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Allegrini 2018
THE ANALYSIS

Italian wine between pre- and post-COVID: turnover could lose 2 billion euros

From the analysis of the Mediobanca Study Area, the pessimism of the main companies in the Belpaese: lockdown and Horeca stop weigh down

Waiting for the real restart, and the hoped-for rebound in consumption, in Italy and the rest of the world, to analyze of the moment that wine companies are experiencing, and 2020 still to be deciphered, is the Mediobanca Study Area, which published the survey on the Italian and international wine sector, which analyzed the economic performance of the 215 major Italian corporations with turnover in 2018 of more than 20 million euros, and aggregate revenues of 9.1 billion euros, and 14 of listed international companies with incomes over 150 million euros, which recorded aggregate revenues of 5.7 billion euros, before and after COVID, between consolidated figures and expectations, trying to predict the impact of the pandemic and lockdown on the Italian wine sector. Thus, an expected and understandable pessimism becomes clear, with 63.5% of companies expecting a drop in sales in 2020, with a drop of even more than 10% for 41.2% of entrepreneurs. The lockdown of the Horeca macro sector and the fall of world trade weigh down, estimated by the World Trade Organization at between 15% and 30%. Concerning exports alone, 60% of companies expect a drop in sales in 2020, and 37.5% expect the drop to be more than 10%. A worse picture than in 2009, when 60.6% of wine companies suffered a drop in sales, with a drop in turnover of 3.7%, and with falls of more than 10% affecting 24.2% of wine companies.
53.4% of the cooperatives, which are more linked to the mass market and distribution through large-scale distribution than Horeca, have made less pessimistic forecasts for 2020 on turnover than those of Spa and Srl, 68% of which expect a decrease in the current year, while the share of cooperatives expecting falls in sales of more than 10% stops at 26.7%, compared to 50% of the others. The distinction by type of product also leads to different expectations. In this case, the producers of sparkling wines express less negative expectations than the others. Among the former, 55.5% expect losses in turnover, with a contraction in exports of 41.2%, a share that rises above 65%, both for losses in turnover and exports, for the others. These estimates are affected by the greater seasonality of sparkling wines, whose sales are growing significantly, especially during the year-end holidays, a period in which it is hoped that the health crisis will be fully overcome.

In general, if it is assumed that Italian wine exports will decrease in line with the fall in world trade assumed by the World Trade Organization, an export contraction for the major Italian producers in 2020 is estimated to range between 700 million and 1.4 billion euros. As for the domestic market, given that approximately 65% of national sales are conveyed by channels other than large-scale distribution, a loss of over 500 million euros is estimated until mid-May. Assuming for the coming months a reopening of non-GDO channels at a rate of 30% below the previous year’s levels, there would be a further reduction in turnover of €500 million. A scenario that leads us to estimate, in 2020, an overall contraction in turnover of around 2 billion euros, the result of lower domestic and foreign sales, with an estimated reduction of the sector between 20% and 25% compared to 2019.

Going back, the preliminary data for 2019 indicate that the major Italian producers closed last year with a 1.1% growth in turnover, a modest result compared to the previous four-year period (2014-2018), in which sales grew at a rate between +6.7% in 2018 and +4.7% in 2015. The slowdown in 2019 is attributable to the negative dynamics of the domestic market (-2.1%) in contrast with exports, which grew by +4.4% compared to 2018, even if far from the +7% growth of the three years 2015- 2017. The turnover of Spa and Srl grew by +3.2% (+5.1% abroad), while cooperatives showed a decrease compared to 2018 (-1.9%) due to the contraction of the domestic market (-4.4%,) partially compensated by the expansion of the foreign market (+1.8%). Sparkling wines also slowed down in 2019 (-0.2%), while non sparkling wines grew by 1.5%: for both sectors, the contribution of exports was important (+3.2% for sparkling wines, +4.6% for others), compared to domestic sales in decline (-2.4% for the former, -1.9% for the latter).

Capital investments in 2019 were down 15.9% over 2018, after four years of strong growth. The most important reduction is that of sparkling wines (-23.9%) followed by Spa and Srl (-16.7%). Employment holds on, an increase of 2.6% on 2018. The pre-balance sheet turnover in 2019 confirms the three major Italian players: Gruppo Cantine Riunite & Civ at 630 million (+2.9% on 2018), within which GIV invoiced 406 million (+4.7%), followed by Caviro at 329 million (-0.4%) and Marchesi Antinori at 246 million (+5.3%). Followed by Casa Vinicola Botter at 217 million (+10.9%), Fratelli Martini at 210 million (-2%), Casa Vinicola Zonin at 205 million (+1.4%), Enoitalia at 199 million (+9.7%), Cavit at 191 million (+0.5%), Santa Margherita at 189 million (+6.8%) and, in the tenth position, Mezzacorona at 187 million (-0.8%). Casa Vinicola Botter is export champion in 2019 with 93.7% of turnover, followed by Farnese with 92.0%, Ruffino with 91.4%, Fratelli Martini with 86.1%, Mondodelvino with 83.3% and La Marca with 82.8%.

Focus - The stock exchange index of the wine companies
From January 2001 to April 3, 2020, the total return (including dividends distributed) of the world wine stock exchange index rose by 222.5%, above the world stock exchanges (+129%). The total capitalization of the 52 companies making up the index improved by 8% between March and December 2019, before suffering a sharp loss of 30% in the first quarter of 2020, following the COVID-19, falling to €35.8 billion at the end of March 2020 (compared to €47.4 billion in March 2019), burning in three months almost the entire growth of the last five years.

Focus - Sustainability: among the largest, only 30% of companies sustainability report, 25% do not talk about it
Out of a total of 39 companies with a turnover exceeding 60 million (5.2 billion aggregate turnover), 7 companies (1.6 billion turnovers, 31% of the total) draw up a sustainability document, in 6 cases it is the Sustainability Report and in one case only the Environmental Declaration. In terms of sustainability certification, 5 companies have joined the VIVA Ministerial Project, one company has obtained Equalitas certification. 20 companies (2.3 billion, 44% of the total) report on their websites some information on sustainability, mainly environmental aspects and quality certifications, in half of the cases in dedicated sections. The remaining 12 companies (1.3 billion, 25% of the total), 60% of which are family-run, not refer to sustainability on their websites.

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