Chapter 2: Italian Lessons

Mark O’Callaghan
9th April, 2020

• Italy is a world leader in the Corona Crisis – for all the wrong reasons. However, it may contain lessons for the wine world.
• The delayed, yet severe, nature of Italy’s containment phase has caught wine businesses totally off guard. There are differences from north to south, however.
• Short term adaptation is around shifting sales channels and saving cash.
• Longer term adaptation is around production decisions, volumes, working capital and survival.

Surely, only the flint-hearted cannot love Italy. Even the poorest, remote parts of the country have a unique rhythm and charm that is hard to match. When it comes to wine however, it is a powerhouse. With approximately 750,000 Hectares, Italy trails only France and Spain in total vineyard area (Australia has ~146,000 Ha). The scale of its production and its horrific coronavirus death toll means it might contain lessons for wine businesses everywhere.

Saturation corona coverage has had Italy in the global spotlight in recent weeks but the implications for wine business have, understandably, struggled for attention. For an overview of how it is affecting winery operations, I spoke to Michael Zaccaria – a friend and Italian wine importer from QuelVino. With a range of producers from Piedmont and Lombardy in the north, through Tuscany and Abruzzo, down to Puglia and Sicily in the south, he has a rare insight into the wide range of circumstances across the country.

“The north is in real trouble – just look at the deaths in Lombardy – and although it was too slow in coming, when the lockdown came it was really fast. I know one guy who got caught in his apartment in Milan and cannot get back to his vineyard and although it’s not supposed to be government policy, the cops have literally been kicking people out of their own vineyards.” With this coming in the northern spring, when movement of workers is problematic across Europe and the UK and after exports have collapsed, growers are worried. If this continues for another 12 weeks, many will lose their crop to disease. Restrictions are not as tight further south, so despite sales being hit, operations are relatively unaffected. That said, with Sicilian vineyards relying on workers from places like Tunisia, all is not well there either.

Despite some encouraging – and diplomatic – statements from bigger houses, it is not the prestige producers of Tuscany or Piedmont that have Zaccaria worried. It is the smaller, family operations who are facing the toughest decisions. Some will simply not have the cashflow to fund the 2020 vintage and the least-worst option might be selling to the local cooperative – the hand-to-mouth business model of their grandfathers. Others are looking at the coming recession, current stock levels and looming disease problems (from not accessing their vineyards) and considering skipping 2020 altogether.

Like so many other places, the wine market has also been turned on its head. As Italians sit out the confinement phase in their apartments and houses, they remain as thirsty as wine drinkers anywhere and there has been a shift in their buying habits. Supermarket sales have increased handsomely, online has increased spectacularly, and Italy is trading down en masse to cheaper bottles.

One thing holding back too many Italian producers in this crisis however, is a relatively poor grasp of technology and general conservatism in the countryside. There is a much slower shift to online promotion, direct sales and delivery in Italy – an environment where handwritten invoices from carbon copy books are still common. According to Chloe Cristallini from Crush at Social in Piedmont, “Italy is still poorly set up for online orders and shipping in general. There are even producers still using third parties to take orders because it is “disrespectful” not to use a traditional 3-tier system.”

When I spoke to Zaccaria, it was also clear that he is well attuned to the human toll it is taking already. “The level of stress and tension is awful and a lot of them are pretty emotional. It has shaken them to the core. Even up in Piedmont, not everyone is selling €150 Barolo and collecting Ferraris. Remember, there are a lot of families making €2-3 bottles of dolcetto and barbera up there and many of them just won’t have the liquidity to ride it out.”