Sunday, November 20, 2016

Trump's America Beckons: A Challenge for Italian Wine in the Age of Disruption

In two weeks, on December 4, 2016, Italians will vote on a referendum to change their constitution. If electors vote to approve the bill, it would activate constitutional reform in Italy, some say the most extensive since the monarchy ended. According to a report in the Wall Street Journal, “’If a ‘no’ vote wins, everything remains as it is,’ Mr. Renzi said in a radio interview this past week. ‘In this way, Italy will remain a system that favors instability and backdoor dealings.’” If “no” prevails, Prime Minister Renzi is threatening to resign. If he does step down, most likely a caretaker government will be put in place. Once again, Italians will be denied the right to vote on their leaders. As one Italian friend told me, “We haven’t voted for our government in almost four years, and even then we had a hung parliament,which resulted in this unholy alliance between the center-left and the center-right. We feel powerless. At least you, in America, had the option to vote for your leader – we haven’t had that option for some time now.”

So before we even talk about America, right off, Italy has internal problems of its own. According to The Economist, Italy “has debts of 132.7% of GDP and a banking sector weighed down by bad debts after years of sluggish growth.” Try and get a loan to buy a house, or a winery, in Italy right now and see how difficult that is. The recent acquisition of a famous winery in Piedmont underscores a tight monetary climate for local investors. Couple that with the ongoing bank meltdown in Italy along with a weak Euro (with potential for more weakness depending on the Dec. 4 result) and even without the wild card of the incoming Trump administration I’d say Italy is facing some hefty challenges.

Trump is a disrupter. The best polling minds in the U.S. could not track his path to victory. And even though his rival won the popular vote, he won the electoral vote and will be on the dais in January in Washington D.C., hand on the Bible, sworn in as America’s 45th president. Will Italian wine producers be able to maneuver through his minefield of disruption and grow, or at the very least, maintain their levels of business in the U.S.?

Lest you think this will become another Golden Age for California wine, consider this. In a recent piece on Jancis Robinson’s Purple Pages, Alder Yarrow wrote about “Winegrowing in the wake of Trump.” In it, he quoted winegrower Steve Dutton, who farms 1,400 acres in northern California. Alder writes, “Agriculture in California alone is a $42.5 billion industry. ‘Go to the produce department in any American grocery store and almost every piece of fruit, vegetable or fruit in there was picked by hand', says Dutton. 'And if you think for a second that more than one per cent of that was picked by American hands, you are dead wrong. 99% of those fruits and vegetables were picked with immigrant hands, coming, most likely, from Mexico or somewhere. Without this source of labour, we would be out of business.’”

There may be challenges on the domestic front in the vineyards (and farms) of California, and indeed, the United states. Does that present an opportunity for Italy and her wines? Too soon to tell. And while Trump campaigned, promising to disrupt trade agreements with his sights set mainly on China, Japan, and Mexico, a lot of it depends on who Trump places in charge of trade.

In a recent article in Reuters, Philip Belnkinsop argued, “Trump has argued that international trade deals hurt U.S. workers and the country's competitiveness, but it is not clear to what extent Trump the president will resemble Trump the campaigner.

“EU and U.S. officials have for more than three years been negotiating the Transatlantic Trade and Investment Partnership (TTIP), with Brussels and Washington recognizing it will not now be completed under Barack Obama's term as earlier envisaged.

" ‘TTIP is history’, Bernd Lange, chair of the European Parliament's Committee on International Trade, told online magazine when asked about the impact of Trump's win on the negotiations.”

So we have the constitutional chess pieces in flux in a country (Italy) that is in economic turmoil, a tectonic social and political upheaval in America, uncertainty as to future trade deals between the U.S. and the EU, and in the center of it all is a disrupter which the spotlight is aimed at. If you are a winery or winemaker in Italy, I’d like to share these recommendations for the next two years.

A little bad news. About 50% of eligible voters didn’t vote in the U.S. elections in 2016. As well, about 40% of all adult Americans do not drink alcohol of any kind. Of those who do, beer is the dominant beverage, followed by wine and then spirits.Wine is growing in consumption, but we are now in the Age of Disruption, which isn't reserved solely for the President-elect.

For one, I would recommend you set your growth expectations for the American market very humbly. Do not anticipate double digit, organic growth. 5% maximum would be my advice. And that’s an aggressive number.

Pare down your selections. If you are a winery, let’s say, in Tuscany, making Chianti Classico, I’d advise you keep your ranges to a handful (that is one hand-full) of wines. This isn’t time to have a lot of Toscana IGT or Gran Seleziones. A basic red, basic Chianti, a Riserva, a special red, and a white or a dessert wine. If you are not from Tuscany or Piedmont, or making a Prosecco, a Moscato or a Pinot Grigio, I’d recommend you try to find a white and a red to build on for the time being. Yes, you read it correctly, a red and a white. Bear in mind, all of Europe, as well as South America, South Africa, Australia, New Zealand, Canada and Mexico and sake producers in Japan are pretty well much in the same boat as you, maybe even further “back of the queue.” Be sane in your anticipation for the next few years.

If a trade war erupts, with sanctions, all bets are off. The climate in America has become much more protectionist and it will be that way for a bit. Politicians are trying to return jobs to the heartland. But the heartland isn’t where great Chianti is born, or any Chianti for that matter.

The world isn’t going to stop its onward march to the future, but that trek will not be on a straight path. Like any mountain climb, there are switchbacks, zigging and zagging and occasionally one must go down into a crevice on the way to higher ground. This is one viewpoint, and one which I hold. I am a fiscally conservative observer, preferring slow growth to rapid. There is an opportunity, for those who look to the next 10-20 years, to build solid business for Italian wine in the American market. Take the next two years to grow solid relationships with your end-users. Come to America, often, and do the work at the front-lines in the battle for Italian wine in America. That hasn’t changed. We depend on agricultural products to sustain our body and our soul. And wine is a very important aspect of an emerging culture in America. It may not seem like it now, but one must look past the headlines, the fears and the dread that so many people have for tomorrow. For all we know, an asteroid, like the one that landed 66 millions of years ago at Chicxulub, is heading our way. In terms of geologic time, this little dot of time is relatively insignificant. The earth will be here long after the polar ice caps melt and Homo sapiens is gone.

In the meantime, set your sights on a realistic goal – think marathon, not sprint. Italy, and America, have had challenges before and will have many more before recorded history ceases to exist. While we are here, let’s bring some light to the tables across America with the wonderful reds, whites, rosés, sparkling and dessert wines that Italy so bountifully produces. This is a time to prepare, but to also keep hopeful. As I wrote on this blog three years ago, "The loss of hope is more powerful than a gun or a sword. To give up at the beginning or at the end, either is not an option. You are never where you are not meant to be. One is always here and now. And this particular here and now, while challenging and vexing to many if not all of us, it is the battleground."

Now let’s go sell us some Italian wine in America. And good luck on December 4th.

written and photographed by Alfonso Cevola limited rights reserved On the Wine Trail in Italy
wine blog +  Italian wine blog + Italy W

1 comment:

  1. It's refreshing to read your sane advice and observations, amico. Many people are running around in a stupefied daze or somewhat hysterical dither. Then there are the emboldened haters, viz. "the worst are full of passionate intensity". Maybe it is my age or maybe not. All I know is that the sky is not falling and there is work still to be done. A lot of it, here and all over this troubled planet. We can help by living by our core experiences and beliefs. It all starts with the individual. Thanks.


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