Italian wine production: the state of play in October 2021

In Italy, where so much buying and selling of grapes and bulk wine takes place every year, the 25 leading wine brokers have a unique insight into production and market trends. Veronika Crecelius of Weinwirtschaft magazine talks to Andrea Verlicchi president of Med.&A, the association that brings together these businesses to discover the impact the 2021 vintage is likely to have on the availability and prices of some of the most popular styles of wine.

Andrea Verlicchi, president of Med.&A, the Association of Italian Wine Commissioners
Andrea Verlicchi, president of Med.&A, the Association of Italian Wine Commissioners

Andrea Verlicchi, who became president of Med.&A, the Association of Italian Wine Commissioners, in May 2020  was born in 1965, into a family of wine brokers and vineyard owners in Romagna.  
Until 1987, he worked alongside his father before founding the Impex national and international brokerage agency two years later. Today, Med.&A brings together 25 companies that broker around 15m hectolitres of wine annually, with collective revenues of almost a billion euros.

Meininger’s: During the harvest, you are constantly on the road visiting big wineries from the south to the north of the country. What is the state of play? 
Verlicchi: The harvest in Sicily is finished, but in other large regions like Veneto, Romagna and further south in Abruzzo and Puglia, it will continue until about the last week of October. It is slower there because there are many areas where picking is done by hand. In the Veneto, on the other hand, it is faster because at least 80 per cent is harvested by machine. In Romagna, we expect to have everything picked by 25 October.

Meininger’s: To what extent are sales negotiations already under way?
Verlicchi: In September, there were the first negotiations for the sale of grape must in Puglia and Abruzzo. After the first ten days of October, the first samples of white wine were available, so business is getting going, especially on the domestic market. It is important to know that, unlike in recent years, there is little wine available from the previous vintage. The official SIAN Italian production register SIAN still shows some stock [in producers’ cellars], but this is mostly wine that is waiting to be collected by buyers.

Meininger’s: How are the prices of the current harvest developing?
Verlicchi: Prices have risen a little less than we thought in June/July after the frosts, when we feared a total disaster. But the decrease in quantity is still strong. According to current calculations, we have 15 to 20 percent less white grapes in Romagna and a 25 to 30 percent drop in red grapes, the picture is similar in Abruzzo. We can only make definitive statements after the harvest is over. 

Meininger’s: At the beginning of September, you spoke of price increases of up to 30 per cent on average. However, you also mentioned that grape prices are currently being quoted without knowing the prices at which the wine can be sold later. 
Verlicchi: This happens at the beginning of the harvest, especially in Puglia. The region is the largest grape market in Italy, and grapes are quoted there daily. The share of grapes that is delivered to the cooperatives is barely 40 percent because most of the production is in the hands of an almost unimaginable number of independent wineries. In the municipality of Cerignola alone, there are 30 companies that buy and process grapes. 
Very often, these enterprises in Puglia have to buy grapes before the sales market has been established. Grape prices have dropped by about 10 percent between the end of August and today 

Meininger’s: How big is the Puglian harvest compared to other years?
Verlicchi: On the basis of the data available to us so far, the decline is not particularly strong: around five percent less overall. Puglia is very well positioned with winegrowers who are highly professional and entrepreneurial. The vineyards are irrigated every day. The farms are commercially very active and professional in viticulture.  

Meininger’s: But Primitivo grape prices have gone up a lot this year?
Verlicchi: Oh yes, from €0.90-1.00 per kg in 2020 to €1.20-1.30. You don't worry about the market not absorbing the product, because the demand from bottlers is increasing. There will inevitably be price increases for the end consumer. 

Meininger’sOn top of that, there are price increases for basic materials such as paper, wood, glass, etc. In order to sell the wine, will the entire production chain have to cut its margins? 
Verlicchi: Primitivo is a phenomenon, the price rise is not due to a shortage of supply or low production. So much Primitivo has been planted in the past three years that the quantity this year is probably higher than last year. 
But the success of Primitivo on the international markets has swelled demand not only from the market leaders but also from countless small, medium and larger producers and bottlers. So prices have gone up.
It is important to note that we had zero stocks of 2020 Primitivo at the start of this year's harvest. In many wineries, bottling of Primitivo is being brought forward to November due to shortage of stock. 
These demand-driven price rises are also being seen in Prosecco.

Meininger’s: What is happening in Prosecco? 
Verlicchi: Last year, around 500 million bottles were sold worldwide, today we are seeing an increase of another 100 million bottles, of which 25 per cent are white and 75 per cent rosé. In August 2021 alone, 35.7 per cent more were bottled than in the same period last year, and in September it was 25.6 per cent more.Prices are rising and currently fluctuate between €2 and 2.10 per litre. At Med.&A our data show the volume of this harvest to be 4.6 million hectolitres. At the moment, the price cannot go down because demand is increasing every month. For a reduction, one would need a market standstill of at least one or two months, which is not currently anticipated. Despite the price, sales are continuing every day.

Meininger’s: In European markets like Germany, Prosecco DOC Frizzante is on sale in discount stores for €2.49 with equivalent prices being seen in the UK, if you take account of taxes. How is that supposed to work, given the cost prices you are quoting?
Verlicchi: You raise an important point. It will depend very much on whether market demand stays at this level. Almost 40 percent of bottling is in the hands of the cooperatives. The private winery market has prices between €1.20 and 1.25 per kilo. The Prosecco consortium has no direct influence on prices, but, together with its counterpart, Pinot Grigio DOC delle Venezie, it is very active in promoting the Prosecco brand. So they are doing an excellent job.

Meininger’s: Is the weakest link in the chain, the winegrower, benefitting from the increased prices?
Verlicchi: Certainly, but only some of the winegrowers will benefit from the increased grape price, depending on how they have been affected by losses due to frost and drought.This varied greatly in Italy depending on the grape variety and the area. 

Let's not forget that the winegrower also suffers from all the inflation that affects viticulture. There are problems finding affordable labour due to the introduction of the unconditional basic income. The agricultural consortia that sell fertilisers and pesticides have increased prices by 5-10 per cent in 2021 and have announced a 20-50 per cent increase for next year. Supply-chain problems are also affecting viticultural supplies materials, and for the 2022 harvest, the purchasing of these products starts as early as November. Spending on new equipment alone has also increased by 40-50 per cent.

 

Nebbiolo harvest in the Langhe

 

Meininger’s: Let's talk about Sicily, where about 95 per cent of the grapes are delivered to the cooperatives. We hear about considerable price increases. What is happening?
Verlicchi: Sicily has suffered from the abandonment and consequent decline of many hectares of vineyards in recent years. At current market prices for wine, winegrowers would have to produce more quintals per hectare to make an acceptable profit. 
Sicily is the Italian region with the lowest yield per hectare – a quarter to a third of Puglia and Veneto. So the winemaker has little gross production to sell. In Sicily, many winegrowers can barely survive. 

Back to the prices. On the island, very high prices were charged for must at the beginning of the harvest, as it was the first region to start harvesting. The first grapes harvested from the end of July were Pinot Grigio and Chardonnay, followed in August by grapes for the production of base wine for sparkling wine. The first sales of must began in August, but the market reacted coolly and little quantity was sold. 

In the meantime, prices have stabilised, but they are much higher than last year. Sicily went into the new harvest with less stock than last year, which strengthened its position. We are talking about a rise of at least 30 per cent for white wines. The prices of red wines were already quite high, so here we are recording a maximum increase of 10 per cent. 

Meininger’s: What is happening in Veneto?
Verlicchi: The availability of white base wine for sparkling is extremely low this year. So the cooperatives that used to sell wine to Germany and other countries are not in the market or only offering very limited volumes. This time, the bottlers in the Veneto will increasingly be looking for table wine from other regions. So, we are seeing the opposite of 2018 when Veneto producers had very large volumes to sell. 

At that time, Veneto had produced 48 per cent more grapes than in 2017, which caused difficulties in the market and caused price drops for white bulk wines in the other regions. 

In the Veneto, white grapes - depending on the vintage - cost less than in other regions, because the cooperatives and private wineries mainly focus on DOC and IGP qualities. It is a mentality of the Veneto that many producers are not interested in having white table wines in the cellar.

Meininger’s: Is this a vintage that has been better for vineyard owners than businesses that have to buy grapes? 
Verlicchi: Let's say for the owners of vineyards it will be less bad. I’m also a grower and have been lucky that my grapes have not suffered too much from the late frosts. We are harvesting 5 to 10 per cent fewer grapes, but my neighbours have lost 30 to 40 per cent. In Romagna, the price is 40 euros for a quintal, which is a good 40 percent more than last year.  

Meininger’s: How big is your vineyard, what grapes do you grow?
Verlicchi: We have 40 hectares, mainly planted with Pinot Grigio and Malvasia Bianca, but we don't make wine, we deliver the grapes to the cooperative.

Meininger’s: How has the wine market developed in the last 10 years? Has the conversion of many IGTs to DOCs influenced production volumes? 
Verlicchi: Of course, Italy relies on autochthonous grape varieties, i.e. the IGPs and DOCs, but we still have a high percentage of grapes that are not certified, and we need them too. Let's think, for example, of Puglia, which produces a large quantity of so-called ’dumb’ must (where fermentation is interrupted), must concentrate and rectified must concentrate for the production of balsamic vinegar 

Meininger’s: How do you see the price development of Pinot Grigio DOC delle Venezie, which has also increased by 30 percent?
Verlicchi: It is finally getting what it deserves. DOC quality should not be sold at the same prices as IGP. The winegrowers in the Veneto would have put up with the very weak prices for a while, but then grubbed up Pinot Grigio and planted Garganega, for example, which has a much higher yield. With the yield of 12-13 tonnes per hectare, the farmer got 4-5,000 euros with Pinot Grigio. That would have been unsustainable in the long run.  

Meininger’s: What are your main goals as President of Med.&A -n the ones that are particularly close to your heart?
Verlicchi: My vision is for our association to develop ethically in line with the times and to gain more weight ‘politically’. We are in daily contact with both producers and bottlers, and in the market every day. 
The great responsibility we carry, as well as our experience and information, could be very useful to the regional conzorzia. This has been recognised by Albino Armani, the president of the DOC delle Venezie consortium, who invites us to all of their meetings. He in turn attends the Med.&A. meetings. Our knowledge helps both the wine policy and the market and market players. 
I organised an informal meeting of our members a fortnight ago to talk about Pinot Grigio and about the Prosecco price increases. We have to be totally correct and accurate in all our statements, especially about Prosecco, because it is a driving force for the whole Italian wine sector. 

Thank you very much.

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