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The lockdown is over, and wine e-commerce is looking at future investments and growth

Campari has bought Tannico: a turning point and a case history. Lorenzo Tersi and Professor Davide Gaeta’s analysis at WineNews

In e-commerce, as well as in all digital sectors, Italian wine is quite far behind compared to the rest of the world. Over the years, however, the gap has narrowed somewhat, and Italy has learned to understand and watch online sales platforms, like Tannico, Vino75, Xtrawine, Bernabei, and Callmewine, grow exponentially. “I Numeri del Vino” analysis of data between 2014 and 2018 showed substantial growth rates (on average 45% in 2018 compared to 2017), seeing their turnovers grow exponentially. Vino75 soared from 151.000 euros in 2014 to 5.28 million euros in 2018, Tannic from 2.47 to 14.71 million euros, Xtrawine from 2.48 to 7.71 million euros and Bernabei online from 18.000 euros in 2015 to 6.6 million euros in 2018. These turnovers, though, are not yet supported by sufficient gross margins (around 23%) to guarantee profits. As a matter of fact, with the exception of Xtrawine, the accounts, 2018 balance sheets at hand, were in red for every one of the major online players, which, however, also invested heavily in inventory and growth, and are waiting for returns in the years to come.
The turning point, considering the dramatic health emergency linked to the Covid-19 pandemic, arrived over the past few months, when the lockdown pushed many Italians, and quite a few for the very first time, to go online for their wine purchases, especially for the consumer Ho.Re.Ca. or on market segment, not well represented in the large-scale distribution channel. Therefore, growth has been exponential during these weeks of the emergency, which is what the wine and e-commerce players told WineNews: Tannico charted +100% in sales; Wineowine +700% in large purchases of wines from small wineries compared to the same period in 2019 and Vino75 shot up from 1.700 to 10.000 bottles sold per day, tripling its turnover. These numbers have brought to light a channel, which up to now has been marginal, where average sales in Italian wineries was 2%. Now the beverage giant, Campari Group,, has decided to focus heavily on this channel, and a few days ago (which WineNews wrote about) acquired 49% of Tannico, after the agreement with all the shareholders was signed - including the leading ones (the CEO Marco Magnocavallo, P101 SGR and Boox SRL) for 23.4 million euros.
Could this be a turning point for the entire sector, or just an isolated case? Two of the top experts in wine economics, Lorenzo Tersi, at the helm of LT Wine & Food Advisory, and Professor Davide Gaeta of the University of Verona (and also winemaker in Valpolicella at the Eleva winery) explained their analysis to WineNews.
“We know the highlights of the digital world very well”, said Tersi, “we are incredibly late on everything digital , including e-commerce. As far as wine is concerned, all of the platforms, with the exception of Xtrawine, have closed in the negative over the past few years. Tannico, instead, tells its own story. One of its shareholders, P101, a company that has a series of start-ups in its portfolio, has adopted the Tannico case just like any other start-up. It invested with new resources, considered and drew up an exit strategy, got in touch with the spirits world, and consequently with Campari”, explained Lorenzo Tersi. One of the costs Tannico incurred was for “logistics, which is very expensive, but by spending to grow as well as to communicate, at the end they were able to find the ideal time, when Campari was repositioning its map, after exiting wineries and vineyard properties, and focusing on the online supply chain. Tannico is a flying wheel; it has a platform, authority and important numbers. What will the Campari Group do with it? It will make Tannico global, with offices and therefore, logistics, where it is already operating, all over the world. It will have a project scalability that it otherwise would never have had, obviously growing in Italy as well. More importantly, it will be a new distribution line for the Campari Group, bringing together wine and spirits. This means that Tannico will soon be 100% Campari, to the satisfaction of everyone”.
The investment also responds to another strategic aspect, continued Tersi, “the Campari Group is repositioning itself in wine, as they have demonstrated by acquiring the Champagne Lallier maison. Therefore, it will be an opportunity for Italian wine producers who will find that they will be able to multiply their sales opportunities by at least five, probably starting in Great Britain. However, the product portfolio will be reduced, to which the Campari portfolio will be attached, which will focus heavily on younger consumers. Wine producers will then have to ask themselves which partner to choose for online distribution, because of the 47.000 companies, many have gone into the e-commerce world without a specific strategy, in a disorganized and confused manner.
We need to align price positioning between platforms and company e-shops because we will have the opportunity to digitize and grow going forward, and we have to do it well. Campari”, concluded the CEO of LT Wine & Food Advisory, “is a reputable and solid company, but there are many companies in Italy that sell spirits and wine brands, so it is not that uncommon. Tannico will not change its know-how but only its portfolio and the wine producer will worry about maintaining the relationship with Tannico, fully aware, though, that the prospects are definitely positive”.
Professor Davide Gaeta remarked, “I would separate the Tannico case from the e-commerce context. Congratulations to them because it is an excellent acquisition, but it is not a typical case in the sector, and it would be an excessive intellectual extension. Acquisition cases often arise and then die following their own logic, which the external observer does not always comprehend. There are a thousand reasons why a group might decide to invest, which we, however, do not know and it would be wrong to attribute to the value of the acquisition. The wine sector is cheering because in just a few years, from its origins to today, it has managed to create value. This is the dream come true of every winemaker; it means that it can be done in the wine sector, even though we had begun to think it was only a fantasy”.
Considering the weight of e-commerce, however, “it is difficult to talk about trends”, continued Gaeta, “based on data for the two months of lockdown. The consumer, in many ways, has made a “geological leap” during this period. Within just a couple of months we have discovered that we needlessly spend a lot of money on electronic toll passes and petrol, and millions of euros in office rentals, when instead smart working lets us work the same from home. Keeping this in mind, we also discovered that you can buy - using a dynamic that economists call “Ammonization” - with a click. So, how much is wine e-commerce worth in turnover? Perhaps 3%, not a really small amount, but we are still not ready to make the next big leap, as Italians and as Europeans. In California, for instance, they are used to e-commerce, and some companies manage to make 80% of their turnover online. There could have been a structural trend if e-commerce had replaced the sales network, but this was not the case. Maybe the real subject is not so much e-commerce turnover, but big data, which are fundamental for those who sell”, said the professor of Business Economics.

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