channel.
In any case, the real emergency, linked to the huge market slowdown, is now the liquidity crisis. Which we need to support now, because the campaign and the vineyard are moving forward, and they need to be followed. Here are the highlights that emerged from the analysis of the entrepreneurs of some of the most important wine realities of the Belpaese, large companies and small wineries, groups with realities in several territories and cooperatives that have long focused on quality, with names like Antinori, Ferrari, Bertani Domains, Castello Banfi, Tommasi Family Estates, Tasca d’Almerita, Planeta, Barone Pizzini, Marchesi di Barolo, Allegrini, Zenato, Umani Ronchi, Arnaldo Caprai, San Michele Appiano, Damilano, il Poggione and Masciarelli (all interviews in the in-depth analysis), with voices from the main wine territories of the Belpaese, from Valpolicella to Langhe, from Montalcino to Alto Adige, from Franciacorta to Sicily, from Umbria to Marche, to Abruzzo. All agree, and it could not be otherwise, on the gravity of the moment, but also on the difficulties they will have to face in the coming months, between the need for liquidity and consumption that will start again very slowly, trying to recover as soon as possible a normality that will probably be different from the one we have known until now.
“Large-scale distribution is certainly an important outlet - underlines Renzo Cotarella, managing director of Marchesi Antinori, the most important private reality of Italian wine - as it is important that families and people who drink at home, can have access to wine. Also online the numbers are important, especially for the most valuable but relative bottles. In the sense that e-commerce grows a lot, but starting from small numbers. What's certain is that buying via internet becomes an attitude even for those who weren’t there before, for wine and not only, and it could consolidate and become normal in the future”.
He is echoed by Matteo Lunelli, at the helm of the Ferrari sparkling wine label, and of the Lunelli Group (and president of Altagamma, ed): “on specialties, reserves, and everything that is high-end, online is also able to bring important bottles to enthusiasts, but from a dimensional point of view, obviously the most important channel is distribution. We, like Ferrari, have a fairly balanced market between large-scale distribution and horeca, but we say that during the year, excluding the Christmas holidays, most of our volumes are in bars and restaurants, and now there is a lack of aperitifs, festive celebrations, which are a fundamental moment for the bubbles. Consumption is growing at home, but you will have to see how you will get to Christmas, there are really important volumes there. But it is essential that bars and restaurants also take over, they are fundamental partners for us. Today it is clear that the most important channel is large-scale distribution, on-line is growing and will grow in the future, but we are still talking about very small percentages”.
“It is clear that organized distribution is the one that can help the most, the level of absorption of volumes is high - underlines Ettore Nicoletto, managing director of Bertani Domains, one of the most important groups of Italian wine, with wineries in Valpolicella, Montalcino, Chianti Classico, Montepulciano, Friuli Venezia Giulia and Marche - and it is therefore logical that overall it is the most important channel. It is equally clear that, in just a few weeks, you don’t develop a strategy in large-scale distribution, either you’re there or you’re not, so it is very difficult for a wine company to quickly make a switch from one distribution approach to another. It's different for e-commerce platforms, where there are enormous growths, but there's still talk of a small size of the business, which certainly doesn't shift the bar. It must be said that this emergency has highlighted the importance of e-commerce and delivery, and I believe that structurally the level of consumption of this type will also rise at a later stage. On exports, many strategic countries are also in lockdown, where there is a large distribution important for wine a certain flow of exports could continue to exist, elsewhere the contractions will be very strong. It will be tough for the coming months, I am an optimist but the evidence is such that we must expect a period of standstill or a long slowdown, and another important channel like travel retail will also suffer a lot”.
According to Enrico Viglierchio, managing director of Castello Banfi, one of the leading realities of Brunello di Montalcino and not only that, “today’s large-scale distribution confirms itself at the levels of 2019, and this is a positive fact, but it is also the only channel that is holding, even if after the exploit at the end of February and the beginning of March, with a hoarding effect driven above all by mid- and low-end wines, it is normalizing. Online, on the other hand, is growing at double if not triple figures, but starting from a share of 1% of total sales it certainly cannot make up for the disaster that Horeca is experiencing, but it was predictable, because alone, between restaurants, bars and wine shops, it is worth over 50% of the market. I predict, however, that even in a situation of return to normal, online as a channel will maintain - continues Viglierchio - the trend of growth: new consumers have appeared, maybe not all will remain, but a good part will still buy online, which, in the short term, could reach 3-4% of total sales. We must then make a distinction between pure online - that of Tannico or Vino75, for example - and that of wine shops that have developed an online channel, which will maintain it in the future. It is difficult, at the moment, to understand the extent of the overall drop in sales but certainly all summer consumer products, and therefore whites, will suffer greatly, given the many doubts for the tourist season, while I see less problems the prospects of Brunello, which can be managed over a longer time horizon and concentrates an important part of sales on the last quarter of the year”.
“As a group, on a global level, our turnover is divided in half between horeca and retail - points out Pierangelo Tommasi, based with Tommasi Family Estates in Veneto, with estates in Valpolicella and Soave, but also present in Lombardy, Lake Garda, Tuscany, Montalcino and Maremma, Puglia and Basilicata - while on the Italian market alone we have recorded an important increase in online sales, where we work with three different operators, but it is also good for the large-scale retail trade, with which we work but not with large volumes. We can say that the wines that have the most movement - underlines Pierangelo Tommasi - have two very precise characteristics: an affordable price, which does not mean entry level but a range that goes from Valpolicella Superiore to Ripasso to Lugana, and well-known denominations, which reassure the buyer. Wines with less media exposure or lesser known denominations are a little less attractive at the moment. In our case, with six wineries throughout Italy, the greatest demand is for Veronese wines, where our brand is historically more present and strong. It’s a type of reasoning that we can also replicate for various foreign markets: the world is basically experiencing a stop in catering, and what works, more or less well, is retail. There are markets that are more retail-oriented - concludes Tommasi - like the Scandinavian ones, where the only place you can buy is in the Monopoly, or in Canada, but also in the USA, with the big national wine store chains and the online one, which is growing rapidly”.
“E-commerce, beyond some logistics problems, is doing very well - says Alberto Tasca, at the helm of the Sicilian brand Tasca d’Almerita - and also the large-scale distribution gives good results, but they are not numbers able to make up for the work we usually do on the Horeca channel, which for us represents 90% of the internal market. Then, there is a small but discreet work done by the small shops, with someone who has managed to organize the delivery by selling even the bottles of the highest segments, but we are talking about very small quantities. Estimating the drop, both in March and the months to come, is impossible, it will take time to return to normal, but I think that certain changes, a bit like after September 11, we will carry them with us forever. Console - concludes Alberto Tasca - that the country, especially in the South, is behaving well, the lockdown seems to be working, but we cannot lower our guard, or we will have to do it all over again”.
Starting from the numbers, again from Sicily, Alessio Planeta, present with his estates in all the territories of Sicily, from Menfi to Vittoria, from Etna to Capo Milazzo and Noto: “those of March comfort us, with a drop of -9%, although we are aware that the decline began in the second half of March. We are a company linked to the Horeca channel, even if large-scale distribution is positive and we are working well on e-commerce, perhaps because brands work a bit better with the general public. We'll do the math, however, with the figures for April, usually a month of high consumption, with Easter and the beginning of spring. Moving forward, but very slowly, we need to enter into the perspective of a significant drop: already a 30% drop would be a goal to aspire to. It all depends on the time when the wave will run out: you can not and should not force the hand, but if, at the end of April, we began to predict a return to normal would already be a good result. Agriculture, however, is accustomed to the unexpected, both from a mental and entrepreneurial point of view: think of frosts, hailstorms, bad years. In Bordeaux - he jokes, but with great wisdom, Alessio Planeta - people used to say that you have to have the energy to resist three bad years out of ten: one for hail, one for frost and one for a relative who runs away with a dancer from Paris! If we take the high steps, giving credit to the productive system and economic help to those below, we will make it”.
In Franciacorta, one of the designations most linked to the internal market, Silvano Brescianini, in the role of general manager of Baron Pizzini (but he is also president of the Consorzio del Franciacorta, ed), speaks of a real catastrophe: “our privileged channel is Horeca, the large-scale distribution is only worth a small share, and after these months we will have to see not only when, but also how everything will start again. There is a double problem: on the one hand the turnover and the lack of sales, on the other hand the lack of turnover compared to the previous months, with the unknown of some activity that, probably, will not even be able to reopen. Online is, instead, reacting well, but at the moment both Italy and all the main markets are at a standstill. It is a situation never seen before, with work going on anyway, in the countryside for the wine we will sell in three years, and in the winery for what we will sell, hopefully, at the end of the year. If there is one thing that does not suffer, it is wine, whereas the biggest problem is liquidity, which we hope to solve with the decrees implementing the “Liquidity Decree” as early as next week, but they will probably be operative from May. Moreover - concludes Brescianini - it should be considered that when the country will start again it will not do it at the same pace it did before, it will be a slow restart, and this is true for the whole economic fabric and it will be reflected on consumption”.
From the Langhe, Valentina Abbona, who is in charge of marketing and foreign markets for the family winery, Marchesi di Barolo, points out that “for our line dedicated to large-scale distribution we are registering a slight increase, while it is on e-commerce that the growth is particularly remarkable, but we start from really low sales, which are not comparable to what is not coming from Horeca, which in Italy, a market worth 45% of our total, represents almost all sales. When the commercial activities, and therefore the restaurants, reopen, we will be close to them, but the situation is really difficult and it is impossible to say when we will start again. There are markets that instead see growth, at least in some categories: if bubbles suffer, red wines where there is a Monopoly see significant increases in sales. Something - adds Valentina Abbona - as individual companies, we will have to do, for example, by focusing on the direct online shop, which until now we had not taken into consideration, taken from other priorities: now there is time and opportunity, but safeguarding our message, carried out for years by sommeliers and restaurateurs, in philosophical and poetic terms, and which today passes for example through direct Instagram or Podcasts”.
From the observatory of Marilisa Allegrini, at the head of the historic Valpolicella winery (but also present in Montalcino and Bolgheri), “the large-scale distribution is holding up, demonstrating that there is room for growth, especially in terms of the quantity of bottles sold, but these are mostly low-priced wines, so that with the same number of bottles sold, sales are still affected. Online, on the other hand, is growing a lot, and it’s a clear fact: being at home everyone has to give up something, but not to spend an hour with the family sharing a good bottle. The numbers - recalls Marilisa Allegrini - are still very vague, so far we are at -15% but the next months will be much harder. Certainly there is the collapse of catering, and for a company like ours, which, from the Horeca channel, makes 50% of its turnover in Italy, Gdo and online do not compensate the losses at all. Then there are importers who are stocking up, but this is an advance on what will happen from now until the end of the year: for now we can only speculate, waiting to understand how and when we will start again. We need creative ideas and new forms to support our productions, but we certainly need to feel the closeness of Government and Europe”.
Remaining in Veneto, straddling Lombardy, between Valpolicella and Lugana, Nadia Zenato points out that “according to the company philosophy, we do not sell our wines directly to large-scale distribution, but only through distributors, so in this period of lockdown our only channels are wine shops, specialized stores and online, which is not, however, our channel of reference. For us, Horeca is worth 70% of the global market. Abroad, on the other hand, we work well with the Monopoly, as in Canada, and the US, but it's hard to say how long it will last. Certainly, there is that those who have worked over the years to position themselves on many markets, with a high image, have some more chances to resist and start again, without, however, running after the needs of the moment”.
Between Marche and Abruzzo, Michele Bernetti, underlines how for Umani Ronchi “the large-scale distribution channel is not one in which we are particularly strong: it holds up, but we expect a slowdown, while it is the small affiliates and the shops, albeit with marginal numbers, that do a good job. It is on foreign markets that the company has reacted better, especially where we have importers who have continued to sell. Where there are monopolies, therefore Scandinavia and Canada, we continue to work well, even marking interesting growth, because with the lockdown the sales of alcohol pass exclusively in the monopoly shops. Then there are markets that have never stopped, like Japan, which is slowing down only now, but which, however, between restaurants and wine shops continues to work. And then there’s online, which is going strong in the US. It’s not all stopped - concludes Bernetti - but the sum is obviously falling, especially on high-end products, which link sales to the Horeca channel. Returning to Italy, online sales have certainly grown, but these are numbers that don’t change the picture much”.
“After an initial period of propensity to buy in supermarkets, with the sharpening of the entry into supermarkets this growth, this partial recovery, is somewhat frustrated. The blockage is felt - underlines Marco Caprai, at the helm of Arnaldo Caprai, a pioneer winery of Sagrantino di Montefalco - people can’t take so many things away from the supermarket, and then the effect is also felt from a psychological point of view. Especially in the north, where the situation is the most critical, and where much of the country's economy revolves. And then you don’t understand when you will get out of this situation and how, while the support measures announced for now are not translated into anything really concrete. For online, something is moving, but even in the face of large percentage increases, we are talking about very small numbers. The real problem for companies is liquidity, so that they can at least grow crops. Hoping that there will soon be a reopening, at least partially, and that, from the beginning of next year, we can return to a normal life”.
From South Tyrol, on the other hand, speaks Hans Terzer, at the helm of San Michele Appiano, one of the cooperative realities of the Belpaese, which was the first to focus on the high quality of wines: “We’ve been in a standstill for two to three weeks, in March, the export has still pulled very well, we have to see from now on the foreign front. In Italy, of course, Horeca, which for us is the reference, is suffering a lot, while online sales are increasing a lot, but it only compensates a few percentage points of sales. For a couple of months or three, we manage to get by despite considerable losses, and we get ready to start, hoping that things will get better, but knowing that it will take a long time”.
Paolo Damilano, at the helm of the Barolo brand, adds: “We are among the most penalized producers, as is the Horeca distribution channel, that is, restaurants, wine bars, and wine shops. It is true that online is moving, we will see in the future, it is a channel that we have not given many incentives by choice because we think that our wines need a story to be appreciated and sold, to explain them, to make them understand, and this can be done by prepared waiters, prepared wine shops and so on. And hopefully, things will improve as soon as possible, our distribution network will be the same as ever”.
“We sell over 70% abroad, with 30% of Italy traveling through a single distributor - explains Fabrizio Bindocci, to the Brunello Il Poggione brand (and president of the Consorzio del Brunello di Montalcino, ed) - and direct sale in the winery. The distributor tells us that it is stopped both because wine shops and restaurants are closed and because there is difficulty in collecting even old credits. I’ve always been optimistic and I've seen many, but the situation is serious. The foreign markets for now, slowly, continue to work, in the U.S. from our distributor’s data on shipments already made, which as many had anticipated in January for the risk of duties, is selling, although slower than normal. Just yesterday we shipped to Austria, Germany seems to be continuing to work, albeit slower. Companies need liquidity, both to buy basic material, such as caps and bottles, and because the vineyard does not stop, of course, and you have to keep going. I have never been in a situation like this before, it is not only an economic problem but also a health problem, a problem of survival, and wine like many other goods is having great repercussions. I think that when the market restarts, people will continue to drink, perhaps they will appreciate wine even more. Large-scale distribution is not a channel in which we are present, e-commerce is not a direct channel, but our partners are doing it, and they tell us that a little bit everywhere is a channel that is doing important numbers, relative to its reach”.
A complex picture, as is obvious what emerges, and with darker than light colours, as is natural. Trying to look at it more positively is Marina Cvetic, at the helm of one of the symbolic realities of Abruzzo, Masciarelli: “right now the lockdown weighs heavily, of course, but we have to look at the positive things, to be “Zen”. We can focus on the campaign to make a great year and when we can get things back on track we will continue to grow. We follow the pace of the campaign, we have to stick to the rules, follow the directions and protect our health first. We work especially on the online, also in communication, with a video campaign aimed mainly abroad to say that we are there and that we will come out of it. On the market, we do not serve it directly, if not through our partners, but especially here in Abruzzo, at local level. We see, instead, an interesting movement on e-commerce through our partners, especially on the medium-high end lines”.