MPS BANK FORUM ON ITALIAN WINE: THE “MAIN DRIVER” IS EXPORTS. 2011 WAS A RECORD YEAR BUT 2012 LOOKS NOT SO ROSY. HERE IS THE ITALIAN WINE SCENE ACCORDING TO MPS BANK

Export is confirmed the “main driver” of Italian wine. 2011 was a record year for the industry, especially thanks to a robust foreign trade (though increasingly focused on tap wine), but 2012 might not be quite as rosy. This is the Italian wine industry scenario, according to the Monte dei Paschi, MPS Bank analysis of the strong and weak points of the Italian wine world at the second Forum on Italian wine held on November 25th in Siena.
After the rebound in 2010, Italian wine production in 2011 was down to 42 million hectoliters, the lowest amount in the last 10 years. The decrease continues for domestic consumption: in the last 30 years the per capita consumption has fallen 50% and in the first 8 months of 2011 large distribution bulk purchases are continuing downhill and registered a further 1% decrease. Even purchases of wines and sparkling wines in the same channels are not encouraging: the amount spent between January and August 2011 increased by a very modest 1%. Foreign trade, then, is definitely the “main driver” of Italian wine demand. The year 2011, which follows a very good 2010, is confirmed as an excellent year for foreign trade: the first semester closed at +13% in value and +8% in volume. Italy is still the number one world exporter in volume, with an average 19.2 million hectoliters of wine exported in the last five years, but it is still second to France in value. In the first semester, Italian exports exceeded 11 million hectoliters, probably making 2011 a record year for Italian wines exported in both volume and value.

In the last two years, Italian wine companies, while maintaining their positions in “mature” markets like Germany and the U.S. that alone absorb an average of 47% volume and 43% value of Italian wine exports, also gained space in emerging markets like Russia and China.
In Russia, Italy is the leader of exports in value. In China, even though Italian wine imports are on a continual rise, Italy is still having difficulty finding its niche on the market: only 6% of the imported wines are Italian while 46% are French. Besides marketing, this is because of a lack of knowledge about high end wines due to French competition, while mid range wines cannot hold up to the Chilean and Australian competition.
In 2010 wine companies registered a rebound, after the 2009 downfall. The ratio financial expenses/Mol (operating income margin) are continuing to decrease, thanks to the reduction in the cost of foreign financing. A mid-term analysis revealed that these companies show a good level of performance linked to earnings, financial soundness and liquid assets. In 2010 the agricultural companies recovered only part of their 2008-2009 losses. The cooperatives, instead, show a slight decrease in 2010 after the stability of the year before. The income-operating margin therefore grew in 2010 because reduced production costs were higher than earnings.

2011 should, therefore, be a positive year for the wine industry: the decrease in Italian production and a big worldwide demand have had evident effects on prices that rose steeply, particularly at the beginning of the new campaign, confirming the trend started at the end of 2010, though with different modalities according to color and quality level. The grape market is also definitely on the rise. Even the climate of trust for the third quarter 2011, calculated by Ismea (Institute of services for the agro-food markets) and the Observatory of MPS Bank, confirm higher trust in the companies thanks to an increase in orders and income. About three times more companies expect to have a higher income in 2011, than those who expect a lower one. Predictions are not as rosy for 2012: global economy is expected to slow down and take with it global trade which could mean a lower demand for Italian goods, in all sectors. This means that price increases will be much more modest than 2011, with the possibility of a drop at the end of the year.