Sunday, August 04, 2019

The top 10 destinations for Italian wine exports? China isn't on the list

From the looks of young Italian wine professionals Instagram and Facebook feeds, one would think China is their top market. Add to that the obligatory posts from Kuala Lumpur, Phuket, Bangkok and Phnom Penh, one would think there’s a lot of business for Italian wine in Asia. Let’s look at the numbers.

According to Istat data, 2019 (From Italian Wine Central) of the 20 top destinations for Italian wine exports, 2018, China isn’t even in the top 10. Yes, it’s a country with good growth potential and 1.2 billion inhabitants. But is the investment in time and travel worth it?

Data from Istat - graph from Italian Wine Central

Look at the metrics: Germany, the United States and England look like firmer, if more conservative, places to keep building.

However, growing one’s Italian wine business in these countries won’t be a walk in the park.

Starting with Germany, which has been a strong market for Italy, if not without challenges in the last 20 or so years. These include the economy, which has see-sawed. The Great Crisis of 2008-2009 was a flashpoint, to be sure, along with smaller reverberations in the economy before that. But Germany has a resilience that is attractive to Italian wine producers. One is that the demand for red wine is strong, and Italy offers good value, often better than France. The other is the popularity of Italian cuisine in Germany, which provides a base (and ambassadors) for Italian wine. With all the uncertainty in global economic conditions and forecasting for the future, economies like Germany’s still beckon the Italian wine producer. Transportation is simple, Germany is relatively close, and producers can travel there easily to work the markets. The economy is one of the strongest and most robust in the global community.

The United States, as well, has been weathering the economic tsunamis of the last last 20 or so years. Look, we’re in an age of disruption, and predictions are difficult to make when the terrain in front of us, the future, is unknown. But as long as the world stays relatively peaceful and going forward, the United States (and the dollar) will continue to be an economic force. As well, there is tremendous interest in Italian wine for so many reasons. The Italian immigrants who have been coming here for the last 150 years laid down a foundation for Italian wine, with the many restaurants and general permeation into the emerging culture of America. It’s not a perfect scenario, and presently with a political struggle and the 2020 elections looming and all that implies (more disruption for sure) when one goes into the heartland of America one finds a diverse people. Not perfect, God knows, the US is experiencing more growing pains. But this is what it is, and what it has been for as long as I can remember. So, unless the North Koreans, the Iranians, the Russians, China and the United States start lobbing nukes at one another, this is the canvas we have to paint on.

England is in serious disruption mode. Or a ticking time bomb. Seeing as getting to England from Italy is still uncompicated, I’d advise to continue to work one’s relationship with the many Italian restaurants and whatever retail channels are still open to producers of quality product. It appears, to me, to be a bit unstable, in terms of growing products that originate on estates, e.g., not just commercially produced plonk. Prosecco is one instance in which the Italian wine market in the UK has been seriously undermined by the quick-profit merchants looking to make a buck on an easy sell in a category that is currently hot. But that bubble will someday burst, just as it did with Cava. I reiterate, one must keep their deep relationships steady. And hope England will someday come out of their Brexit fog.

Sidebar - Canada. Things may appear to be flat there, and the route to market is plagued by governmental hurdles. But it is a good country for wine and Italian wine at that. I’d say, if one is working in Canada and the US, to make sure to keep Canadian visits (and relationships) in the rotation, while one is going from New York to Miami to Houston to Los Angeles to San Francisco, to Portland to Seattle and Chicago. Canada may be slowing, even slumping, but the country isn’t experiencing the massive disruption that places like the US, England and China are, from a societal point of view. Sure, you talk to Canadians and they’ll tell their country is going to hell in a hand basket. But everything is relative.

The real challenge is the Untied States. And going into an election year cycle, which historically has seen slow-to-no growth because of the uncertainty of possible new leadership (which affects economic predictions, at least on the surface of things). If people are dissatisfied with current leadership (and it appears that might be the case, but in America, who really knows what the hell is going on?) then that will clamp down pocketbooks and American will just wait it out. This is a time for Italian wine producers to invest in being on the ground. Give up a vacation to Cuba or Fiji and spend a week on the beach in August, not a month. I know, habits die hard. I’ve seen Facebook and Instagram, posts of all the pretty beaches in Italy lately, I know what many of you all are really doing. Well, it’s your time and your investment and your family business. But if you asked me, I’d say, get back on the trail.

Look, the American society is in crisis as I haven’t seen in 50 years. 40,000 people die a year from gun related incidents, and more mass shootings, three in the last week! This cannot continue ad infinitum. Something has to give. And Italian wine isn’t on the top of everyone’s list. So, if you want to keep your business and grow it, get over here and into the trenches and fight for what generations before you have sacrificed to get Italian wine where it is in the world. And America is still a big deal for Italian wine. The numbers don’t lie.

Data from I numeri del vino
Which leaves me to wine categories. What’s hot. What’s not.

It looks like Pinot Grigio might be saved a little by the rosé movement. I see a lot more ramato on bottles of Pinot Grigio. That’s a short-term fix, but hey take advantage of it. But Pinot Grigio won’t be around forever.

Prosecco- This is a horse that has been almost beaten to death but is propped up with drugs to keep him in the race. And he’s running. But it’s a sad affair. One of the most beautiful places in Italy for winegrowing and it’s been a race to the bottom. I was in a store last week and Prosecco was selling for US $5.99, clearly at a loss, but the huge wine importer had to make fiscal year end numbers. That’s what Prosecco has been subverted to. If you have a small, artisanally produced Prosecco, whether it is a standard issue or a fashionable col fondo, I’d say look elsewhere. Sell it in Denmark or Japan. Bypass the US. Jeff Siegel’sbig wine” is in control here and they aren’t giving up any territory to the small guys.

Natural wine – We love it, we drink it, we compose sonnets to it. It still accounts for a minuscule percentage of wine sold. If that’s all you make, so be it. But there aren’t going to be any cultural shifting currents that make astronomical growth possible. That’s not even the way natural winemakers work or think. But if the trend goes “big” you know who will take that one over? Look at the AR trend. Jeff Siegel’s “big wine” marketers will have “got it on lock.”

Barolo, Brunello, Super Tuscan and other 1%er premiums- I guess there’s still some room in the wine cellars of the trophy hunters. But someday these folks are going to have to drink the wine, unless they’re just keeping it like they would be keeping art or gold ingots. Relatively small production, by world standards, but part of which makes the reputation for Italian wine great and can compare to the best wines of California, even France. I just don’t see any room for anymore $100+ wines in this country, when farmers in the Midwest are declaring bankruptcy in alarming numbers, far outpacing those we experienced in the Great Crisis of 2008-2009. The wealthy 1% of the 1% can have 90% of the money in America, but they can only drink so much. This is not a good pond to dip your pole into right now. Better to drop your prices and sell some of the wine. Another harvest is looming.

Etna wines – the darling of the somm-crowd. Well, these wines are piling up too, and Siegel’sbig wine” is on this too. I just don’t see the trend exploding. It’s queuing up, standing in line, waiting for its turn. But not a lot of wine is burning through. Thankfully, production is small, but unlike Burgundy the status for the wines has ebbed. And retailers are telling me they’re having to discount the stuff to get it off the racks and into consumer’s hands.

So, what does that leave us with? Verdicchio? Rosé wines? Chianti? Montepulciano d’Abruzzo? Fiano? Lambrusco? There’s plenty more. The channels are crammed right now. And going into the holiday selling season, I predict lots of “deals” are going to be struck because wine keeps getting made. Warehouses are full, retailers are full, consumers are wary, wine drinking as a cultural attachment is diminishing. People are drinking less or drinking other, for now, and the upcoming generations are economically and culturally challenged to follow in the footsteps of the generation that came before them. And they aren’t even predisposed to go in that direction on any case. So, it looks like Italian wine is in the crisis with the rest of us and will need to roll up sleeves and get into the streets and move this wine through.

The good news? America is a big market that still has growth potential, even with all the doom and gloom. But now is more of a time to have realistic expectations laced with a hearty work ethic. Forget about working on your tan – It’s now time to build up your brand.

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