Operatunity knocks?

With Italian wine exports to the USA showing signs of levelling will new EU member states provide ready markets for the Italians – or tough competition? Brian Jordan quizzes the major  layers

DECEMBER is always a difficult time to review the previous year’s wine performance from any European country.  Record-keeping is almost universally exemplary throughout the New World where regulation is almost non-existent.

But in the EU, where legislation has developed into an art form and several bodies in each country collate figures, definitive results seldom appear before half way through the year following harvest, and all too often vary considerably in the published results.

This makes it all too easy to use the most convenient figures that suit the political or journalistic direction of the communicator – confident that endorsement or correction is still several months away.

However, figures from whatever source all showed Italy’s annual production in 2004 proved the crop disasters of 2002 and 2003 were behind them, with volume indications for 2004 almost exactly matching those for the healthy crop of 2001.

But detailed examination demonstrates conclusively that although crop quantities were better than satisfactory, Italy’s balancing act between a significant fall in classic wine sales, offset by the increase in sales of bottled wines from material previously destined as bulk – with bulk wine sales falling as a consequence, together with the effect of vineyard removals – continues on the path set since the millennium.

Against this challenging background we asked senior figures from the top companies to give us their views on the biggest challenges ahead over the next year and, more specifically, what they feel are the major obstacles they will face in the UK market.

Cavit was, as is traditional, very reticent with information.  The best precis of comments stipulated by the company as "off the record" is that Cavit had been lucky to enjoy something of  headstart in the USA and is doing well there; that it is apprehensive of the increase in EU membership; and it feels that the UK market is "uncomfortably competitive".

GIV was, again as usual, much more forthcoming. With GIV already active in Argentina, CEO Emilio Pedron stressed, "It’s important to look abroad for expansion and we might be interested in Central Europe.

The UK is for us a source of special relationships, although that can be a danger if there is too much commitment to one major retailer."  Antinori gave views from several executives, most noticeably Alessia Antinori who has displayed a deft touch in all her export activities.

"Relationships are important," she suggested.  "We have a quality range and find quality representation will always succeed."  Others in the company, as with GIV, felt that the  onopolies controlling the UK market, which are "all going their own way", are the greatest stumbling block.

Stefano Girelli, CEO at Girelli, is unusual in exporting every bottle of wine he produces "except for what we drink at home", and is invariably the most lucid and thoughtful commentator on the  Italian wine scene.

He sees the arrival of the extra 10 EU member countries as "a huge opportunity, but it’s also an  opportunity for the other European producer countries, and it’s also an opportunity for East europeans to export to us! Italy must learn to work together and fiercely promote exports as home sales continue to weaken," he adds.

Bolla has long held a high profile position in the USA, and has been one of the companies to profit from its already recognised name and established position in that market. It pointed to the attraction of selling to the States "even though it’s really 48 different countries", and compared profits from US sales with "profits, lack of them, from UK sales, where margins are approaching the unacceptable".

At Banfi, which is not only Americafocused but American-owned, the Long Island-based Mariani family must be delighted to find its huge investments paying off at last.  John Mariani has never made a secret of his desire to find a profitable export environment for wines wrapped with the glamour and sophistication that Americans associate with Italy.

"It’s the name of the game – don’t make it difficult, give them what they want," he said. Fabrizio Guerrini, marketing manager for Santa Margherita, told us two years ago, "We northern producers now find it difficult to sell in the south and, with Italian consumption static, northern shortfalls must be made up with exports."

Last year he commented, "This year the paradox is more complex as not only are southern customers not consuming northern wines, but northern Italians are markedly increasing  consumption of southern-sourced wines as well, putting even more pressure on northern production wine sales."

His solution for both years was, "We must increase exports of northern wines." Now, finally, he feels, "It’s starting."  But he observed at the same time, "We [Italy] are always very  vulnerable as we do not produce sufficiently economically."

This cannot be considered a healthy commercial environment, and when associated with the comparatively low per capita consumption in Italy compared with previous decades – with young people, especially, ignoring wine in favour of more apparently "exotic" beverages – this indicates a gloomy prognosis for the future unless something dramatic occurs.

No doubt the most positive development of the past five years has been the expansion of the US market.  This came as a surprise as efforts in the past had never been hugely rewarded except in areas with strong Italian ties.

However, slowly but surely, the US has overtaken other Italian export markets to become number one, and with good average prices per bottle too.  Though one factor Italian wine producers overlook is that their increases of 18% to 20% in exports to the US exactly reflect the 18% to 20% drop in the value of the dollar over the same time-frame, favouring imports of apparently cheaper products.

Indeed, this export upswing is already showing signs of levelling off.  Unfortunately, the only other dramatic event that may occur, far from helping to correct the slide, is more than likely to promote decline.

Of prospective and new member countries to the EU, three are serious wine producers with a freer and cheaper labour market and a surprisingly good international marketing understanding – even as far back as the pre-1990 Comecon days.

Remember, for some years Bulgarian Cabernet Sauvignon was the UK’s biggest selling red wine, and although freedom from Russian domination and a return to capitalism never allowed Hungary, Bulgaria and Romania to realise their perceived export potential, trucking a comparatively short distance to Milan or Turin could provide an attractive and potentially receptive market.

Signs already exist of a gradual acceptance of imported wines, with Spanish Cavas on sale in Italian autostrada shops, for example.  Moreover, these new EU brothers can also provide seriously tough competition in existing European markets for Italian wines such as Germany and Austria in particular.