A snapshot of Italy’s bulk wine

Italy is the world’s largest producer of bulk wine, making it exquisitely sensitive to market trends. Bulk Wine Broker Luigino Lazzaretto looks at how the market is evolving.

In recent years, the Italian bulk market has changed considerably in terms of purchase timing, prices and final destination markets. Italian bulk wine is no longer moving simply from the south to the north, or to the traditional European markets. Today, markets are connected and what happens in this single ‘unknown market’ (as I like to call it), determines the movement of the entire chain, to the final price of the bottle on the supermarket shelf.

However, there are now two well-defined, distinct bulk markets in Italy. The first one is the commodities market for entry-level red, white and rosé bulk wine, where Italian players must fight it out against the other big wine producers, such as Spain, South Africa, Chile, Argentina and the eastern European countries. The second market belongs to the IGT/IGP, DOC/DOP and DOCG wines, where the individual wines have different values and where success is to be found in the export markets, given that domestic Italian consumption is steady. The gap between these two markets is remarkable, particularly in terms of price and profitability.

International snapshot

In the 2015 harvest, Italy produced about 49 ml. hectoliters while Spain reported a smaller crop of about 41 ml., which is smaller than in the previous two years, while France produced around 47 ml.

According to figures available at the time of writing, the world will have produced almost 276 ml. of wine in 2015, an increase of approximately 2% over 2014. World consumption is around 270 ml. hl. (including the material needed for juices, concentrates, distillation and the food sector), giving a surplus of about 6m hl. This isn’t a great deal, so we can confirm that the world is almost in balance.

Many commentators predicted that the Italians would lead the market, thanks to higher production, and the prediction has been borne out, thanks also to an acceptable quality of the white wines and a very high quality for the red, especially for those coming from the center of Italy. This has allowed Italian producers to recoup market share, particularly in traditional countries such as Germany, but also in the Czech Republic, France and others. Meanwhile, Spanish prices have become more competitive, in order to maintain market share. Spanish generic white wines are particularly competitive, as are reds and some varietals; even so, Spain has seen some moderate price increases.

In line with the law of supply and demand, we can observe a stable market with regard to the Generics bulk Italian wine from September to December 2015, while from January to April 2016 bulk price for Generics increased a little bit.

A lower Californian crop has caused increased market activity and the strong US Dollar has surely helped importers to find good opportunities while news from the southern hemisphere is varied. Chile, Argetnina and South Africa should have a lower crop this year (crops are still in place in this moment) while Australia and New Zealand’s both report strong harvest numbers. We forecast an increase in price especially in Chile and Argentina but despite this trend, bulk players are very active to secure their annual volumes.

The Italian situation

From January to December 2015, Italy exported about 5.1 ml. hl. of bulk wine – a downward trend of about 11,7% – with a median price of €0.72/L ($0.80), according to ISTAT figures. During that period Italy exports a total of 20 ml. hl. of wine, down 1.4% on previous year but with an increase of price of about 5,4%

Overall, the exchanges are working well and the bulk wine that’s been purchased is loading quite fast, leaving sellers gratified. Overall, the bulk producers achieved good sales until December 2015, with good availability of wine. Even so, there are some bulk wines that are in tight supply, where prices are rising. These include: Prosecco DOC and DOCG; Pinot Grigio IGT/IGP from central and south Italy; Primitivo/Zinfandel IGT/IGP; and DOC Manduria, which continues to be successful all over the world. Other less well known wines that continue to be in demand Lugana DOC/DOP in Germany and Gavi DOCG in the UK.

Overall, Italian wine exports are being driven by sparkling wines in general, and Prosecco in particular. Prosecco has become popular all over the world and markets are thirsty for this value-for-money sparkling wine, particularly in the UK and the US. Prosecco is an unstoppable phenomenon, as can be seen by the bulk wine prices, which were 1.60 to €1.70 Euro/liter at the beginning of vintage in September 2015, but which are €2.35 to €2.50 Euro/liter today. It has already become difficult to obtain Prosecco in large quantities and if this trend continues, I think we will arrive at the next harvest with no stocks of Prosecco left.

Besides the Prosecco phenomenon, we see no other particular problems for other Italian wines, At the end of May we will know if the DOC delle Venezie (Veneto, Friuli Venezia Giulia and Trentino) will be approved for this vintage 2016 or 2017. Indeed, some bulk players, importers and bottlers are already demanding alternatives such as Pinot Grigio from Sicily or Abruzzi, or substitute blends of other bulk white wines.

Other trends we see at the moment are Organic and Vegan wines; Appassimento or parziale Appassimento red wines; low histamines wines; Riserva red wines from south Italy; Falanghina and Fiano from Campania; Biodynamic/Demeter Wines and generic robust red wines of 14% to 14.5% abv with Amarone-style residual sugar.

Looking ahead

The biggest challenge we foresee are for Italian bottlers. While Italy has a big bottling capacity, the average of industries are too fragmented and not big enough when compared to the big European or international bottlers. The competition is extremely tough, reducing their margins and not allowing them to invest on their own brands; maybe in the next future they’ll need to concentrate more on M&A.

As far as producers go, we need to wait and see how foreign markets respond. In general, however, we expect to arrive in September with some stocks of bulk wine remaining, although not in big quantities, particularly when it comes to red wines and popular appellations; it’s probable that prices will be steady until September 2016.

Luigino Lazzaretto, bulk Italian wine broker, and president of Intermediazioni Lazzaretto S.r.l. Luigino, has more than 50 years of experience.