Thursday, January 15, 2009

Italian Wine 2008 - Report from Flyover Country

The intell is in. 2008 is wrapped up and put to bed. What an interesting year it has been. Lots of good data in this post, as long as you don’t mind it coming from flyover country. Not the high highs (and the low lows) of either coasts, but the steady drip of Middle America, the drum beat pounding. The mill of God grinding slow, but exceedingly fine.

I’m not quite giddy about the results, but considering that patch of Dante’s Hell we just walked barefoot through, not too bad. Italy, even with Brunellopoli and any number of shortcomings, is rising from the ashes of the world economic meltdown. Not to say 2009 is going to be a stroll in the glen. That it won’t be. Unless you are an importer or a merchant who just can’t stand people, it should be tolerable. But my warning (or prediction) is this: This is not going to be a year to get uppity or impatient. And as much as the world wants to help everyone to what they are entitled to, the pie must be sliced a bit thinner this year. Old vets and young startups alike, this year will be about the people left standing. So, talk among yourselves and make friends. On to the data.

I have at my disposal an analytical tool called Diver, pretty much the industry standard these days for mining data. One of our Diver Diva’s has set me up with a couple of markers that I can tweak. What I am reporting is the tip of the iceberg data, that is, I will not dive deep. For one, it is proprietary information. And secondly, it isn’t relevant to this post. But what I do share is an overview; let’s say the view from 30,000 feet as we are stealthing across flyover country. Middle America from Texas to Ohio, Iowa to Indiana.

Two areas, dollars and cases. Important for both because of the fluctuation of the dollar/euro exchange in 2008. For the most part, dollars showed greater increases (when they did) than cases. More with less. I analyzed sales from Italy, France, Australia, California, Japan and the whole kit and caboodle, that being everything wine, beer, spirits. Interesting year, but I already said that. It bears repeating.

This year Italy surpassed France in the world I look at. France is in the crapper. Champagne sales and high dollar Bordeaux, along with what seems to be a self-destruct mechanism in the French government towards the growth of sales of alcoholic beverages. I have no idea what they are up to in France, though I have read that perhaps the En Primeur (the annual Bordeaux showcase for the recent vintage) might or might not happen in March. This year they also host Vinexpo.

Australia and Italy were neck and neck in dollars this year. Impressive showing by Italy, seeing as the bulk of the sales of Australian wine are in the Yellow Tail price range. Foster’s wine sales in Australia have been lagging and that accounted in part for the Italian/Australian photo finish. Except Italy was trending up and Australia was trending down. The Italian market is in a bit of a sweet spot because the folks, who in the past would spring for a bottle of wine, say at $40-50 retail, are now looking to the $20-30 range. And there Italy has a great range of viable products. Not Brunello or Barolo maybe, but certainly a better than average Chianti Classico, an Aglianico, Barbera, plenty of options. And Italian culture is just hitting its stride here in America. What used to be a phenomenon on the coasts now is becoming more integrated in the developing cultural life of America and how she eats and drinks. That, along with a new political atmosphere, would be in most times a moment for a spike in growth. But seeing as we are still enveloped in the world financial meltdown, I remain optimistically cautious. This isn’t the year to gamble the dance contest on a newly learned tango. Maybe something like a waltz or a rumba. I have no idea what that is supposed to mean, but my inner editor let it get by.

I broke the analysis down to three areas of comparison: December 2008 vs. December 2007, 4th quarter 2008 vs. 4th quarter 2007 and all of 2008 vs. all of 2007. I was looking for patterns.

First off, December really pulled everything out of the tailspin. November helped a bit in the 4th quarter analysis but looking at the three areas of comparison, the 4th quarter (October especially) was where everything came unraveled.

California was mixed. High dollar volume and cases, but there is resistance to the prices. $60 and up California wines are dormant for now. Italy is in a good position to take some of that business, as long as we don’t let the Brunello consortium steer the ship.

While we’re talking about the embarrassment that has emanated from Montalcino, I am happy to report that even though it seemed to be all we heard last year, there are a slew of regions and producers who are going about their business and who haven’t been affected by the Montalcino meltdown. I’m sure somewhere Luca Zaia is patting himself on a back and taking a long drink of milk in a self-congratulatory victory lap. Would that it was just happening inside his head, but from what I can tell, he is itching to take credit for all the good that is happening.

Rising star? Japan and sake’. Huge increases (albeit on a small base) but the potential for growth is exciting. It seems that Japan is committed to quality. And while sake’ might never be another Pinot Grigio, it could take some business away from California and France, especially in Asian restaurants.

Pinot Grigio, by the way, showed growth in sales from production areas outside of Italy. That would be California, Oregon, Argentina and Australia. If the trend continues at the pace it is right now, in 3-5 years more Pinot Grigio will be sold from areas other than Italy. So a country that defined a category is threatened with losing the lion’s share of the business, out-hustled by California and Australia. Today I was in a retail store and saw California Pinot Grigio’s in the set with Italian Pinot Grigio’s. The Trophy Generation doesn’t know and doesn’t care.

In Texas, Italian wine now dominates the import market, being a larger dollar volume than any other country (Australia, France, etc), for 2008. And we’re talking about the land of Bud and Crown Royal. That’s huge news. New York might be the center of the world for most Italian importers, but the center has some shrinkage.

After 25 years in the hinterlands doing missionary work, it’s a nice affirmation that we are actually going somewhere besides just trying to outrun the authorities. Onward, through the fog.








3 comments:

Marco Pecorino said...

The Italian sweet spot is somewhat higher for those who drive a Carrera than those of us who drive an Acura TL. Interesting data mining that is understandable. La Bella Figura is really penetrating the heartland.

Do Bianchi said...

This is an important post, on many levels. Thanks, Alfonso, for sharing the info and the insights.

The Pinot Grigio numbers are, well, mind-boggling. How did a series of misunderstandings and marketing strategies lead to this?

Is that Anna Magnani in that still and from what film? I can't place it...

Alfonso Cevola said...

Thanks Dr.J

re: pinot grigio - my feeling is that the Italians spent more time competing against the St. Margherita mark than realizing it was bigger than that. Typical Italian jealousy thing. Meanwhile, the Californians (and Australia, etc) just ran with it. Now they have so much shelf space (in retail) the Italians will probably never catch up with their momentum.

yes it was Anna Magnani in "The Fugitive Kind"

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