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The Italian Wine Sector

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The Italian Wine Sector The Italian Wine Sector 28 Feb 2017 The Italian wine sector is the world’s largest wine producer and its second largest exporter by volume behind Spain. This paper gives an overview of wine production, consumption, imports and exports for the Italian wine sector and how these compare with Australia. Production Italy produces the most wine of any country in the world. The OIV estimated that while Italian wine production fell by 1.2 per cent in 2016 to 4.9 billion litres this still placed Italy ahead of France (4.2 billion litres) and Spain (3.8 billion litres In comparison, Australian wine production is one quarter of Italy’s (1.2 billion litres). Between 2001 and 2015, Italian wine production averaged 4.7 billion litres, reaching a peak of 5.4 billion litres in 2006. Italian wines are categorised by their official quality level designation. The highest quality level in Italy is Denominazione d’Origine Controllata e Garantita (DOCG), of which there are currently 74. The second level is Denominazione d’Origine Controllata (DOC). There are 334 DOCs. European Union (EU) law allows Italian producers to continue to use these terms, but the EU officially considers both to be at the same level of Protected Designation of Origin or PDO –known in Italy as Denominazione d’Origine Protetta (DOP). Therefore, the DOP list contains all 408 DOCs and DOCGs together. The quality level below this, which has less stringent requirements and therefore gives producers more flexibility on how they make their wines, is called Indicazione Geografica Protetta (IGP) – or Protected Geographic Indication in English. There are 118 IGPs. This level was traditionally called IGT for Indicazione Geografica Tipica and producers are allowed to use either term, IGP or IGT, on the label. Everything else that does not qualify for the DOP or IGP level, due to being produced outside an officially approved area or failing to follow the requirements mandated for wines of that area, is simply ‘wine’ or vino. Overall, 38 per cent of Italian wine production is designated as DOP, 30 per cent as IGP and 32 per cent as ‘other’. Production is weighted slightly in favour of white varieties over red. Italy has 20 key wine producing regions (refer to figure 1). Two-thirds of Italian production is sourced from five regions – Veneto, Puglia, Emillia Romagna, Sicilia and Abruzzo. There are distinct differences between regions in terms of colour and quality. For example, Veneto 1 has three-quarters of its production in white varieties and Toscano has 87 per cent in reds. Trentino-Alto Adige has the highest proportion of DOP wines (89 per cent) while Puglia has the lowest at 8 per cent. Figure 1: Italian wine regions profile, 2015 Wine Production Region White Red/Rose DOP IGP Other (million litres) Veneto 973 75% 25% 57% 35% 8% Puglia 793 46% 54% 8% 31% 61% Emilia Romagna 738 51% 49% 19% 39% 41% Sicilia 563 55% 45% 25% 48% 28% Abruzzo 299 36% 64% 35% 12% 54% Toscana 283 13% 87% 62% 27% 10% Piemonte 247 43% 57% 85% 0% 15% Friuli-Venezia Giulia 187 77% 23% 35% 39% 27% Lazio 170 73% 27% 50% 26% 24% Campania 161 47% 53% 17% 12% 71% Lombardia 141 44% 56% 56% 33% 12% Trentino-Alto Adige 123 71% 29% 89% 10% 0% Marche 96 53% 47% 36% 18% 46% Sardegna 79 47% 53% 70% 14% 17% Umbria 77 49% 51% 46% 41% 13% Calabria 40 21% 79% 17% 10% 73% Molise 23 37% 63% 8% 18% 74% Basilicata 9 17% 83% 35% 31% 34% Liguria 8 68% 32% 55% 30% 15% Valle d’Aosta / Vallée d’Aoste 1 35% 65% 85% 0% 15% Total 5,011 54% 46% 38% 30% 32% Source: Istat There are five red and five white varieties in the top 10 most planted grapes in Italy. Sangiovese and Montepulciano are the two major reds and Trebbiano and Catarratto the two leading whites (figure 2). Between 2000 and 2010, the biggest declines in vineyard area came from Catarratto (down 46 per cent), Trebbiano (down 42 per cent), and Barbera (down 39 per cent). The varieties with the biggest increase in plantings were Pinot Grigio (up 69 per cent), Glera (up 58 per cent) and Chardonnay (up 40 per cent). 2 Figure 2: Top 10 most planted varieties in Italy in hectares (2010) Source: Istat Domestic market Wine consumption increased in Italy in 2015 after declining for decades. Reasons for the long-term downward trend include changing lifestyles and tastes as well as anti-alcohol drinking campaigns. Per capita wine consumption was estimated at 36 litres in 2015, significantly lower than 110 litres in the 1970s. Imported wine has been on the rise, albeit off a small base. In 2001, imported wine accounted for 2 per cent of wine consumption in Italy and has grown to a 12 per cent share in 2015. In other words, imports have been growing in a declining market. Two-thirds of the imported wine was from Spain, 15 per cent from the United States (US) and 7 per cent from France (source: Global Trade Atlas). 3 Figure 3: Italian wine sector key trends (million litres) Source: OIV, Istat, Euromonitor Interational Exports With domestic consumption on the decline, Italian wine producers have looked to overseas markets to grow demand. In the decade to 2011, Italian wine exports climbed from 1.6 billion litres to 2.5 billion litres. Exports account for around 40 per cent of Italian wine production (for Australia, the share of exports is 60 per cent). The most recent export statistics that are available for Italy are for the 12 months ended October 2016. The volume of exports increased by 1.6 per cent to 2 billion litres while value increased by 1.9 per cent to US$6.1 billion (or A$8.2 billion). The top five markets for Italian exports by volume were: Germany (541 million litres, down 2.6 per cent) United States (319 million litres, up 3.6 per cent) United Kingdom (305 million litres, down 1.4 per cent) France (92 million litres, up 7 per cent) Canada (72 million litres, up 2.7 per cent) 4 These five markets account for two-thirds of Italian exports. Italy is the number one imported wine category in Germany, the USA and United Kingdom and second in France and Canada. China is not yet a major destination for Italian wine, ranked 15th with 29 million litres, up 11 per cent in the 12 months to October 2016. In comparison, Australia exported 99 million litres to China in 2016, an increase of 45 per cent in the 12 months to October 2016. Australia achieved a higher average value for bottled exports than Italy in the 12 months ended October 2016 – US$3.96 per litre versus US$3.80 per litre (see figure 4). There are differences between key markets. The most telling is the USA, where bottled Italian exports averaged US$4.72 per litre compared to US$2.94 per litre for Australia. On the other hand, in the UK, Australia averaged US$3.04 per litre compared to US$2.29 per litre for Italy. Figure 4: Average value of bottled wine exports from Italy and Australia (US$ per litre) Destination Italy Australia United States 4.72 2.94 Germany 3.15 3.08 United Kingdom 2.49 3.04 Canada 4.89 4.11 Switzerland 6.62 11.18 Japan 4.12 3.78 Denmark 4.72 4.09 Netherlands 3.54 2.91 France 2.99 8.10 Sweden 4.66 3.41 All destinations 3.80 3.96 Source: Global Trade Atlas Disclaimer: While Wine Australia makes every effort to ensure the accuracy and currency of information within this report, we accept no responsibility for information, which may later prove to be misrepresented or inaccurate, or reliance placed on that information by readers. Provisions of the Copyright Act 1968 apply to the contents of this publication, all other right reserved. For further copyright authorisation please see the www.wineaustralia.com website 5 .
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