Sunday, May 17, 2020

The top 10 destinations for Italian wine exports in 2019? Once again, China wasn’t one of them. In 2020, Quo Vadis?

Young Italian wine professionals had been posing wistful pictures on their Instagram and Facebook feeds, when travel destinations such as China, Taiwan, Korea, Thailand and Singapore were de rigueur for building their Italian wine business. From first blush, one would think there’s a lot of business for Italian wine in Asia. I’m looking at the numbers from 2019 and prognosticating upon what the possibilities for growth in 2020 are.

According to Istat data, 2020 (from Italian Wine Central): Of the 20 top destinations for Italian wine exports, 2019, China wasn’t even in the top 10. China might conjure up exotic and romantic visions, but from a business perspective, it hasn’t proven to be a top place to invest time and energy in growing your brand. Yes, it had been seen as a country with good growth potential with 1.2 billion inhabitants, but that was prior to COVID-19. And then everything changed.

Yet even in 2019 I asked, “Is the investment in time and travel worth it?” Now, a few fateful months into 2020, I’m asking different questions:

What is there to return to, to try and build back business?

Do we know when that will even be possible, to go back, and to effect a strategy to rebuild?

And what about the larger import markets, such as Germany, the United States, England, France, Canada, Switzerland, Sweden, the Netherlands, Russia and even Japan, which surpasses, if not altogether eclipses, China? This is a strategic nightmare, notwithstanding the impact COVID-19 has had on Italy’s domestic market, with millions of jobs lost, people untethered from their daily life and routines, the decimation of the medical infrastructure and education, not to mention a lumbering, at best, political machine.

They say we’re all in this together. Well, we are all in this same storm, but we’re not all in the same boat.

And winemakers span the economic spectrum just like other segments of society. There are the uber-wealthy landowners, who have resources and cash, and can wait out the storm, no matter how painful that seems in these uncertain times. But families who have known nothing for the last 100 years but their little plot of vines in Tuscany now are being exposed to dangers they might not be strong enough to overcome. Add to that the expense and uncertainty of building up foreign markets. In the best of times, it was a crap shoot. Now it is more akin to Russian roulette. And what if you’re 33 years old, and you’re just a few chapters into the book of your working life? This is monumental, life-altering and all pervasive, so it seems.

Now we need to look at our altered world with an eye to strategies for survival.

Starting with strengths. One is the ascent of Mediterraneanism in American consciousness. What do I mean about this? Italian wine producers, and to a degree, Spanish and French, benefited from two generations (roughly 1958-2018) of building the brand of wine in league with changing American cultural and culinary customs. It’s not like it was in 1988, when this was still a far-fetched idea.

I know, because I was on the front lines working six days a week as one of thousands of brand ambassadors, building the idea of wine with food. And in my case, Italian wine with all kinds of food, not just Italian. And in my career, I saw explosive growth from 2004 until 2018, such that the rate of growth was almost unbelievable. Big thanks to Pinot Grigio, Moscato, Prosecco and Chianti, the four workhorses of this Golden Age of Italian wine. And yes, of course, Barolo, Brunello, etc., all the fine, small-batch wines also buttressed the reputation and esteem of those two generations worth of effort.

Now let’s check the data. Look at the figures for 2019 – the top 10 countries that imported wine from Italy didn’t change much from 2018, albeit with modest growth. But forget that happening in 2020. What I would do, if I were an Italian wine producer would be to whittle it down to a bare-bones strategy for the rest of the year. Pick five (5) countries that look to have hope for salvaging your brands this year. Do not expect growth, expect lesser losses. Got it? Losses, but not apocalyptic ones.

Which countries should I pick?

Well, for one, America, because it’s a big country and hard-headed enough to not stay sequestered in our homes. And the infrastructure for selling is still in place with salespeople, supplier reps, import companies, etc. I know it sounds like an odd strategy, but America will probably get herd immunity (the hard way) and during that time, there are going to be a lot of restaurants re-opening. In addition to that, there will be those who will still shelter-in-place, more careful of their movements. And they will get their Italian wine fix from their retail store, online and even from some restaurants that can now sell retail, if the price is right.

One unknown factor in this is the tariff issue. If the current administration continues to weaponize tariffs, it will be increasingly difficult to keep one’s head above water. I know some folks have been using creative solutions for getting around the tariff issue. Let me just recount something an old Italian importer once told me: “You want to make 20% on $10,000 or 0% on $100,000?” Yeah, your margins are going to continue to suck, unless to can get around the tariffs or utilize more direct-to-consumer sales.

Online retailing presents one of the most alluring opportunities. 2020 will be a landmark year for DTC imports, although in 20 years it’ll look like a trickle, I hope.

OK, America.

Where else? Look at the data – Germany is close, drivable and another opportunity. It also has fared better than many countries during this virus.And it is a large volume customer. It might not help the small producer, but the larger, more commercial companies will keep knocking on Germany's door.

Number three? England, for similar reasons to the American one. Anglos are obdurate, and maybe this will serve that population well. In the meantime, it is also reasonably easy to travel to, by car and Chunnel, if you must. That is, if travel restrictions ease up. And if they don’t? Well, how about spending more time talking to your customers, not just on social media channels, but by giving them a call? Or better yet, start writing them letters. Do something out of the ordinary – keep your relationships going and make them stronger.

Right now, no one wants to see anybody showboating on SM channels. Now is a time for a humbler approach. Hat in hand kind of thing. And S-I-N-C-E-R-I-T-Y. Truly heartfelt emotions. We know if we sent all the politician in a spaceship on a trip around the sun, in six months we wouldn’t notice they’d left. But put all the farmers in that same spaceship instead, and in six months we all would starve. So, use your strengths, not as a weapon or a threat, but as a promise for a better life and a better time. And wine plays right into that dreamscape, as far as I see it. But hat in hand, humility. Intention.

The last two countries of your five? This is where you will need to personalize your strategy to fit your model. Look where your past business was good, but make sure those two countries are in the top 10 - whether it is Canada, Switzerland, France, Sweden or Denmark. Choose two, and keep in mind how you are going to work with those countries, whether it might be in person, or via some remote set-up that we all seem to be embracing out of necessity these days. But build them, and build slowly but with good foundations and again, intention. But again, as I wrote last year, forget China – for now. China might conjure up exotic and romantic visions, but from a business perspective, it shouldn’t be in your top five picks.

Let’s talk about the 900-pound gorilla in the room – money and pricing. No getting around it, the monetary channels have shrunk. There is just less of it to go around these days, whether people are hoarding it, or they took gain losses in the stock market in February and March. Or if businesses, like restaurants, operated, as has been widely reported, with so little reserves, that the last two months stretched their finances down to the coin jar. You will not make normal margins this year. Even taking tariffs or trade sanctions out of the equation, gains will be vaporous. But the grapes keep growing, and you have to rotate and make room for the future harvests. So, take an account of what you can really live with, for this special time, and see movement in your inventory. A lot of wine producers from all around the world are sizing this up. And those who rise out of this rabbit hole will be the ones who asked a little less than they wanted to, or maybe even needed to, in order to get the sale. This is a short-term issue. But a critical one, in my opinion.

I’m not an economist, or a sociologist. But I have been working in and watching the wine trade for the better part of my life. I’ve never seen anything like this. But I believe in a resilient approach and a positive mental attitude.

Wine is a glorious, delirious delight. And it offers us comfort and security. Eating dinner at the table with our family, with a hearty, refreshing bottle of wine, restores one at the end of the day and gives many of us the spirit to take on another day, or in this case, another year or two of unforeseen challenges.

Wine is a civilizing element for many of us. And as we peer into the abyss of a dearth of civility, ongoing political unrest and societal fragmentation, it can be a frightening future that awaits us. But it needn’t be. We didn’t rise up from the ashes of World War II and spend two generations slowly rebuilding, only to throw it away now.

So, we must think like that bottle of vintage red wine that we put in the cellar many years ago. It takes time, and patience, and perseverance for a great wine to become greater. And likewise, with us humans too. I know Italy can rise up and do this, just as I know America can as well, and the rest of the world too. For a world without wine is a far gloomier proposition than I care to envision.

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