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Regional Analysis |
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Italy’s wine culture goes back as far as the Etruscans, yet it is only in the last quarter century that it has made leaps and bounds in quality winemaking. Even as far back as forty years ago, when Italy was still pre-dominantly an agricultural land, wine was produced more in quantity than quality and consumed as part of the daily staple diet.
Over the last two decades, Italy’s winemakers have been filled by boundless optimism. New estates, new wines, and new money have been invested in emerging areas, not to mention the continuous improvements in wines already on the market. Various factors have contributed to what has been a remarkable improvement in quality, spurred on by financial success in sales. A new generation of dynamic winemakers has combined inherited know-how with technical innovation, clonal research and scientific vineyard management.
“The research has been critical to quality improvement,” stresses winemaker and consultant Carlo Ferrini. “Italy, however, still needs to carry out more scientific work. We need an authority in viticulture, like Bordeaux University in France. Research here is more or less left to the individual producer, who must carry out his own massal and clonal studies.”
The most important changes have come from the greater class found in Italy’s traditional wines led by the classic reds of Piedmont and Tuscany, and the elegant whites of Friuli. Today these regions are still looked upon as innovators of quality. More recently a new surge from the south led by Sicily, followed by Campania and Abruzzi with Puglia and Sardinia close behind, are seen as dynamic forward regions, their sun-blessed Mediterranean climate yielding fruit-forward wines are able to relate quality to quantity and maintain lower prices, producing well-structured wines that can compete successfully with the growing category of New World styles.
Yet this surge of enthusiasm now inevitably calls for restraint and realism. The so-called international varieties Chardonnay, Cabernet, Merlot, Syrah and Sauvignon Blanc have staked an important place in the vineyards. Even more significant achievements have come from the many native varieties that yield wines of unique and inimitable taste, personality and style; but there are risks. While blends of the two have given rise to some fascinating wines of great class, the number of international and indigenous combinations seems endless. No one can blame Italy’s winemakers for wanting to exploit the possibilities to the full, but the country is near the point where it explodes from an abundance of wines, drowning the spectator in a sea of names.
The past 20 years
In the last twenty years total wine production in Italy has gone from 77 million hectolitres in 1996 to 49 million in 2006. A generation ago it accounted for 20% of global production; today that number is 17%. Of that volume 60% is red and 40% white, with cooperatives accounting for half of |
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Regional Analysis |
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the total.
In 1980, 900,000 grape growers cultivated an average of 0.7 hectares; today that number has decreased to 500,000 with an average of 1.5 hectares. According to Giuseppe Martelli, president of the Assenologi, the Associazione Enologi Enotecnici Italiani, within the next ten years it is likely that there will be a greater consolidation among smaller producers. He foresees an average of 4 hectares per unit accompanied by the according drop in the number of growers.
Italy’s annual production is bottled by about 250,000 registered estates or companies. Of these only 20% export a minimum of 100 cases per year. Due to fragmentation in size and portfolio, most struggle to reach a critical mass for exports. The remaining 80% is sold nationally and more often regionally.
In value the total production of Italy today equates to 10 billion Euros, of which 3 billion Euros come from exports. According to Italy’s Assenologi, Italy’s winemaking equipment alone is worth an additional 2 billion euros.
More significantly, over the past fifteen years Italy has lost some 178,000 hectares of vineyard, equal to the current vineyard area of Sicily and Piedmont. Over the past generation, the decline paints an even bleaker picture. In 1980, Italy’s vineyards covered 1,230,000 hectares, in 1990 they fell to 970,000 and today they stand at 792,000, a drop of 35% over the productive life of a single vine. After the record crops of the early 1980s that contributed to what was known as Europe’s “wine lake”, it became necessary – given the market’s inability to regulate itself and southern Europe’s tradition of relying on government for solutions - to curtail production by banning the planting of new vineyards and paying premiums to growers to uproot old vines.
In order to drain this vast lake, the European Union has regularly issued Italy, France and Spain with a ‘distillation crisis’ permit to turn millions of hectolitres of unwanted wine into unneeded alcohol. In 2006, Italy was allocated a permit to distil 2.6 million hectolitres of table wine - the equivalent of Austria’s annual production – with 56.7 million Euros of taxpayers’ money. According to Martelli, the Assenoligi have actively given their support to the wine regulation that the European agricultural commission recently proposed to the European Union requesting the abolition of distillation in all member countries, which would automatically regulate production yields.
Regions, Varieties and Appellations
Italy is by far the most complex, yet at the same time, perhaps the richest and most exciting wine producing country in the world. The sheer diversity of its wines stems from 350 registered indigenous grape varieties, spread over twenty regions of production, each with their individual styles, unique soils and microclimates. With this vast plethora, Italy is in a position to offer the consumer not |
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Regional Analysis |
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only something different, but also to reverse the growing trend of the globalization and standardization of wine. Whether that is what the market wants, remains to be seen.
The other side of the coin is that such a variety of wines from so many sources does not assist effective marketing and can be confusing to the consumer. Italy’s wine panorama is, to say the least, incomprehensible and awesome to the consumer. The market sector is led by its hundreds of appellations with their individual grape varieties. Today, where trademarks lead most markets, Italy has virtually no real brand to speak of – and few in Italy have shown any true desire to create one.
The country’s classified wines are designated Denominazione di Origine Controllata e Garantita (DOCG), Denominazione di Origine Controllata (DOC) or and Indicazione Geografica Tipica (IGT). To summarize, there are 30 approved DOCGs, 307 DOC zones and 117 IGTs in Italy. In some cases the DOC classification refers to the vineyards of an entire region; in other instances it refers only to a few selected sites. While many of these denominations are famous worldwide, others are hardly known, even in their place of origin. And while DOC(G) wines continue to increase in number, only a minority of the country’s total production is classed in this, theoretically at least, cream-of-the-crop category. Today, ever more producers of high-quality wine opt out, preferring to market some or all of their range under the more liberal, but theoretically “lesser”, IGT designation, which classifies wines from larger geographical areas and from varieties that are not covered under a single or even any DOC or DOCG. Still, the latter have come a long way. In the 1980s the total DOC(G) production amounted to 12% and Vino da Tavola 88%. Today DOC(G) averages 29%, IGT 27% and Vino da Tavola 44%.
At risk of repeating the obvious, and as elsewhere in Europe, it is the name of the producer rather than the appellation which guarantees quality. Unfortunately, again, as elsewhere in Europe, there are very few strong brands, so that consumers looking for good Italian wines have to do a fair bit of homework. For most, by default, the appellation has become the brand.
Italy’s brands
Italy has some fairly big companies, but it has few big global brands. There are, of course, wines like Tavernello, packaged for supermarket distribution in Italy, and Santa Margherita, which is almost synonymous with Pinot Grigio in the States, but these are the exceptions to the rule. Perversely, world famous names such as Antinori and Frescobaldi, which are seen as brands – though far from best-selling brands – in England or Japan, seem to prefer not to be considered as such. Antinori is far less overtly branded than Duboeuf or Torres and no modern Italian label in Anglo-Saxon markets currently compares with such once ubiquitous names as Riunite Lambrusco. There are hopes, however, that Canti, which is |
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Regional Analysis |
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doing well in the UK, will achieve similar success in the US in 2007.
Market Threats
Most would agree that the appellation system, which was set up in the 60s and has been modified on several occasions since, including the introduction of DOCG and IGT, still needs to be further reviewed and simplified. Although as it stands it may protect some areas of production, it certainly hinders communication.
“Although France and Spain have just as many individual appellations, Italy has a number of what I call UFOs or ‘paper’ appellations – which only exist on paper for political reasons,” states Martelli. Assenologi have ‘denounced’ to the Ministry of Agriculture a number of DOC appellations – at least 20% to 30% of the total, which in their view need to be abolished. This would be an initial step in eliminating some of the confusion in order to highlight those appellations which deserve recognition.
Another obstacle in Italy, particularly when it comes to communication, is a complex labelling system that some producers make even more confusing with odd colours, trademarks, coats of arms and their consortium seal. Generic communication is yet another sore point, which should be easier to solve. More than any country, Italy needs an institute to effectively communicate and promote its history, culture and diversity of production. Ostensibly this role falls under the responsibility of the Istituto Commercio Estero (ICE), the government’s office for External Commercial Relations, but little is actually done. The office has a reputation among importers and producers of being at best absent or ineffectual, but at times even damaging, to the image of Italian wine.
“We need an institute which can support and assist with export strategies. Italy’s main problem is its fragmentation. Until Italy can communicate its wine as a unified force
we are at a disadvantage,” says Ettore Nicoletto, export manager of Gruppo Santa Margherita.
Instead, communication has been left largely to the individual companies. Recently, however, some of the more progressive wine grower associations, such as the Chanti Classico, Brunello and Prosecco Consortia, the Alto Atige Chamber of Commerce and Trentino Spa, have began to stage tasting events and promote their producers and wines with annual regularity to export markets in different countries. Moreover, aided by Vinitaly’s recent trade fairs in China and India, exports are slowly beginning to show a positive trend.
Among the success stories have been pinot grigios, such as those from Santa Margherita and Ecco Domani, whose sales have exploded in recent years. In Great Britain, for example, sales of pinot grigio have tripled to 2.1 million cases in just three years. For some observers, however, the brand pinot grigio is vulnerable to competition. This variety, which is generally associated with Italy, is already being |
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Regional Analysis |
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produced elsewhere. Not only in Hungary and Slovenia, for example, but also in Oregon and New Zealand, and when sold under an Italian-sounding name these wines create confusion. While this probably would not necessarily affect most consumers, many of whom would neither notice nor care where their pinot grigio came from, cynics respond that Italian producers are already taking advantage of consumer carelessness – by labeling and exporting genuinely Italian trebbiano as pinot grigio.
On the subject of global warming and its effects on viticulture, Assenologi’s President Martelli warns of the seasonal changes and its irregularities which could in the long-term affect the quality and the growth cycle of the vine. “If we look at the climatic conditions in Italy over the past few years, with above normal temperatures in spring and bizarre weather conditions in August and September, both months which are fundamental to the natural cycle of the fruit, there are questions that need to be asked.” Indeed, should average temperatures rise by another one to two degrees centigrade, as some forecasts predict, the warmer Italian regions will be hard pressed to adapt and even the cooler regions may need to rethink their varietal mix.
Market Trends
“Lifestyles are changing rapidly throughout the world, consequently, so is the production of wine,” comments Andrea Sartori, president of Unione Italiana Vini, editor of Corriere Vinicolo, and managing director of the Sartori Veneto wine company. “Wine is a commodity which needs, without forgetting its ancient roots, to adapt its profile to fit in with the ‘lifestyle’ of the present era.”
Perversely, Italy’s strength and weakness lie in the same factor. The diversity which wine enthusiasts find so exciting is a handicap when dealing with overseas’ consumers who are looking for simplicity. However, there is no denying the overall improvement in quality in recent years and the willingness of consumers to follow the encouragement of influential wine journalists to try new products. Within Italy, there has also been a successful promotional focus on regional wines and food.
Tastes in Italy are changing, too. According to Renzo Cotarella, the phase of powerful, anonymous, pumped-up muscular wines or soft, flabby, sweet wines is no longer in vogue. “Today’s Italian consumer is looking for a wine that is not overly concentrated and that expresses the personality of its growing region. It is important to use our ‘diversity’ as a point of difference, yet at the same time produce wines which please the consumer,” says Cotarella. Whether his views reflect trends in North America is rather less certain.
Indigenous varieties versus international varieties are a hotly debated issue. “Indigenous wines are important, but our top wines other than Brunello and Barolo are Bordeaux blends, such as Ornellaia, San Leonardo |
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Regional Analysis |
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and Sassicaia,” comments Ferrini.
Southern Italy, in particular Sicily and Campania, are probably the two most exciting emerging stars, especially with estates from the north investing there and bringing with them their established expertise and a dynamic approach to exports. Estates such as Planeta, which first made its name with Chardonnay, realize the importance of their indigenous Nero d’Avola, capitalizing on its market appeal. “Sicily has emerged thanks to research in improving the quality of its indigenous varieties such as Nero d’Avola.
Speaking for Planeta and Settesoli, we have chosen to concentrate both on international and indigenous varieties,” comments Francesca Planeta. In simple terms, however, wines made from indigenous grapes generally work well in other markets only when produced and marketed by firms with international prestige like Planeta or if they come under well-distributed brands that were often created by an importer for its own market, such as Da Luca and Tre Uve, both of which were created by Western Wines for sale in British supermarkets. Gallo’s Ecco Domani essentially did the same thing for pinot grigio in America.
Export Markets
Italy’s present export value is worth 3 billion Euros. While wholesale prices have fallen by an average of 5.5% in the first six months of 2006, Italy’s exports have grown by 12% in volume to 7,839,000 hectoliters and 7% in value over the same period. For all the good cheer, exports in volume are still far below their peak of 18,657,000 hectoliters in 1999. At the same time, wine imports shot up seven-fold from 251,000 hectoliters in 1994 to 1,786,000 in 2004 and domestic consumption dropped, putting the Italian wine industry under further pressure to export more. The higher export value, which in 2006 is expected to have topped 3 billion Euros for the first time in history, and at that almost double the value of ten years ago, is a boon only for those who have a market.
Italy’s main exports rely on the on-trade overseas, a myriad of Italian restaurants where ‘Made in Italy’ is the main selling point. However, competing in the international arena, especially in the off-trade sector, Italy faces two major hitches. The first is that most Italian companies are small in size and often so fragmented in their offer that they lack the significant volumes of single wines or ranges needed for brand building. The second is that many producers are still very short-sighted and have no idea what export markets entail – the need to promote consistently, work together with their importer, build a relationship and create a strategy.
“What Italy lacks is effective market research and studies. It makes little sense trying to conquer new markets such as Russia or China. We need to consolidate our exports,” says Sartori. “Let’s see what Italy’s promotional Buonitalia is capable of achieving.”
What the Future holds
For many the future of Italian wine lies in its diversity, which is a strong point, as we have seen with Sangiovese and Barolo, but as Renzo Cotarella stresses, “we must take care not to go out on a crusade over the ‘indigenous’ cause.” As most would agree, international varieties are still very important in opening the doors to some of the lesser-known areas and regions of production.
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