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   Share this article     Summary of Editorial column Wine Tasting 
  Editorial Issue 202, January 2021   
The Price Paid by WineThe Price Paid by Wine  Contents 
Issue 201, December 2020 Follow DiWineTaste on Follow DiWineTaste on TwitterIssue 203, February 2021

The Price Paid by Wine


 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



   Share this article     Summary of Editorial column Wine Tasting 
  Editorial Issue 202, January 2021   
The Price Paid by WineThe Price Paid by Wine  Contents 
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