Allegrini 2018

Italy is the leader in wine exports but the price per liter is lower than average on its top markets

Italy has the highest concentration on the first 10 destination markets
Gabriele Barbaresco of Mediobanca

Italy is one of the largest wine producing and exporting countries, and also boasts the highest concentration on its first 10 markets. The HH index, which measures this parameter, touched 1.108 points for Italy, 729 for France and 631 for Spain. There is also another unusual aspect, though. On markets where Italy has a stronger market share, prices are lower than the others. So, on its first 3 markets (which account for 53.5% of exports), the average price of Italian wine is 3 dollars per liter, which increases to 3.8 dollars on the 7 markets that follow(which however weigh “only” 24.7%. This is not the case for France, which sells at 6.3 dollars per liter on the first 3 markets -worth 38.6% of its exports- and 5.6 dollars on the following 7 (which weigh 36.3%). And, it is not the case even for Spain, which in both cases exports average 2 dollars per liter. This situation has a lot to say about how much work there is to do on the subject of value, as Gabriele Barbaresco, Head of the Centro Studi of Mediobanca explained, at the Federvini Meeting, in Rome.
“Italy works with these two opposing aspects”, he told WineNews, “that make for a very strong export capacity, and the paradox is that on markets where it has a larger share and is leader, it sells at lower prices than average, while none of its main competitors does the same. This situation can be explained in two ways. On the one hand Italian wine, even though its unit price is growing, still has not been able to make the market acknowledge an appropriate price for its real value. On the other, the sector still has a “shy” approach towards the most distant markets, especially in the Far East, where clearly there are more risks but also more opportunities, and where the chances of getting higher prices are better, due to growth in these "upper class" countries”. Another aspect is the size model of Italian wineries, which are often small, still linked to strictly a family management, and not inclined to open up to external capitals and management, although both phenomena have been increasing in recent years. This model has worked well until today. Now, though, in an increasingly global and globalized scenario, “it is a bit outdated and beginning to show its limits. The ability to manage markets efficiently far and wide requires an adequate size, and if we examine the budgets of companies”, emphasized Barbaresco, “this aspect emerges quite clearly. Larger companies have much more profitable and satisfactory margins than smaller companies, which, although they have positive results, do not have an adequate profitability profile for business risks. In my opinion, the effort for size growth is an obligatory path, but it clashes with the family structure, which is closed to the opening of many wineries. It is no coincidence that the biggest companies we have in Italy are cooperatives, which have aggregated many small producers. However, wine is a profitable business, as is food in general and wine, in particular, is the flagship of Made in Italy production, and one of the fastest growing sectors. This is the reason why the producers’ expectations for 2018 are positive. Analyzing the sector, in spite of the positive picture, there is a bitter aftertaste, which comes from the unspoken potential, and the awareness that more could be done if there were a willingness to make an effort towards the modernization and managerialization of companies”

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