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 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 falling. The gap between these two markets is remarkable, particularly in terms of price and profitability.
International snapshot
In the 2015 harvest, Italy produced about 49m hL. Spain reported a smaller crop of about 41m hL, which is smaller than in the previous two years, while France produced around 47m hL
According to figures available at the time of writing, the world will have produced almost 275.7m hL of wine in 2015, an increase of approximately 2% over 2014. World consumption is around 270m 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 centre 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.
A smaller Californian crop has caused increased market activity, while news from the southern hemisphere is varied. While Chile, Australia and New Zealand’s bulk wine markets also seem to be working well, movement in South Africa and Argentina continues to be slower. In the case of Argentina, this is due to the uncertain political environment of recent months. Throughout the southern hemisphere – and in Italy and southern Europe as well – there are are some worries about drought conditions that could impact the prices of many agricultural products. In line with the law of supply and demand, we can observe a stable market with regard to generic bulk Italian wine from September to December 2015.
The Italian situation
From January to September 2015, Italy exported about 3.7m hL of wine – a downward trend of about 9% - with a median price of €0.73/L ($0.81), according to Istat figures. During that period Italy exports 14.5m hL of wine, down 2.4% on previous figures.
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 to 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 delle Venezie and Veneto; 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 are 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 €1.40 to €1.45/L at the beginning of September, but which are €2.50 to €2.60/L 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, with the exception of Pinot Grigio IGT/IGP delle Venezie/Veneto, as there are rumours about possible changes in regulations for Pinot Grigio from this area. Indeed, some major buyers 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-histamine wines; Riserva red wines from south Italy; Aglianico, 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 difficulties we foresee are for Italian bottlers. While Italy has a big bottling capacity, the industry is too fragmented and not competitive enough when compared to the big European bottlers. The competition is extremely tough, reducing their margins. 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 for most products during the first half of this year.
Luigino Lazzaretto, bulk Italian wine broker, and president of Intermediazioni Lazzaretto S.r.l. Mr Lazzaretto has more than 50 years of experience.
