The investment bank Mediobanca, together with the credit insurance company SACE and the market research institute Ipsos, has produced a report analysing not only wine but also spirits companies. For the leading businesses in the wine sector, a decline in sales of 4.1 percent was registered in 2020, while the business of spirits producers only declined by 1.7 percent.
The analysis is based on surveys of 240 wine companies that achieved a turnover of more than €20 million in 2019, and for spirits on 63 companies with revenues of more than €5 million.
Hardly any decline in profits
The 4.1 percent decline in turnover is made up of a 6.3 percent drop in the domestic market and a 1.9 percent decline in export business. However, the Ebit margin decreased only slightly from 6.2 in 2019 to 5.8 percent. Net profit as a percentage of sales performed well, with a slight change from 4.2 to 4.1 percent.
Sparkling wines lost more (-6.7%) than still wines (-3.5%). The cooperatives were able to limit the losses to two percent. The share of sales in food retail increased to 38 percent compared to 35.3 in 2019 (in value it generated a 2.3 percent increase). The on-trade channel shrank from 17.9 to 13.4 percent (-32.7%) and wine bar and wine shop sales from seven to 6.7 percent (-21.5%).
The explosion in online sales is split between company-owned shops (+74.9%), specialised platforms (+435%) and non-branch portals (+747%). Although wine companies have cut back their investments by 14.3% in general and by 13.4% in advertising in particular, they have put 55.8% more money into digital equipment.
Cheap and organic is booming
Farms that achieved growth in 2020 generated 70.8 percent of their turnover with the sale of qualities below €5 per bottle. The share drops to 52.6 percent among producers with declining business results. "But the shift to higher segments seems only postponed until consumption habits have calmed down after the pandemic," Mediobanca hopes.
Organic-certified wine saw the highest jump in sales in 2020 (+10.8%), coming in at 2.3 percent of the market; vegan wine held its own (+0.5% with a 2.3% share). Biodynamic wines have not yet caught on, dropping 21.9 percent to 0.1 percent of the market.
Finally, 2020 brought a 5.8 percent growth for wines in alternative containers. According to Mediobanca, this is because they are "light, environmentally friendly, suitable for online sales and meet the interest of younger generations in new products."
Export scenarios
Over the two-year period 2021-22, wine consumption is forecast to increase by an average of 3.8 percent in many of the main markets. For the USA, annual growth is estimated at two percent, and for Germany at 3.1 percent. In Switzerland, thirst is expected to remain stable. For Great Britain, consumption is expected to increase by 2.4 percent per year, but the forecast is difficult due to the Brexit.
Mediobanca sees opportunities for growth in various markets that are already familiar with Italian wine. Canada and Japan, for example, are both showing strong wine consumption growth of 5.9 percent annually. China shows one of the highest growth potentials at 6.3 percent annually.
Wine and spirits account for 30 percent of Italy's food and beverage exports and they amount to €7.8 billion in 2020. The sector has been growing for several years: 6.3 percent per year on average for wines in 2010-19, and as much as 9.7 percent for spirits.
In 2020, wine exports declined by 2.3 percent, spirits exports by 6.8 percent. In 2020, the value of Italian wine exports was €6.3 billion, with sales in the US accounting for 23.1 percent of the total, sales in Germany 17.1 percent and in the UK 11.4 percent. While sales in 2020 fell in the USA (-5.6%) and the UK (-6.4%), Germany developed positively with 3.9 percent growth. The pandemic hit the export of sparkling wines in particular (-6.9%).
The spirits industry generated an export value of €1.5 billion, 60.4 percent of which in Europe. The main markets for spirits are also the USA and Germany, which together account for 40 percent of the total value. During the pandemic, Americans increasingly turned to high-proof spirits (+21.5%) and displaced Germany (+3.5%) from its position as the main export market.
Based on the developments in the first months, the 240 wine producers surveyed expect growth of 3.5 percent for 2021, with exports alone growing by 4.6 percent. vc
