Structural decline in consumption, demand for different wines and more: the difficult future of wine

World trade in slowdown, as well as purchases in the large-scale retail trade of the different countries and consumption more generally in decline, not only due to economic factors, are the not very comforting summary of a 2023 told by more or less complete data. A scenario - to which must be added the macro theme of climate change - that, in view of the 2024 that has just begun, but also of the near future, leaves no room for Pindaric flights and who knows what optimism for the world of wine, which, driven by necessity, begins to question itself more deeply on issues that we have been telling and analyzing for some time. Which also emerge in the latest report, published by Ismea, where, net of the economic data already analyzed several times (between a low 2023 production, below 40 million hectoliters, but winery stocks never so high, stably above 40 million hectoliters, exports stable in volume but down in value and purchases in large-scale distribution down in volume and up slightly in value, but mainly due to price increases linked to inflation), it emerges how, looking to the future, the sector is questioning some critical issues that, by now, can be considered structural rather than cyclical.
“The slowdown in purchases by the world’s main importers, with obvious repercussions on Italian exports as well, is only partly attributable to the supplies made in the pandemic when there were problems with shipments for which there was a hoarding race in fear of stock breakages. Much more problematic”, Ismea stresses, “is the slowdown in world consumption and the reshaping of demand linked to generational change and also to the spread of health models that do not always include wine consumption. Italian producers have begun to question what the solutions might be given a demand that is becoming increasingly polarized: premium and low-end wine continue to have a precise consumption target, while the whole crowded middle range could have problems. There are therefore questions about reshaping the offer also toward products with a lower alcohol content, toward less structured wines and with more appealing packaging especially for the segment of consumers who are entering the world of wine for the first time. Another issue is the type of packaging, which must be increasingly environmentally friendly, and thus there is discussion about lighter bottles. From many quarters, people are beginning to think about the usefulness of continuing to expand the area under vine given the current market difficulties and the record stocks at the end of last year’s campaign. Specifically, it can be said that the world wine market has begun to convey some obvious signs of discontinuity in the scenario that require to be examined and addressed with due attention in order to avoid being faced with emergency situations in the future. In addition, it emerges loud and clear how production must respond to a drop in world consumption together with the reshaping of demand, which, on the one hand is moving toward a polarization of consumption with respect to prices, and on the other demands “easier” and less structured wines. There are also questions about supply management to avoid years of overproduction that may not be sustainable on the price front and therefore profitability”.
Telling all these difficulties, as mentioned, in addition to the sentiments and reflections of many producers that WineNews interviews and meets throughout the year, are the data. Looking at exports, as is well known, exports in the first 9 months of 2023 marked a substantial stability in volumes shipped across borders against a slight drop in values (-2%) due to the different product mix and with bulk wines growing by 19% in volume, while bottled wines fell by 5%. It also seems to be slowing down, at the moment, the race of sparkling wines: -3% in volume against +2.5 in value, Ismea points out. A performance, that of Italy, which is part of a more general context of a slowdown in world trade of more than -5% in volume, which is also accompanied by a less than proportional reduction in revenue due to the increase in prices.
Of the top three major exporters, “Italy is, moreover, the country that has suffered the least in terms of exports”, Ismea further emphasizes, “as volumes in the first 9 months of 2023 are basically in line with those of the same period of the previous year, but with a 2% reduction in value. It certainly went worse for Spain, which lost 4% in both volume and value, while France reduced volumes by 8% while losing 1% in value. Much worse did the overseas countries: Chile, Argentina and the United States showed declines of almost 30% in volume exports while Australia stopped at -8%. Almost all major global buyers starting with the United States (-13%), the United Kingdom (-7%) and Canada (-10%) were responsible for the reduction in global demand. Meanwhile, the Far East market also remains very sluggish, with China reducing its demand by 27% and Japan by 13% over the same period in 2022”.
Domestic demand, especially with respect to large-scale retail sales, also does not appear particularly dynamic, despite the slight recovery in consumption since late spring. The cumulative figure for the first 10 months of 2023 reported by Ismea (and substantially in line with Circana’s data as of December 24, 2023, analyzed by WineNews) records a -3.1% drop in volume for a countervalue, driven by high prices, that marks a change of +3.1%. Still wines show, however, a drop of almost 4% in volume while sparkling wines are above last year’s volumes (+1%). And looking ahead, there will also be the issue of “prices”, which, however, seem to be under control, overall. While production 2023, in fact, has been low, stocks have always remained high 51 million hectoliters as of July 31, 2023, before the harvest, while the latest post-harvest Icqrf’s Cantina Italia figure, as of November 30, was 53.9 million hectoliters, ed.). And this, together with slowing demand, meant that the Ismea price index closed, overall, at -2% on 2022. But not for everyone the trend is the same.
With the start of the current wine year, 2023/24, things have changed as a result of rather low production partially compensated, however, by high inventories. As early as August, price lists began to pick up, and it was always table wines that were the most responsive, partly because they are the most affected by international tensions. The end result is that 2023 closes with a recovery in list prices especially for table wines, which, however, is not enough to offset the losses accumulated in the first part of the year. In fact, the Ismea price index, limited to the first 11 months of the year, indicates a slight decrease in table wine prices, while for Igt and Doc-Docg the average annual reduction is -4% and -2%, respectively. Looking at common wines, after a rather complicated first part of 2023 for common wine lists, which until July had recorded losses of 9% in whites and 16% in reds, with the start of the new campaign there were very different dynamics. Until last summer, at a time of generalized increases in production costs, wine somehow represented a buffer against these increases to avoid exaggerated increases in consumption. With the start of the new campaign, however, Ismea explains, market conditions have completely reversed. In a situation of non-abundant availability, in fact, the market responded with a certain liveliness of demands especially on common wines, which, moreover, are those whose stocks were down on the previous campaign. Indeed, the first five months of the campaign saw double-digit rises in both whites and reds, with the former reaching 5.20 euros per hectoliter and the latter 5.45 euros per hectoliter. Again, these are not record list levels but certainly a good recovery on the downturns of the last campaign. Similar situation on the Spanish market for ordinary wines, which traditionally represents Italy’s biggest competitor in this segment. And even for Igt wines, in the last months 2023, there is a definite upward push in quotations, especially in regions that have had major production declines. In Sicily, for example, Igt wines, both white and red, are showing increases of more than 30% compared to the last months of the previous campaign, while in Abruzzo it is mainly the whites that are marking double-digit rises.
In the highest segment of the quality pyramid, i.e., that of DOC and DOCG, 2023 was a year where average declines in white wine prices were recorded, while red wine prices were more stable. Going into more detail, however, rather diversified situations are evident. In whites, reductions were recorded mainly in Prosecco and Conegliano Valdobbiadene. With a minus sign also some Abruzzi DOPs and Pinot Grigio delle Venezie. In contrast, there are slight increases in PDOs from Trentino, Alto Adige, Friuli and Piedmont. Declining, however, are some Sicilian and Sardinian PDOs. In the reds, there is a good performance of the great reds for aging, which is contrasted by the reduction in the quotations of Lambrusco, Chianti and Doc Sicily. In the first few months of the new campaign, moreover, little has changed in the situation for PDO wines, which traditionally do not have a market that follows the campaign but more the calendar year, so it will probably be the beginning of 2024 that will shape the PDO market more. It should be kept in mind that it is precisely the PDO wines that had the biggest inventory problems in the last campaign, so it will have to be understood how this will combine with the lower production expected for the current one.
Looking in more detail, however, among the values reported by Ismea, even very different dynamics emerge in the quotations, which, it should be remembered, are based on the average values of the prices of bulk wines recognized at production, net of VAT and ex cellar. In any case, it emerges how, among PDO whites, the rises are quite generalized. The highest prices are recorded by Alto Adige, with Traminer Aromatico at 480 euros per hectoliter (+4.1%), followed by Franciacorta at 375 euros per hectoliter (+11.7%), and Pinot Noir from Trentino for sparkling wine base at 332, 5 euros per hectoliter (+6.6%), and above 300 euros per hectoliter is also Gavi, which with an impressive +23.3% touches 325.3 euros per hectoliter, and Roero Arneis, at 305.83 euros, up +10.8%. Among the large appellations, the entire Oltrepò Pavese is growing, with the highest value linked to its Pinot Nero, at +13.6%, while Prosecco Doc is flexing, at 205 euros per hectoliter (-13%), as is Conegliano Valdobbiadene Prosecco Superiore Docg, at 297.8 euros per hectoliter (-3%), and Pinot Grigio delle Venezie, at 108.1 euros per hectoliter (-1.6%) and Vermentino di Sardegna (-14.7%, to 138.1 euros, while Vermentino di Gallura, at 215 euros per hectoliter +2.6%, grows) also lost something. Verdicchio dei Castelli di Jesi in the Marche region is doing well, with the “base” rising +4.7%, to 108.1 euros per hectolitre, and the Classico substantially stable at 125.5 euros (-0.4%).
Among the PDO reds, Amarone della Valpolicella, at 1,105 euros per hectoliter (+14.3%), takes the lead in quotations, edging out Brunello di Montalcino, stationary at 995 euros (+0.2%), and Barolo, at 910.8 euros (+4.8%). At 700 euros, again, is Barbaresco (+7.6%), and above 300 euros also go Lagrein from Alto Adige (395 euros, +3.3%) and Vino Nobile di Montepulciano (+2%), and even better, in Tuscany, does Chianti Classico, at 317 euros (+5.9%), while Chianti, Italy’s largest red wine appellation, suffers and not a little, at -15.3%, with prices around 129 euros per hectolitre. Morellino di Scansano did well, at 234 euros, a jump of +17.9%, although the greatest growth is in Oltrepò, with Bonarda, at +26.4% (117.5 euros per hectoliter). Again, stable Montepulciano d'Abruzzo (+1.5%, at 72.5 euros per hectoliter), as well as, among the large appellations, the various Barbera, with that of Alba at 278 euros per hectoliter (+3.9%), that of Asti at 160 euros (+6.7%) and that of Monferrato at 130 euros (+8.3%). Still, down is the whole world Lambrusco, between the 54 euros of that of Sorbara and the 58 euros of Grasparossa and Salamino di Santa Croce, with drops between -4.9% and -7.5%, and more generally the South, with the -6.1% of Sicily Doc, at 100 euros round while Etna grows, at 221.4 euros per hectoliter (+3.7%), or the -16.6% of Castel del Monte (at 77.8 euros).