Italian wine: after the suffering of 2020, the rebound comes in 2021 (and 2022), thanks to exports

It has suffered the pandemic, Italian wine, but it is already ready for the rebound, which will be sustained as early as 2021, thanks mainly to exports. Because if the loss, overall, stopped at -4.1% of turnover in 2020 on 2019, looking only at the main wine realities (those with a turnover over 50 million euros, ed.), in the current year, estimates speak of growth of 3.5% on 2020, mainly thanks to exports. And, all things considered, profitability, for the top players, has not suffered much. But in addition to the economic picture, Covid has brought changes that will remain. From the weight of the purchasing channels, which has seen the growth of large-scale distribution and digital, even if the restaurant industry will regain space as the world overcomes the pandemic. To the polarization of consumption, increasingly shifted to higher and lower price segments, with greater difficulties for the middle range. From the growing importance of everything associated with sustainability and health (with the peculiarity of the growth of organic wine and the growth of biodynamic). All aspects to be taken into the utmost consideration in order to engage in a recovery that also passes through the restarting of trade fairs in presence, such as Vinitaly, fundamental for business, in Italy and abroad, but also from the awareness of an aggregation phenomenon of the fragmented productive fabric of Italian wine that, through mergers or acquisitions of companies, as many and important have been seen in recent months, or virtuous consortium projects, as the case of Prosecco Doc, among others, shows, is destined to intensify in order to allow companies to put together not only the critical mass of products, but also the more and more refined and in-depth competencies that will be needed to face a market that, also from a logistic point of view, is becoming more and more competitive and complex. These are the assets that emerge from “Wine and Spirits: the challenges of an Italian excellence - The structural change of companies and consumption in the post-pandemic scenario”, the first joint report on the sector signed by Area Studi Mediobanca, Ufficio Studi di Sace and Ipsos.
The numbers, in detail, say that 2020 of Italy's largest wine producers closed with a revenue decline of -4.1% on 2019 (-6.3% domestic market, -1.9% foreign). The ebit margin reported a slight contraction (-0.4% retreating to 5.8%, compared to 6.2% in 2019. Net income as a percentage of sales performed well, with a slight change from 4.2% to 4.1%. Sparkling wines lost more ground (-6.7%) than still wines (-3.5%). Cooperatives contained the drop to 2%. The large-scale retail channel saw its incidence rise to 38% compared to 35.3% in 2019 (in value it grew by +2.3%), HoReCa, contracted from 17.9% to 13.4% (-32.7% loss in value), while wine bars and wine shops went from 7% to 6.7% (-21.5%). Online sales exploded during the pandemic: +74.9% sales on proprietary web portals, +435% for specialized online platforms, +747% for generalist marketplaces.
A consequence of the fact that, in 2020, investments in digital of the major wine producers have increased by 55.8%, against a drop of -14.3% in overall investments and -13.4% in advertising spending. Companies with rising 2020 sales sold basic wine (less than €5) for 70.8% of their sales; a share that drops to 52.6% within the group of companies with declining sales. But the shift towards higher segments appears only postponed until post-pandemic consumption styles settle down. On the shields there is organic wine, with 2020 sales increasing by 10.8%, for a market share of 2.3%; vegan wine is holding its own (+0.5%, also accounting for 2.3% of the total). Biodynamic wines are still not catching on, falling by -21.9% and confined to 0.1% of the market. Lastly, 2020 brought development of 5.8% for wines packaged in alternative containers to glass (bricks, cans, bag-in-boxes), light, eco-sustainable, suitable for online consumption and in line with the interest of the younger generations in new products.
“That the sector has suffered is undoubtedly true - pointed out by Gabriele Barbaresco, Director of the Research Area of Mediobanca - but positive aspects have also emerged from this situation. From the fact that wine exports, after years of growth, have decreased, but less than Italian exports in general, a sign that companies have been able to cultivate the markets of the world, to the fact that 40% of the largest producers have seen their turnover increase and that profitability, all things considered, has held up”. And, as mentioned, 2021 shows positive signs: “data of the first quarter are still negative, but they must be looked at with caution - added Alessandro Terzulli, Chief Economist of Sace - because the comparison is also on the months of January and February 2020, which started with great pomp when the pandemic had not yet exploded. We look forward to a growing 2021, and even better 2022. We expect a strong recovery in established markets such as the US and Germany, but also in the UK, despite some difficulties due to Brexit, but also in countries such as China, but also Japan and Canada where free trade agreements with the EU help, as well as in northern European markets, but also in smaller countries such as Vietnam, for example”.
Certainly, the resumption of wine, as well as an improvement in the pandemic and economic situation, will be driven by some macro trends, as explained by Enzo Risso, scientific director of Ipsos: “on the one hand, there is a strong push towards naturalness, which is combined with healthiness, with well-being. On the other hand, there is an exponential growth of the "local", of the genius loci: people are looking for products rooted in the territory, that tell a story, that have a character. Moreover, there is a great attention to the reduction of sugar and meat consumption, which involves the consumption of lighter wines, but also what we call "spuntinomania", the need to have more convivial moments in the day, which opens up new moments of consumption. Moreover, as the attention for cooking is growing, the attention for wine-food matching is also growing, and in this sense the boom of online has greatly helped. The theme of "green identity" is also very strong, which is not only about being organic or not organic, but overall, it goes well beyond the product and concerns the whole way the producer operates. This is also why it is increasingly important to look at so-called narrative packaging, which tells not only the product but also the story of those who produce it. Another aspect that consumers are looking at, and which will be increasingly rewarding, is the active role of the producer for the benefit of the community in which it operates”.
Trends that can be found in the case histories of many realities of the wine industry. From that of Tannico, leader in Italian wine e-commerce, “born seven years ago as a simple online wine shop - said its founder Marco Magnocavallo - and then evolved by developing b2b services for wineries, including market analysis”, and that also thanks to the entry of Campari, which has taken over 49% (with a view to increasing to 100% in the next few years, ed.), has also acquired the French company “Venteàlapropriété”, an operation “that could lead to a consolidated turnover in 2021 of around 80 million euros", said Magnocavallo. Or like that of Italian Wine Brands, “the first Italian reality to be listed on the Aim list in 2015”, said CEO Alessandro Mutinelli, and which recently acquired Enoitalia for 150 million euros, creating a 400 million euro turnover colossus.
An operation, the latter, which is one of the many ways of aggregating the supply chain, as has always been the case, in a different way, with wine consortia. Like that of Prosecco Doc, directed by Luca Giavi, which, even in the year of the pandemic, accompanied the companies of the denomination in a process of growth. “In 2020, in spite of everything, we certified over 500 million bottles, more than in 2019, and we are the first Doc of Italy for volumes and values, so much so that almost 1 bottle out of 4 exported from the Belpaese is Prosecco Doc. It has been a difficult year, in addition to the pandemic we had to deal with Brexit, but our production system has held up well. And we are developing a multi-year program, with the new Board of Directors of the Consortium, which speaks of further development, including all those values that are not only economic, but also intangible, which must accompany the narration of the product. For 10 years now there have been those who say that Prosecco is a bubble, in many ways, there have been those who have tried to downplay the success of this denomination, but we have continued to grow, Champagne France is our fourth market, despite the fact that we have been disparaged. But, in the future, in general, even with the new CAP, the role of wine consortia will be more and more important, and there are many that are working well, such as that of Sicily DOC, just to make an example. But we must start thinking, at least in terms of size, as “European” denominations. And we still have a lot of work to do on the association between denomination and company brand, because once the promotion of the Consortium is over, the operator obviously wants to know where to go to buy the bottle”. Fundamental, as it has always been in the last 15-20 years, will be exports, with wine discovering new markets. As Nadia Zenato, at the helm of the historical winery from Veneto, icon of Amarone della Valpolicella and Lugana, tells us. “Abroad is very important, my father Sergio Zenato began to cultivate it in the 1970s, first in Germany, then in the USA, and today we are in over 60 countries. And we have been investing, for some years now, in China, with a dedicated brand ambassador. It has certainly been a difficult year, but diversifying our markets has allowed us to limit the damage. Among future markets, I would say there is a lot to be done in Asia and China, but also in the richest countries of Africa, such as Ghana, where opportunities are opening up for our wines. But we must also work on linking wine to other worlds, as we are doing with art and photography with the Zenato Academy, through which we involve young artists who use their language to tell the story of our work and our wine culture. We have many initiatives in the pipeline for 2021 and 2022, and in 2023 we will make our debut with an exhibition in the USA”.
Another way of bringing people together - and business, of course - is that of trade fairs which, after a year and a half of standstill, are restarting with great confidence in the future, as told by Giovanni Mantovani, Veronafiere MD: “in June, in just a few days, we had events such as Opera Wine, Vinitaly Preview, but also Motor Bike Expo and Innovabiomed, where exhibitors and buyers, including from various foreign countries, gave important signals. Many have told us that in just one day at the fair they have recovered the relationships lost in a year characterized by webinars and online meetings that cannot replace face-to-face meetings. There are three fundamental things to do at the fair: meet people, do business, but also see how far the sector has come in terms of innovation, on many fronts, including the very important one of logistics, also for wine, which in an increasingly complex and articulated geographical context must be understood and analyzed well. In particular, on wine, we are putting in place extraordinary events, even abroad. And it will be a choice that will be strengthened, because having the ability to operate in Europe, the USA and Asia will be fundamental for trade fairs. In China, for example, we have our own platform, thanks to which Wine2Asia will be staged in August, after several postponements due to Covid, and from September many events will start”. These will lead, in October, to Vinitaly Special Edition (October 17-19): “at the events in June, many producers and buyers told us that a handshake is worth more than many online activities”, stressed Gianni Bruno, manager of Wine & Food Vinitaly Veronafiere, “and Vinitaly in October will be a very important signal of the great restart, and we already have the participation of all the most important players in the sector. We are looking ahead to Vinitaly 2022, April 10-13, for which we are already sold out, with over 4,600 companies”. For an Italian wine that bites the bullet to get going again.