Wine: First Signs of Optimism

 It begins to become clearer what have been the effects suffered by the world of wine and caused by the containment and prevention measures for Covid-19. In the last past weeks, in fact, they have started to issue the first data concerning the trend of wine market in Italy during the first half of 2020, therefore, of course, also concerning the period marked by the so-called lockdown. This is, of course, not exactly reassuring data, something that was all too predictable and obvious. The data, especially the most recent ones and concerning the period immediately after the restart – therefore at the end of lockdown – however give a pretty good hope for the immediate future, although with moderate optimism. Of course, any positive data, after an extremely critical and negative period, leads to optimism, however there are signs giving hope for a moderate recovery.

 In any case, we can only speak about recovery and not about growth, however the news that the vertical collapse of wine sales, including exports, has ended, is in itself great news. The reopening of restaurants, bars and other places where wine is served or sold is certainly contributing to this recovery as these activities represent the main share of wine market. Although with moderate optimism, the disposal of wine currently in stock remains a serious problem for wineries, especially the one made for immediate consumption and belonging to vintage 2019. Moreover, with the wineries still “occupied” by unsold bottles, the upcoming 2020 harvest, that is, producing new wine without having sold the previous vintage, becomes a problem, and not only a logistical one. In this regard, the forecasts of many producers suggest that, in any case, 2020 harvest will be less abundant than the previous one and not only for the green harvesting they did in vineyards.

 As for the disposal of the wines of vintage 2019, in these days has been issued in Italy a ministerial decree that allocates fifty million euros for the distillation of wine currently on the market. A measure – it must be said, not appreciated unanimously by all operators of the sector – aimed at removing large quantities of wine from the market and which could create an obstacle for the one of the imminent 2020 harvest. The distillation of crisis would concern only “common wines” and would therefore exclude those belonging to denominations and geographical indications. The measure is financed with funds from the European Community and has the aim of reducing current stocks as well as producing ethyl alcohol to be mainly destined to the industrial production of disinfectants. The decree also allocated one hundred million euros for the green harvest and reduced the production yields for common wines from 50 tons per hectare to 30, a measure which – evidently – does not meet the favor of wineries producing this kind of wine.

 Before talking about the moderate optimism of the producers, let's see, specifically, the situation occurred during the lockdown period and which affected the wine market. According to the data gathered and issued by Vinitaly-Nomisma Wine Monitor Observatory, the first two months of 2020 produced better results than the same period of the previous year, favored, in particular, by decidedly positive market factors. The result, something easily predictable, has been hugely vanished by the lockdown period of the second two months, with heavily negative results. According to analysts' forecasts, the two-month period May-June – which we have just left behind – could produce even more negative results, thus nullifying the excellent start of 2020. The data gathered in April highlight the drop in the market of Italian wines, however the response has been more effective than in other countries. A result probably achieved thanks to the failed collapse of the American market and the introduction of tariffs on French wines.

 With such negative results, difficult to predict and contrast, even the slightest hint of recovery is clearly a signal that produces justifiable optimism. After all, hoping for the worst to be gone and the fearsome “second wave of autumn” hypothesized by some will not occur, the next months will obviously be marked by the recovery of the markets. In this sense, producers show signs of optimism starting from the summer months, during which a recovery of tourism is also wished and which will certainly help the economy of our country, including wine. Of course, everyone is very cautious in making forecasts of any kind, although being confident of a recovery in the markets and therefore of the economy. It will certainly not be enough to recover the huge loss occurred during the lockdown period, at least – and this, in itself, is good news – it will help to limit them and make available the indispensable liquid assets.

 Producers are in fact confident for both the reopening of the restaurants and wine shops and the important export activity, the latter, for many wineries, a fundamental budget quota. Specifically, producers trust, in particular, in September, typically the month during which clients issue the orders for Christmas and New Year periods. In case market forecasts and expectations should go like producers hope, the second half of 2020 should mark a significant recovery, both in economic and consumption terms. A condition that, of course, would affect not only the internal market, but also and above all the international market and therefore exports. Furthermore, other producers believe it will happen a drop in average prices due to the huge availability of unsold wine and which, with the aim of making a profit in the short term, could be sold at lower prices.

 It should be said that, in this sense, only medium-low range wines would benefit from this marketing strategy. In any case, these are encouraging signs that will certainly help wineries and producers to limit the already severe losses of 2020. In fact, nobody is confident of the closing of this year with important profits, however any signal such as to interrupt the negative trend of the market is certainly desirable as well as fundamental. A little optimism can only do good for the whole world of wine and, not least, for the whole country. Because after such a severe and unexpected collapse – social, economic, productive and sanitary – we all need signs of encouragement, even timid and modest ones, but which can allow us to have confidence and good hopes for the immediate future. There are small but important signs giving hope and that we can certainly greet with a well-wishing toast. With good quality wine and of which, obviously, we have plenty of it in Italy.