We knew it. For many months we had been aware of what was going to happen in
the wine market. A prediction, not so difficult to make, and which obviously
happened. We have known for months that because of the pandemic and the impact
it has had on the economy, any productive area would have been significantly
affected and, in some cases, even in a devastating way. We also knew the
economic consequences and the restrictive measures affecting trading activities
and related to the world of wine would have had a very heavy impact on the
market and on all producers. Those who could and were in the economic condition
to do so, obviously tried to resist by resorting to the resources available and
which, of course, were not and are not unlimited. Those who have not been able
to do that, or have run out of resources, tried to remedy as much as possible,
understandably trying not to succumb.
In the past months, and this is nothing new, the global wine market has
suffered a significant and certainly unpredictable collapse, both because of
the Covid-19 pandemic and certain economic and protectionist measures adopted
by some countries. Many, in my opinion and even rashly, hailed the foreseeable
increase in so-called on-line sales as the lifeline for the wine market.
There are even some who have speculated this will be the preferential way for
the future of the wine market and it will save it from the crisis of these
times. There is no doubt that selling through e-commerce platforms has
in part limited the damage caused by the loss in sales of conventional
channels. It in fact limited it, probably in a negligible way for many.
On-line wine sales have clearly increased, mainly because of the fact, in many
cases, it has been and is the only way to sell wine.
Many people emphasize the extraordinary increases in e-commerce sales of wine
which, in some cases, has been even higher than 400%. A value that certainly
seems to be striking, however it has no concrete meaning without the comparison
with the generated volume, in particular with the turnover prior to the current
situation. If a winery, in fact, before the pandemic, recorded, for example, a
turnover in e-commerce sales of a few hundred euros per month, an increase of
400% does not significantly affect the balance of a medium-sized company. This
is because, above all, the sale through electronic commerce is mainly about the
retail channel, made up of purchases of some bottles, certainly not the volumes
typical of large-scale distribution. If we add to this the obvious decrease in
people's spending power, the situation becomes even more serious.
The restaurants and business activities that have always been the main sales
channel for wine, are also in a very serious situation, forced to not be
able to do their jobs, have drastically affected the collapse in sales. The
consequence is that wineries are in the position of having a quantity of unsold
bottles and casks which are still full and that, in some way and like to say,
must be emptied. Not only for the fact of seeking the legitimate profit, but
also to free up space to make room for the wine of the 2020 harvest and the
bottles that will be produced. We know that some recovery measures have
been implemented, authorizing, for example, the extraordinary distillation of
large quantities of wine. In this regard, it should be considered that a
distillery is interested in the alcoholic fraction of the wine only, they do
not give much consideration to the denomination or the label, not even the
prestige or the work done to make a wine. Alcohol – that is, the product the
distilleries are interested into – is always the same, from table wines to
those belonging to Denominazione d'Origine Controllata e Garantita
(Denomination of Controlled and Guaranteed Origin, DOCG): the price is the same
in any case.
Wine in restaurants has suffered a huge decline in sales, in supermarkets
– notoriously – are preferentially sold wines belonging to a certain price
range, so to speak popular, in wine shops are also sold prestigious
labels, the electronic commerce channel sells a bit of everything. However, the
fact remains that wineries and consortia have the problem of how to sell what
was not possible to sell. Even at the cost of selling off their products, as it
would always be more than the price paid by the distilleries. It is no
coincidence that I said products – evidently alluding to wine – obviously
excluding the brand which, for many producers, represents the main reason
for their profits. Many wine producers – big and small, including consortia –
have always sold their wines with specially designed brands, thus avoiding the
involvement of the primary brand, with the aim of selling wines at a much lower
price, therefore obtaining an immediate profit.
This sales method covers all categories of wine, from table to DOCG, that is,
those having a Denomination of Controlled and Guaranteed Origin. I think
everyone has seen DOC or DOCG wines at surprisingly low and unusual prices on
the shelves in a supermarket. There is no need to underline the quality of what
is inside the bottle: we all agree that real and true quality has a decidedly
high cost. When a wine has obtained the recognition of the denomination, that
is, it satisfies the production criteria provided for by its disciplinary, it
has the full right to bear the name of denomination in the label. The
production disciplinary, it must be said, establishes only the production and
geographic criteria, it makes no reference to the selling price, not even to
the minimum one. This means the producer has the right to set the price of the
wine, even at prices much lower than the competition and the average price at
which the denomination is usually sold. It could be said that this is
detrimental to the prestige of the denomination and obviously disturbs
its target market, however – to paraphrase a famous movie cue – that's
the free market, baby.
As far as I'm concerned, I understand these sell-off choices by producers and
consortia. I do not feel like criticizing that, I understand the difficulties
of the moment, both economic, logistic and, above all, entrepreneurial. It does
not cause me any discomfort, personally, to see wines from noble and
celebrated wine areas on the supermarket shelves at obviously unlikely and
highly questionable prices. Nobody forces me to buy them and, in fact, I don't
buy them. I know well, just like anyone else, there are fixed costs to bottle a
wine that have a quite important impact. By doing a quick calculation, it is
evident the proposed price for those bottles can barely cover the cost of
bottling, let alone that of wine. Therefore, anyone is absolutely aware that in
those bottles they will not find a sublime nectar, despite the name and
denomination written in the label. If I buy that type of wine, I certainly
don't expect to be surprised by the high quality, rather, by the low if not
poor one, and this is something everyone knows even before putting that bottle
in the cart.
Moreover, we all know very well this year has been very difficult for everyone,
for every business sector, with very high losses in profits. Wineries – which
evidently are, first of all, business activities – have notoriously suffered
the enormous economic consequences imposed by both the pandemic and the market
conditions of 2020. With the result of having huge quantities of unsold
bottles. And every bottle not sold takes up space and that will not be freed
for the bottles of the new vintage. For this reason, and as far as I'm
concerned, I fully understand the entrepreneurial need to accept the loss
caused by the sale and which, certainly, would be even more significant in case
this would also affect future productions. Then it is better to sell them out,
to close the 2020 chapter with the awareness of the loss and starts again
for the future. If then on the shelves we see noble wines at unjustified,
unlikely and evidently popular prices, the final choice is up to the
consumer. They can in fact choose whether to accept to buy a bottle with
consciously questionable and predictable quality, paid at a very low price, or
to leave it on the shelf. With all due respect to those who cry at the
alleged treason scandal.
Antonello Biancalana
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