Is Prosecco losing its sparkle?
Last year, exports of Prosecco to the UK fell for the first time in a decade, by 7% in the first half of 2018, according to Italian farming association Coldiretti.
It blamed “the effects of Brexit” and “nationalistic fake news designed to discredit the Italian drink” for the decline, referring to the media hype surrounding the so-called ‘Prosecco smile’, as dentists warned that drinking too much Prosecco (or any acidic carbonated beverage, for that matter) could damage your teeth.
Late last year, UK accountancy firm UHY Hacker Young also reported that 2017 had seen the slowest growth of sparkling wine sales in the UK since 2011, which is largely driven by Prosecco. Sales totalled 35.8 million gallons in 2017, an increase of 5% compared with the previous year, but it was still the first year of single-digit growth since 2011. “A 5% increase in sales is not at all bad, but that comes after several years of double-digit growth,” said James Simmonds, head of drinks at UHY Hacker. “Unless the industry can revitalise its image this year, we may now be reaching ‘peak Prosecco’,” warned Simmonds, who also compared Prosecco to fashion house Burberry, which had to battle to regain its premium position after it was embraced by the mass market. Such an assessment seems a little unfair. The UK remains the world’s biggest market for Prosecco, and it is still in growth, with saturation of a market the natural conclusion for any successful export, especially one made from a limited agricultural resource. At a certain point, maintaining consumption becomes more important than endless growth.
But, as the 29 March deadline for Brexit looms, the picture for Prosecco in the UK (and for all wine importers) remains clouded. Many UK-based retailers are already stockpiling for the potential fallout, including Majestic and The Wine Society. Should the UK leave the European Union without a deal, then Prosecco producers will have to cope with additional tariffs on top of the 1 February duty rise, explains Miles Beale, chief executive of the Wine and Spirit Trade Association, which will “bump up prices and is highly likely to end up square in the consumer’s lap”, he says.
“For sparkling wine, which is taxed at a higher rate than still, the combination of the duty rise on 1 February (11p) plus the added tariff (26p) will mean an average-priced bottle, which in January cost £7.14, will go up by 37p to £7.51.” If the UK leaves the EU without a deal, “a swathe” of extra paperwork will also be required to ship wine from Europe into the UK.
Avenues of growth may still exist, but as the UK approaches ‘peak Prosecco’, a number of questions arise. How can producers maintain consumer appeal for Prosecco as interest in alternative fizz grows, and also develop its brand beyond that of a cheaper alternative? And, more importantly, where should producers seek further growth beyond the UK?
Supply is not the issue
While supply shortages have previously sparked panic, notably following the 2014 vintage, which saw volumes decline by 50% in some areas, supply is not the issue. Prosecco DOC is expected to produce 464 million bottles from the 2018 harvest, an increase of 5.6% on the previous year, with an estimated retail value of €2.4 billion (£2.09bn), an increase of 13.4%. That’s the equivalent of 3,650,000hl of wine from the 23,000 hectares of vineyards in the region. Meanwhile, the DOCG area – which totals around 5,000ha – is expected to produce more than 100m bottles of certified fizz, taking the total amount of Prosecco available close to 600m bottles. Total DOC Prosecco exports are also expected to have increased by 7% in 2018, to 343.5m bottles, thanks largely to positive trends in the US and Germany, says the Consorzio.
Last year, exports of DOC Prosecco to the US increased by 11.7%, rising to 68.7m bottles, while exports to Germany rose by 6.6%, compared with 1.5% in the UK. Together, these three countries account for 70% of the Prosecco market. According to the 2011-2021 IWSR Vinexpo Report, Prosecco is due to add another 50% to current global volumes by 2021.
With Prosecco production still growing, the potential worldwide remains huge, says Paolo Lasagni, managing director of Bosco Viticultori. “Even though the UK is going down slightly, the rest of the world is growing in a massive way, especially the US market. Of course, we need to invest more in brand consolidation, but as long as there is growth in other markets it will compensate for the UK.”
According to the IWSR Vinexpo Report, Prosecco remains firmly at the forefront of the sparkling wine trend, which has been spreading across North America in recent years. “As in other regions, price positioning has been key to the sub-category’s success,” it said. “It is growing throughout Asia, too. Prosecco’s rise in the UK is well documented, but it is also making waves in France and other key European markets, buoyed by the success of Aperol Spritz, as well as affordable pricing, its accessible flavour profile and fashionable image.” The report also notes the growing popularity of the fizz in the “brunch scene” in parts of the Middle East and Persian Gulf. Currently, the US is the second-biggest market for DOC and the fifth-largest for DOCG Prosecco, of which it holds a 9% share of the market.
Here, the target demographic is more tilted towards millennial consumers, particularly women, says Stefano Silenzi, marketing director of Zonin1821. “Here, Prosecco is a phenomenon that particularly involves the younger target groups. We expect it to continue to be a market of great potential. Emerging countries include Canada, which has significant growth rates, which we believe will continue in the coming years.” The US is also a priority for Villa Sandi. “It is a huge country where we can do so much more,” says Flavio Geretto, UK, USA, Americas and Asia Pacific export manager for the firm.
“Prosecco is famous there, but it is not positioned like it is in the UK. Our priority is the US, and we have invested a lot in this market, but Canada is another big market. Here the focus is on Ontario, but Prosecco is also growing in popularity in British Columbia and Quebec. Our approach is to speak about Prosecco not only as a wine, but as a territory. We have to consider the real identity of the wine.”
China on the rise
China, meanwhile, is tipped to become the world’s second-biggest importer of wine by 2020, according to the IWSR Vinexpo Report, with Prosecco growing in popularity, particularly in Shanghai, Beijing and Hong Kong. “In China, Prosecco is at the very beginning,” says Lasagni. “First of all it’s huge, but every region has different consumption trends and players. In China there is a market for French wines and a market for other wines: two different products. Wine consumption in China is increasing but it’s still very slow. For the moment consumption is related to red wines. They like sparkling sweet wines, but it’s going to take time. We must be reactive, but it’s a market that is going to grow.”
If developing new markets and gaining distribution is half the battle, then shaping the reputation of the category is the other. Prosecco is one of the wine trade’s biggest triumphs of the past decade, but its success has come through little effort, rather good timing, value and approachability; there has been no co-ordinated approach in its messaging.
“Honestly, we are still far behind people in general with a marketing plan at Consorzio level,” says Lasagni, who admits that Spanish wine brand Freixenet has stolen a march on Italian producers with its DOC Prosecco, launched in 2017. Lucy Auld, head of marketing at Freixenet Copestick, says sales of Freixenet Prosecco increased by 196% year-on-year in 2018. Italian-born Prosecco brands still dominate the market, but the average punter is unlikely to be able to name one, and there are even fewer established at the high end.
Partner Content
“There is some evidence of premiumisation in Prosecco. However, the overwhelming majority of its growth is coming in the mainstream segment,” says Giles Gough, senior analyst at IWSR. “Prosecco is relatively anomalous among sparkling wines in that other types are dominated by strong brands, such as Grandes Marques in Champagne and Freixenet in Cava. However, no big consumer brand has emerged in Prosecco in the UK. Without key brands underpinning category image, there is a natural tendency among shoppers and retailers towards value for money.”
A clean slate
While the UK has its own battles to fight, newer markets offer producers the luxury of a clean slate when it comes to marketing, with innovation and premiumisation a key focus in turning the tide on Prosecco’s value-driven approach, says Silenzi.
“We have developed innovative concepts over time, some of which are unique to Prosecco (Black, Grey and White Prosecco, Ice Prosecco). Rosé Prosecco is an interesting issue, and we believe can further fuel the category with its trendy image, as is happening for rosé wines all over the world.”
Many producers already make rosé sparkling wines, but have been unable to label it as Prosecco. For example, Freixenet’s pink ‘Prosecco’ is listed as ‘Italian Rosé’.
Similarly, Bottega will soon launch Stardust Rosé, inspired by its Bottega Stardust Prosecco DOC. This pink sparkler is made from Manzoni Moscato – a rare hybrid of Moscato d’Amburgo (Hamburg Muscadel) and Raboso Piave. Made from pink glass, the bottle is embellished by a “galaxy of diamond-cut crystals to create a stardust effect”.
However, soon it will be legal for DOC producers to produce a pink-hued Prosecco, with a planned change in the appellation laws expected to allow for a blend of Glera and Pinot Noir. As confirmed by the Prosecco Consorzio DOC, experimentation to define the guidelines for rosé Prosecco are under way. These findings still need to be presented and approved by the Consorzio and its members.
“The timing for this last phase is not certain,” the Consorzio said, “so at the moment we cannot confirm with certainty when it will be possible to produce Prosecco rosé.” The likelihood is that the first bottles will become available from 2020, say producers. “We know that the blend will be Glera and Pinot Noir, but officially we don’t know the proportions or if there will be changes in the production yields,” says Geretto.
Last year, Francesco Zonin, vice-president of Zonin1821, told the drinks business that his estate would “probably” make a rosé Prosecco from the 2018 harvest, albeit unofficially, while the first DOC Mionetto Prosecco Rosé is tentatively set for release in 2020, says Jan-Hendrik Boerse, senior vice-president at Henkell Freixenet Global. He says it will “definitely lead to a further increase of the whole Prosecco category”.
DOC producers are expected to embrace pink Prosecco, but that won’t extend to the DOCGs of Conegliano-Valdobbiadene and Asolo. The former said it would “strongly defend the identity, culture, history and quality of Prosecco”, and that a rosé expression would not be in keeping with its “authentic expression”. In the historical area of Conegliano-Valdobbiadene, the cultivation of Pinot Noir is almost non-existent.
Low-calorie Prosecco is another area of innovation, where some of the strongest attempts to create brands have emerged. “The health trend, which is increasingly present in our way of life and in the world of food, has important repercussions,” says Silenzi. “Even in the world of wine it is finding areas of expansion ranging from organic to natural and also low-sugar and calories. These products will will create market niches where some brands will seek an opportunity for differentiation.” Skinny Prosecco was launched in 2016 by UK-based Amanda and Ian Thomson.
At just 67 calories a glass, the brand is aimed at 20- to 35-year-olds who “want a balanced lifestyle, eat well and drink mindfully”, says Amanda Thomson. “We are already seeing clear evidence of that with other products coming onto the market that ape our messaging. But if copycats are producing inferior low-quality, sugar-laden fizz, that’s arguably counter productive. The more winemakers who switch to organics with better quality and purity and therefore less added sugar needed, the better for the entire industry.”
Prosecco might not be Burberry, but there is merit to the comparison. Like Burberry, Prosecco has been embraced by the mass market, which, similar to the fashion house, became its greatest asset, but is also its biggest threat. There’s no denying the commercial acumen of Prosecco, but endless growth is not sustainable. Increasing value is key. New markets offer scope to redefine Prosecco beyond everyday value, and as growth in the UK market slows this will be the focus for producers. The difficulty will not be growing the presence of Prosecco in emerging markets, but raising its quality and reputation.
