In this interview Edoardo Freddi talks about the wines most in demand abroad, emerging markets and the challenges posed by the conflict between Russia and Ukraine.
In Giordano Brega’s interview with Edoardo Freddi for Affari Italiani, hot and topical issues are discussed, such as the conflict between Russia and Ukraine and the effects of the war on the world of wine; but lighter and more curious topics are also touched upon, such as: which wines are in greatest demand at the moment, those in greatest growth, emerging markets and those that are more difficult to enter.
Below is the complete interview.
Your company operates in 90 countries around the world. Which are the markets where Italian wines are strongest and the most interesting emerging ones?
The United States and Canada are undoubtedly the front runners; they are markets where there is significant demand for Italian wines. Between one state and another, preferences can be very different: in Florida, for example, they are inclined to sweet wines and Moscato, which in the aromatised version are among the best-selling products in the USA; while in the more northern states, such as Oregon, Washington and New York, more intellectual wines such as orange wines, or hyper-macerated white wines, are in demand. The same phenomenon, in terms of consumption preferences, also occurs in Canada, where there can be abysmal differences between one monopoly and another. In Europe, the states where Italian wines are highly appreciated are Germany, Switzerland and the UK; traditional markets where, however, the demand for wine is constantly growing. As far as the most interesting emerging markets are concerned, we certainly find the Asian ones such as South Korea and China; countries that should by no means be considered as one uniform world. If South Korea is a type of market that is increasingly approaching the traditional ones, for China it is a different matter. A simple meeting is not enough, often a lot of brainstorming and al-ways studies are needed. It is necessary to get closer and closer to what is the ‘feel’ of a nation and thus of its customers. Staying in Asia, another country with great potential and on which to focus is India. This at the moment, however, is more price-oriented: it mainly requires low-priced products and spirits. Other emerging markets to look out for are Angola and Nigeria.
How much have Italian wines paid the ‘duty’ of covid first and the war in Ukraine now? And what will need to be worked on to overcome the difficulties between now and the coming months?
Although 2021 was a record year for wine exports, more than EUR 7 billion in value generated, at first the advent of Covid affected the wine world considerably. The setback of the Ho.Re.Ca. channel was felt, especially for those wineries whose business was focused on the On Trade channel. Exports to many countries came to a complete halt, while in others they continued, albeit with reduced volumes. Subsequently, the sector gradually restarted and at the end of the 2020 budget, the excellent performance of the Off Trade channel and the boom in e-commerce emerged. 2021, as anticipated, was a record year, but then the conflict between Russia and Ukraine broke out in February 2022. In terms of exports and trade, the situation was really tense at the beginning of the conflict: very long queues of trucks at customs, blocked imports, uncollected goods, collapse of the rouble. Although something has changed slightly now, the situation is still critical because the Russian financial system, also weakened by the sanctions imposed by the EU, does not allow wineries to have insurance coverage on the payment of goods, so Italian companies prefer not to take risks and decide not to send goods; and because, many companies are no longer able to source essential materials from Ukraine, such as glass and capsules. Some small opportunities for new companies or those more inclined to risk are, however, appearing as local wine consumption in both Russia and Ukraine is gradually recovering. To cope with this crisis, wineries will have to focus their exports on new markets, boost sales in those already served; in short, try to change business models and diversify sales as much as possible. Another fundamental aspect on which wineries can focus to cope with the crisis is innovation, both in terms of strategy, packaging and supply.
Apart from war, are there countries where Italian wines find it more difficult to ‘enter’?
Yes, the African states and Brazil are markets where it is very difficult to enter and propose the wines of Italian wineries. This is mainly due to local legislation that imposes a long and complex bureaucratic process and a large economic investment, which is not always sustainable by Italian wineries.
What are the most popular Italian wines at the moment?
Undoubtedly Tuscan wines, i.e. appellations such as Brunello and Chianti, and Barolo; considered the kings of premium bottles. The performance of Prosecco and Valpolicella wines is also excellent. Together, these denominations account for more than 50% of the total amount of wine exports.
And which ones are growing the most on world markets?
The wines of Etna are now starting to assert themselves more and more worldwide, to the point of being defined as the Barbaresco of Southern Italy. Apulian wines such as Primitivo di Manduria and Appassimento are also performing well, i.e. red wines with great body and breadth, which have conquered the Asian markets (Vietnam, Korea and China) right after the European ones. Sales of Negroamaro abroad are also growing steadily. Finally, the natural and orange wines, considered the wines of the future, which are conquering the countries of Northern Europe, the United States and Canada, should not be underestimated.
In the second half of the year, what are the prospects for the Italian wine market in the world?
The general situation is still unclear, between increases in the cost of raw materials and their availability. To date, the production cost of some is at the limits of tolerance for the sector categories: it is clear that the cost of producing a bottle cannot double. Similarly, the costs of cartons (+50% approx.) and transport pallets (+100% to 200%) have risen. As far as transport is concerned, there is still no smooth flow: for example, in the United States there is speculation of a significant loss of wine quota. An estimated -18% export to the USA on an annual basis as of 31 December 2022 (i.e. after the 2022 harvest) except for so-called luxury wines. The transport issue is not making anyone’s life any easier, delivery times have become scarcely compatible with the needs of the sector. Average delays of at least 60 days are estimated in the delivery of containers to the final consignee; this delay could irreversibly damage the bottles shipped from Italy.