Italy is the country that has exported most in 2011 and sells its bottles around the world at one of the lowest prices. At this point, the question is legitimate: does Italy sell so much because it is worth so little? It is a plausible interpretation of the tables presented in this issue, which show that, with 12 million hectoliters, Italy is the world’s top exporter in volume but gives the first market values to an unreachable France (6.4 billion dollars), and drops to fifth place when it comes to average price: $ 3.70 per liter, behind New Zealand, France, USA and Australia, and followed closely by a dynamic Argentina, making us feel her breathing down our neck.
During the period examined – eight years from 2003 – Italy shows positive cumulative growth rates (Cagr), but insufficient when compared with what the main competitors managed to do. One thing above all: the value of exports has had a trend of 7.8%, higher only than France and Australia, but well below Argentina, which has a growth rate of nearly three times her values. Even Chile (+12%), Spain and the U.S. (+8%) grow better than Italy does, all driven (except Spain) by a revaluation of the unit value of the wine, above what our bottles can express: Italy marks +2.6% on average (which incidentally from 2008 to 2010 suffered severely from the crisis, falling regularly), against +3% and +3.4% in Chile and Australia, +6% in France , +8% +11% of the U.S. and Argentina, the country that better than any other has upgraded their image.
The bottom shelf
Italy is in fact a giant with clay feet, which – beyond territorial exceptions – places its product on the bottom shelf of an imaginary world supermarket, and that finds it hard to make the quantum leap needed to find a better return. What other countries have managed well: see the case of Argentina, who thanks to an aggressive penetration strategy implemented in the United States, has climbed position after position focusing more on value than on volume, both increased in eight years from 12% to 21% of turnover.
In terms of average price, the countries that grow the most are four: New Zealand (+7% in eight years), France (+6.41%), USA (+4.73%) and Australia (+4.26 %) are – coincidentally – the most exposed on the Eastern area, as we documented in a recent issue of the Corriere Vinicolo examining the 2011 export data, where we concluded that we are witnessing an epochal shift in the balances of world trade to China, Hong Kong, Taiwan and Singapore, countries that are willing to pay the wine figures on average higher than the Western markets, to which Italy is overexposed, that show slow growth. Take the case of China and Germany, in eight years, the value of imports of bottled wine in the country of the Great Wall has increased by 78% against the pale + 5% of Berlin. In terms of average prices, with reference to the values of Italy’s primary market, the United States, Beijing stands out with an increase of 5 times these values.
Those countries that in recent years have had a clear strategy are seeing their efforts rewarded: on one side the countries of the so called “New World”, who have “abandoned” the bottle versus bottle competition in mature markets (U.S. and UK), in favour of the “bulkinization” exports (Australia +18% in volume in eight years), concentrating on the recovery of values in the brand new markets of the Far East. Those who – like Argentina and Chile – have concentrated their efforts on fewer targets, are gradually moving away from unprofitable markets or on which the competition was played exclusively downward. Even France, which with $ 6.41 per liter is second in the world rankings, thanks to the great results achieved in Hong Kong, saw a revaluation of its asset value equal to +6%, twice that of Italy. The U.S. is also a prime example of how the massive shift of bottles to the East is increasing the value of the sales, up 8% in value since 2003 and above all an average price per liter increase pof 11%.
Madrid, Italy’s future bogeyman
Following this rate (+8% trend) it is likely that next year Argentina will be able to negotiate a higher average price than that of Italian wines (and for the italian market Argentina means the U.S.). Italy’s competitive horizon must begin to shrink to a country that Italy has undervalued in the past years, but that has the potential to attack the tricoloured stronghold: Spain. We invite our readers to examine the graph of the packaged wine export volumes, and see what the Iberian enology was capable of doing in the last two years with an increase from 5 to 7 million hectoliters and a growth of 7% from 2003 to 2011, compared to Italy’s +5%. With the economic crisis playing its part, with markets searching for wine at sale prices, the Spanish product could be the one with the perfect skill: large volumes (Madrid still exports 63% in bulk at the lowest price, 49 cents), little value, potential market aggressiveness.
The markets on which the Spaniards are focusing today are pretty much the same to which Italy plays: Germany, United Kingdom and United States, countries where large retailers and discount systems are the rule. Spanish wines have the perfect price for Aldi and Tesco, $ 2.44 per liter, not a great scenario for the Italian companies. On the one hand, Italianare not able to make our surplus value recognizable, or at least comparable to the effort of retraining implemented in recent years, a value that enables us to compete in a more profitable circle (what remains in our pocket after removing the effect of inflation?). On the other hand, Italy has below a “low profile” competitor hungry for the market, with tanks full of wine and that could be the best choice if the market should suffer some freeze (such as the last rise in excise duties in the UK).
These are all signs that should lead Italian wine industry to aim to balance the equation “a lot for little” which has for too long ruled exports, especially considering that because of the CMO (Common Market Organization) the “lot” is becoming “little”.
Source: Corriere Vinicolo