Wine and markets: signs of recovery from Asia, but much uncertainty in Europe and North America

Italy, with great caution, tries to start again, learning to live together, while waiting for the vaccine, with the Covid-19. The most awaited stage, also from the world of wine, is the reopening of bars and restaurants, where a fundamental share of quality wine consumption passes. This is the first step towards the return to normality, but it will certainly not be enough - on its own - to save budgets for a sector that links a good half of its turnover (6.4 billion euros in 2019) to exports, much more in the case of many leading companies, especially in the most prestigious territories and denominations. From around the world, two months after the pandemic took on global dimensions, the signs that are coming are not yet positive, but a few glimmers of light are coming, starting from Asia, where everything started and where everything, is returning to normal (considering warehouses still full, especially in China), waiting for Europe and North America, where large-scale retail and online are the masters (especially in Germany), with the State Monopolies that - in Norway, Sweden and Canada - guarantee certain stability, considering an inevitable contraction in consumption. We talked to some of the most important wine entrepreneurs in Italy about markets, between current events and medium-term prospects: from Marchesi Antinori’s Renzo Cotarella to Michele Bernetti, at the helm of the Marche Umani Ronchi brand, from Sandro Boscaini, head of Masi Agricola in Valpolicella, to Valentino Sciotti, president of Farnese Vini, from Massimo Ruggero managing director of Siddùra, in northern Sardinia, to Sandro Sartor, general manager of Ruffino, from Enrico Viglierchio managing director of Castello Banfi, leader of Brunello di Montalcino, to one of the great names of Abruzzo Marcello Zaccagnini, from Diego Cusumano (one of the great brands of wine Sicily) to Beniamino Garofalo, to the Santa Margherita Group, to Valentina Abbona, export manager of the historic Marchesi di Barolo.
“The situation - explains Renzo Cotarella, managing director of Marchesi Antinori, perhaps the best known Italian wine brand in the world - is still very unpredictable: on the one hand, we are registering small signs of interest and, on the other, there is still no real willingness to restart. Even where we try to return to normal we do so with many restrictions, it is too early to say whether the situation is normalizing. Some elements show an improvement, but it is difficult to say how much and when. On the good side, we think more about how to start again than how to remain defenceless, but the consumption lost in the restaurant, however, we will not be able to recover it, and this applies to all countries. Hopefully, we will start again from China and Hong Kong, the only countries from which there are real positive signs, while in the Scandinavian countries we have been less suffering so that even the signs of recovery are less evident. In Germany - Renzo Cotarella continues - the off-premise is doing well, while the on-premise is stationary: it is a country where catering is fundamental for us, and we hope to start again by the summer, albeit slowly. It’s difficult to understand how, without making Pindaric flights, it’s a situation that needs to be analyzed and tackled day by day. The situation is different in Great Britain, where large-scale distribution is much less varied than in Germany, and the price dynamics are decidedly less rewarding, if not for low-range wines. In the USA the situation is particularly varied: half of the States have reopened, albeit under restricted conditions, but the effects are not yet visible. Many restaurants, while working with delivery, have wine cellars full of wine, and it will take some time before they buyback, especially without income. It is true that consumption, by volume, has even increased, thanks to the fact that families, unlike what usually happens, have been able to spend much more time at home”.
“The markets linked to the Monopoly, and therefore to shelf sales, have even increased sales,” Michele Bernetti says, at the helm of Umani Ronchi, “because they are consumption that does not usually pass through restaurants. We are talking about Canada, Sweden, and Norway, where the wave has slowed down in any case: lockdown measures have also slowed down the possibilities of purchase and the trend of the economy, starting from Sweden and Canada, where purchases pass, as here, more and more for large-scale distribution. In the classic markets, things are not going too well, Japan is slowing down, and the steady Horeca is a problem because people are used to eating out often. China, on the other hand, has restarted, but importers will have to dispose of their stocks at the beginning of the year. In Germany they tell me that Gdo is doing very well, some orders are being reviewed, the signal that something is moving, there are many small distributors and wine shops that are restarting, replacing restaurants in some way. In the United States, the market under 10 dollars per bottle on the shelf is strong, but the rest is suffering, even if take-away and online sales are holding up. Overall, the medium-high end of the market is suffering everywhere - says Michele Bernetti again - and we can’t do much, but we are figuring out how to react, even if from afar it is difficult to understand individual situations: we certainly don't have to lower prices beyond a few adjustments. Promotion becomes difficult as well, and everything depends on that, also in terms of marketing. We hope that from June the picture will become clearer”.
“The Far East is experiencing a moment of recovery, which perhaps becomes even more noticeable in the lack of liveliness in other parts of the world: nothing exceptional, but at least something is moving. I don’t see any encouraging signs - warns Sandro Boscaini, at the helm of Masi Agricola and president of Federvini - if not the will to return to normal. As an Italian wine sector, in China we do not have such an important past situation, we hope to grow now, especially thanks to the leverage of quality at fair prices. Russia has had problems of various kinds in recent years, and now it is in the middle of the pandemic, we will see how it comes out of it, I do not see any particular things, the market is quite cold. Arriving in Europe, we have to draw a line: Scandinavia, also for the monopolistic distribution system, or concentrated (as in Denmark), where drinking out of home is marginal compared to us, seems to hold up: it is a system that allows you to control the numbers very well, always reliable and fast in the statistics, and from these markets, the backlash was less. Germany has felt the closure of the HORECA, and therefore, quality wines are paying for it, while in our country the situation is even more serious: we entered first and we will leave afterward, and then we have a very fragmented system, between restaurants and hotels, which have less resistance than the big chains. We hope that, in the restart, there will be no relapse in terms of health, and that the small restaurateurs will resist. In Canada - continues Boscaini - the situation is mirroring that of the Nordic European countries, while in the United States the system has been shaken by the pandemic, there is a reluctance to place orders until the situation is normalized: on the whole, it is a market that reacts quickly to both positivity and negativity, so we hope it will start again soon. One aspect to which little attention is paid - underlines the president of Masi Agricola - is that of duty-free airport and supplies of aircraft, ships, and trains, which for some companies has a double negative value: loss of turnover and lack of brand exposure, with repercussions on both corporate and territorial prestige. And this is linked to another point: through the bottle of wine passes so much communication of the Belpaese and made in Italy abroad, it is perhaps the most popular souvenir”.
“Australia and New Zealand - says Valentino Sciotti, who over the years has taken Farnese Vini's labels to every corner of the world - have suffered a lot, also because their respective governments have decided important limitations on purchases, fearing to find themselves facing a problem of alcoholism. In Asia, China has experienced an airtight closure, but it is beginning to start again, while Japan has even grown, as well as South Korea, which has never closed its premises, and Thailand, at least until they blocked the sale of alcohol, has gone well, especially thanks to the off-trade. Indonesia has suffered a lot instead, also because of the ban on importing Italian wines. The other Asian markets are marginal, while Russia at the moment, due to our type of distribution, is at a standstill. The rest of Europe is experiencing the same dynamics, the online and large-scale distribution chains dominate, with the horeca disappearing. It was a nightmare to see the closure of catering throughout the continent. In Germany, as in Switzerland and Belgium, we work very well with off-trade - Sciotti recalls - and this also applies to the United States and Canada. In the USA, however, as the figures from the world’s largest importer, Southern Wine & Spirits, show, with the lockdown, consumption grew, at home, by +4% by volume. Finally, paradoxically, in South America the only market that still works is Venezuela”.
“We see some glimmers, like Japan, but for Europe the moment is uncertain. In the reopening - comments Massimo Ruggero, managing director of the excellent Siddùra winery in northern Sardinia - there will be a little more pressure on the domestic market: those who can resist, however, must grit their teeth and not raise prices. Concerning the Old Continent, not even in Germany is still moving much, there is a certain fear, as well as in Holland, while from Switzerland some orders arrive, it is a country that thinks more about tomorrow. The lockdown with the passing of the weeks has affected everyone, and the negative element does not only concern exports but the economic trend itself. The United States is at a standstill, Canada has continued to buy something, also thanks to the protection of the State Monopoly, also because some states of the country have not been touched by COVID. The problem is that for the first time the market, on a global level, is unable to react and to understand the size and the trend of the problem. We are still in the trenches, many companies are destined to fall, in all sectors, and much will change, but there will necessarily be a rebound. Going back to the current situation, and finishing the world tour, for us China - concludes Ruggero - is still a distant and marginal market, where we will only go in a few years”.
“It will be a year on the decline, barring miracles. But not from panic - says Sandro Sartor, general manager of Ruffino - at least for our reality, which has a mix of different distribution channels in over 80 countries. If in Italy, for example, we are practically only on the HORECA, and the growth of gdo and online has not at all compensated for the drop due to the stop of restaurants, in other countries, where we also have more presence in organized distribution, domestic consumption, which has increased significantly, has brought the balance equal. We have also observed an interesting phenomenon, in general: in Italy, there has been great growth in private label wines, more than those of individual company brands. While in many foreign countries, where private label is usually very strong, the brands of individual companies have performed better than those of distribution. In general, it should be stressed that if it is evident the crisis that we live in many important markets, there are others, very important, that have not stopped working, even if they have slowed down, like those in monopoly. This is the case in Canada, for example, or in Northern Europe. Certainly - concludes Sartor - difficult times will come: in the USA the 25 million unemployed are shaking their wrists. But we must resist, or rather be as resilient as possible, with two priorities: protecting health first of all, and jobs”.
“As far as Asia is concerned, something is beginning to move, in the sense that slowly we can see a return to normality, also in terms of work, but to understand and measure the effect on exports will take time - says Enrico Viglierchio, managing director of Castello Banfi, the leading company of Brunello di Montalcino - because the importers are managing a pre-crisis warehouse. The same, slowly, happens also in Europe. England will not reopen the restaurants before July, the United States has never stopped completely, even if it is early to make predictions on the on-trade channel, with Italy anxiously awaiting the next few weeks: in the Belpaese there will be a bit of inertia, despite the completely stopped tourism, both at Italian and international level. Scandinavia and Canada have shrunk, but without ever stopping, maintaining a part of the business linked to take-away, even if with limited rhythms and times. These are also countries where there is more regulatory clarity and faster reaction - points out Enrico Viglierchio - and I'm thinking of the reopening of restaurants, while the reduction we've had, as Italian wine, on all markets, depends a lot from company to company and the distribution channels we decided to focus on”.
“The last quarter was undoubtedly characterized by a domino effect at global level, which started with the first lockdown in February in China and continued westwards, with the USA, Canada, and Japan being the last to be affected,” explained Beniamino Garofalo, to the Santa Margherita Group, one of Italy's export-oriented companies. “On the one hand, the off-premise has recorded good performance, characterized by an initial peak in sales (due to the so-called “panic selling”) which affected all the main markets - including Italy - with different timeframes and then normalized after a couple of weeks but still maintaining a slightly positive trend. The negative effect of the so-called “Ley seca” was noteworthy, even though it had an impact on smaller markets: in some Central American countries, the sale of alcoholic beverages was banned, thus blocking the sell-out also in the off-premise channel. On the other hand, the on-premise channel has suffered extensive paralysis and only now, three months later, is giving the first signs of recovery in those markets that were the first to record a setback. It is still too early, however, to generalize: in Asia, real positive signs - albeit with reduced gears due to the limitations imposed by social distancing - are now only coming from Shanghai and Hong Kong; the rest is still gaining ground very slowly. We can therefore only imagine the evolution of this pandemic - continues Garofalo - basing ourselves on the experience that we are maturing by observing those countries that first entered into crisis and that first seem to be coming out of it. If it will hopefully be possible to defend pre-COVID market positions in those countries where our presence mainly concerns the off-premise, such as Australia and Russia, it will undoubtedly be a difficult quarter for the on-premise at a global level, marked by a slow and staggering recovery, which for some countries is still indefinite, as in the UK case”.
“Our turnover - explains Marcello Zaccagnini, at the helm of the Abruzzese brand - is 85% linked to exports and 15% to the Italian market, of which 12% in the horeca channel and only 3% in large-scale distribution. Of this 85% that we do on foreign markets, only 15% is on the on-trade, while the remaining 70% comes from different channels, both large-scale distribution, and monopolies. So, while the on-trade channel is stationary everywhere, large-scale distribution has grown, both in Northern Europe (Norway and Sweden) and in the United States, where we recorded a surprising phase of growth, consolidating our leadership on 22 March, with a share of over 30% in the Montepulciano d'Abruzzo category and revenue growth of 11.5% with an average super-premium price point of $15.06 per bottle. As an overall drop - continues Zaccagnini - we are at -7/8%, but considering that there are channels, especially in Europe - from Germany to France - which are completely stationary, the overall figure is almost miraculous. The credit is also and above all for the work we have done in past years, especially in terms of brand recognition. In Asia, in March, orders were placed on all the main markets: Japan, China, and South Korea, which therefore show signs of recovery, with regard to numbers we achieve in the East. In the end, in the difficulties, the balance sheet is positive”.
“We are waiting to understand how the different countries are reacting - says Valentina Abbona, export manager of the historic winery in Barolo, Marchesi di Barolo -, to date positive signals are coming from Holland and Eastern Europe, which hint at a recovery. In some countries, catering has never stopped, but people are afraid, and the result is similar to what we see here. In Asia, work is being done on warehouse stocks, with some difficulty in Hong Kong, apart from private individuals and high-end wines, but the catering is in trouble. In mainland China, we may have been lucky, because we had closed several contracts before the pandemic, but there is still a glimmer of hope. Taiwan, on the other hand, responds better, hasn’t had any contagion, it is a rich and stable market, on which we would like to find space soon. In the United States - continues Valentina Abbona - there are many differences between the different States, with New York, the most interesting destination for us, completely still, and the other States are not able to compensate for this collapse. They think about how to organize themselves to reopen, but there is still a perceptible fear on the part of consumers, and in this context are online and chains, even of level, through delivery, to resist. What is missing, moreover, is the comparison of when you go around, the possibility to see and evaluate with your own eyes the different situations, even if - concludes the export manager of Marchesi di Barolo - technology is giving us and will give us in the future, new and interesting opportunities”.
More trenchant, finally, the opinion of Diego Cusumano, head of one of the best wine brands in Sicily, who speaks of “closed markets, everywhere, for companies like ours. We will have to wait until the end of May, but more likely June to understand if something will move again, also according to the reaction that customers will have, linked to the restriction measures that each country has put in place. Starting from Italy, which, however, has a great strength: the beauty and uniqueness of its squares, the most beautiful in the world, which the mayors of cities and towns should make available, by pedestrianizing them, to restaurants, free of charge.It would be a beautiful and strong signal, to see the squares invaded by the tables, to give back serenity and courage to the people, who, however, when they can, will make their holidays in Italy, staying in the open air, and at the same time supporting a sector that needs it more than any other, but also launching, especially outside, a positive message of strength”.