Let’s Talk Numbers

A Doctor Wine reader named Daniele has asked me to make some sense of all the numbers circling about in the wine sector. There are those who are upbeat because exports are rising, others who say the Italian market is on its last legs, while some pundits claim in magazines that the hike in wine prices at restaurants has been excessive and is responsible for falling consumption. All these views hold some truths and some lesser truths, as is always the case when your try to make sense out of complex realities by cutting considerations to a minimum or drumming out the alleged guilty party based on prejudice or ideological grounds. We will now examine some numbers and while the results may not be precise, call them ball park if you like, they will offer some clear indications. We can start off by saying yes, exports in 2011 did rise 9% in volume and 12% in value, which means that the average price per liter rose slightly. The total value of the volume exported reached 4.4 billion euros, which makes wine Italy's single-biggest agricultural export, out of a total of some 30 billion euros. However, some 80% of wine exports are towards three countries: United States, Germany and Britain. Exports towards China, Russia, Japan and Brazil are on the rise but today they represent a hope more than a reality, given that together they account for less than 10%. Other countries like France, Chile and Australia, in particular, are working much harder to boost their exports towards these expanding markets, while Italy is falling far behind. There are another problems. The less than 4.5 billion euros in exports represent about one third of the whole sector's turnover, which is in the neighborhood of 14 billion euros. This means that almost 10 billion euros are from domestic consumption and of these more than half, around six billion euros, are from major distributors like supermarket chains, discount shops and outlets. Of the rest a small part is sold directly by producers and about 25% through HoReCa, the traditional sector of hotels, restaurants and caterers. The latter, with some significant exceptions, is in deep crisis. The suppliers for this traditional sector, in general small-medium-sized wineries are suffering not only because sales are declining but also because payment scheduled are much longer than in the past. What this all means is that producers who have problems exporting because their sale prices are too high (due to excessive production costs, obviously, and not just organizational difficulties), those who cannot break into mass distribution and those who only or mostly sell to the HoReCa sector are struggling to even stay on the market. Added to this is the credit crunch and a 15% hike in VAT, from 20% to 23% that have created a perfect storm. As if this was not enough, there is also the possibility of a increase in property taxes on farms.
Not on wineries but probably for holiday farms and buildings used for the sale of homemade products. Does the future look bleak? For sure there are no reasons to jump for joy. But has John Belushi said in the film Animal House, ''when the goin' gets tough... the tough get goin' ''. What this means, metaphor aside, is that what is needed is a nice injection of professionalism, which will make producing and selling wine a little less romantic but will allow for greater efficiency, a greater knowledge of markets and a better use of European promotional funds. And we need a greater awareness of the sector's problems on the part of those who govern us, who cannot continue to spout the excellent virtues of Italy's food and wine sector without know anything about how things really are and what is really needed to promote exports.