Crash Course on the Italian Wine Industry

A branded synthetic Italian wine cork
A branded synthetic Italian wine cork (Photo credit: Wikipedia)

 

Dr. Lovero’s Crash Course on the Italian Wine Industry: Vini d’Italia

Valdivia in Jerez, Andalusia (Spain)
Valdivia in Jerez, Andalusia (Spain) (Photo credit: Wikipedia)

The global wine industry/market consists of the retail sale of champagne, fortified wine, sparkling wine and still wine sold in:  North America, South America, Western Europe (including France, Italy, Spain, Germany and Portugal), Eastern Europe, MEA and the Asia-Pacific region.

English: Two different bottles of Banyuls fort...
English: Two different bottles of Banyuls fortified wine. Català: Dos exemples de vins dolços de Banyuls. (Photo credit: Wikipedia)
English: A glass of port wine. Français : Un v...
English: A glass of port wine. Français : Un verre de Porto. (Photo credit: Wikipedia)

 

The Global Wine industry was truly one of the first globally-traded products and one of the first global industries. It is also a highly fragmented industry.

It is becoming a popular major for college students. The Wine Business Institute of Sonoma State University  “offers a specialized curriculum targeted at the business challenges of the wine industry. Courses are offered in Wine Marketing, Wine Finance and Accounting, Human Resources Management, Wine Business Strategies and Wine Production, Operations & Distribution.” Sonoma State University a wine certificate program as well as a “Wine Business Study Abroad Class.”

The Global Wine Industry-1
The Global Wine Industry-1 (Photo credit: dmhoro)

The market share of Constellation Brands, the leading player in the global wine market, generated only 3.8% of the market’s volume. The other key global player include: E & J Gallo Winery with 2.8% of the market; Foster’s 2.1%; The Wine Group 1.9% and all the other industry participants holding 89.4%  of the market share. Wine is distributed in the folowing channels: Supermarkets / hypermarkets 35.8%; On-trade 27.6%; Specialist Retailers 24.2% and Other 12.4%.

The Wine Group is the third-largest wine company, by volume in the United States’  behind Constellation Brands and the E&J Gallo Winery. “The company was founded in 1981 with a management buyout of the wine assets of Coca-Cola Bottling Co. of New York.” It was owned by the Franzia Brothers winery in California with corparate headquarters in Livermore, California.

Italian Barolo wine made from the Nebbiolo gra...
Italian Barolo wine made from the Nebbiolo grape in the Piedmont region (Photo credit: Wikipedia)
Label of "Croix-Milhas", a Banyuls w...
Label of “Croix-Milhas”, a Banyuls wine, a sweet red Vin doux naturel, a French style of fortified wine. (Photo credit: Wikipedia)

 

This image shows a red wine glass.
This image shows a red wine glass. (Photo credit: Wikipedia)

 

English:
English: “Marsala” fortified wine, from Sicily Italiano: Vino “Marsala”, dalla Sicilia (Photo credit: Wikipedia)

 

Still wine is the largest segment of the global wine market and accounts for 80% of the market’s total value.The fortified wine segment accounts for a 12.8% of the market and champagne occupies 5.2%.

Madeira is exposed to high temperatures during...
Madeira is exposed to high temperatures during its winemaking process and is thereby able to sustain exposure to higher temperatures more easily than other wines. (Photo credit: Wikipedia)

 

According to the Marketline Industry Database, the Global wine market has experienced steady growth in recent years. The global wine market was generating revenue of $257,504,000,000 in 2011. This represents a compound annual growth rate of 1.9% between the years 2007 and 2011.

 

The market is predicted to continue growing moderately until 2016.  In 2016, the global wine market is forecast to have a value of $303.6 billion, an increase of 17.9% since 2011 with an average annual growth rate of about 3 %.

 

The Americas and the Asia-Pacific markets will grow at a higher rate of between 3.4% and 12.6% respectively, over the same period. Their respective 2011 sales values will be $54,258,000,000 and $31,560,009,000.

Sign of globalization : wine shelf in Bangalore
Sign of globalization : wine shelf in Bangalore (Photo credit: ShashiBellamkonda)

 

 

Chianti sub-zone
Chianti sub-zone (Photo credit: Wikipedia)

 

In the Italian wine region of Piedmont
In the Italian wine region of Piedmont (Photo credit: Wikipedia)

The domestic Italian wine market has declined since 2007 and it is predicted to continue declining marginally over the forecast period to 2016. However, Italy produces some of the world’s finest and most coveted wines including: Amarone, Barolo, Bunello di Montalcino and Passito di Pantelleria. Italy is a favorite destination for wine tourism. These variables create attractive opportunities for the Italian wine industry and emerge as driving forces for their business strategy decisions.

Marsala Wine
Marsala Wine (Photo credit: madlyinlovewithlife)
Italy -1999
Italy -1999 (Photo credit: Jasmic)

Italian wine from Castello Banfi in Tuscany

 

Taken at an Italian wine festival in Sicily. A...
Taken at an Italian wine festival in Sicily. A demonstration of the traditional winemaking usage of a basket press (Photo credit: Wikipedia)

Italy is one of the world’s largest and oldest producers of wine.  Italy is the world’s second largest producer of wine; France has the dominant position. Historically, it was referred to as “Enotria; the land of wine.” It has always produced a wide variety of grapes because of its ideal Mediterranean location.

Total revenue in 2011 was $38,060,2oo,000 representing a compound annual rate of change (CARC) of -0.9% between 2007 and 2011. The market’s volume is expected to fall to 2,659.6 million liters by the end of 2016, representing a CARC of -1% for the 2011-2016 period. The largest segment of the Italian market in 2011 was still wine with total revenue of $33,545,5oo,000 equivalent to 88.1% of the market’s overall value. The fortified wine segment will contribute revenue of $3,255,400,000.

 

Italian Wine
Italian Wine (Photo credit: st_gleam)

The 2011 population of Italy was 60.7 million. The GDP was $1,136.2 billion. The nation is cloaked with vineyards and the wine industry makes a significant contribution to the county’s GDP. Every year, one in fifty Italians is involved with the grape harvest.

Although the Global Market is highly fragmented; with the top four players controll 10.6% of the total market by volume. The Italian market is even more fragmented. Here’s the market share of the top three players: CIVIRO (6.8%), Bacardi 0.8% and Casa Vinicola Caldirola 0.1%. All the other players in the industry control 92.3% of the market share.

Vineyards in the Italian wine region of the Veneto
Vineyards in the Italian wine region of the Veneto (Photo credit: Wikipedia)

 

CAVIRO is headquartered in Faenza, Italy. The company operates 41 wineries with more than 20,000 growers throughout Italy. Some of the key markets for the company include Italy, the UK, Japan, Germany and France.

 

Casa Vinicola Caldirola produces still and sparkling wines and produces more than 60 million bottles per year from its bottling facilities in Missaglia and Gattinara, Italy. The company markets its product to 40 countries under brand names like Casa Vinicola Caldirola and Maestri Cantinieri.

 

English: Grapes growing in the Italian wine re...
English: Grapes growing in the Italian wine region of Valpolicella in the Veneto. (Photo credit: Wikipedia)

The Italian wine market is characterized by intense rivalry. Great wine families have been making wine in Italy for centuries like the Antinori and the Frescobaldi families. They have built very strong brand names with a powerful portfolio of varietals. Wine producers can differentiate their products by the overall segment (still, fortified or sparkling) and by the region of the origin and the varietal. The end product is strongly influenced by the region of origin, the grape that is used in the process and the skill of the winemaker (Datamonitor, 2009). The retailers constitute the major distribution channel in the Italian wine market with over 50% of the total sales.

Italian cheese, meat, wine and fabulous compan...
Italian cheese, meat, wine and fabulous company Tuesday 16 March (Photo credit: mermaid99)

 

Winemakers generally pursue vertically integrated business models that involve growing, harvesting, crushing, aging and bottling their wine. Most winemakers own or lease vineyards. Sometimes large companies source grapes from third-party growers and the company-owned vineyards are used for producing premium wines; while third-party grapes are used for producing lower-priced products. Wine is vulnerable to the threat from its substitute beverages including spirits and beer.

 

A good example of the Italian wine Brunello di...
A good example of the Italian wine Brunello di Montalcino with partial Sangiovese cluster behind class. Just need to crop out the chickens. (Photo credit: Wikipedia)

 

The sun-drenched terroir of Italy “extends from the thirty-sixth to the forty-sixth parallel.” The peninsula has a comparative advantage in the production of wine in certain geographic regions between the “Upper Adige and the island of Pantelleria.”

The Italian wine industry provides a wide assortment of wines with various aromas, flavors and textures that deploy different wine-making practices. The diversity of these wines tends to harmonize with various types of food because of their overall natural acidity.

Fontina, Tallegio, Pecorino Sardegna - D.O.C. ...
Fontina, Tallegio, Pecorino Sardegna – D.O.C. Pizza, Carlton (Photo credit: avlxyz)

Chicken Marsala

 

Italian wine region of Piedmont
Italian wine region of Piedmont (Photo credit: Wikipedia)

 

 

The extensive latitudinal north to south range of the terroir allows the grapevines to be caressed by the convergence of many natural forces including climate, temperature variation, sunshine, soil, humidity, slope, elevation, sea breeze and rainfall. Terroir is a French word that passionately describes the total impact of a given microclimate’s geography. These forces produce a kaleidoscope of wines in many distinctive wine regions throughout the Italian peninsula.

View of the Italian wine region of Piedmont wi...
View of the Italian wine region of Piedmont with vineyards in near Barolo (Photo credit: Wikipedia)

 

English: Map of Italy and its districts.
English: Map of Italy and its districts. (Photo credit: Wikipedia)

 

The Italian winemakers rely on the “appellation” system to control the quality of their wine. This is a French concept known as Appellation d’Origine Controlee. This term is used to describe the region or specific area where wine is produced. Since the amount of good terroir is limited, so is the production of outstanding wines.

Português: Garrafa de vinho Brunello di Montal...
Português: Garrafa de vinho Brunello di Montalcino de Biondi Santi – 1985 (Photo credit: Wikipedia)
A DOC label for the Italian wine Chianti
A DOC label for the Italian wine Chianti (Photo credit: Wikipedia)

 

Vineyard in the Italian wine region of the Veneto
Vineyard in the Italian wine region of the Veneto (Photo credit: Wikipedia)

 

The Napa area of California and the Bordeaux region of France both provide good examples of the concept of terroir.

In northern Italy, wine regions border France, Switzerland and Austria. The grapes that thrive in these regions and the wine that is produced from these grapes are quite different from the wines that are grown in Tuscany or in the volcanic soil of Campania and Sicily. Apulia and Sicily are the largest regional wine producers: they each control about 17% of Italy’s total production.

Some regions produce cool-climate varietals and others do not. Some regions produce mostly white wines from grapes like Chardonnay, Pinot Grigio or Vermentino. Other regions produce mostly red wines like Barolo from red Nebbiolo grapes or Chianti from red Sangiovese grapes. The tannins of red wine generally overpower the delicate flavor of fish, so fish is often accompanied by white wine.

 

In the Italian wine region of Piedmont
In the Italian wine region of Piedmont (Photo credit: Wikipedia)

 

Hung, Drawn…
Hung, Drawn… (Photo credit: diaconelli)

 

Italian wine
Italian wine (Photo credit: toyohara)

 

Beyond terroir and weather conditions, wine making offers many opportunities for winemakers to improve or damage their wine. The diversity of Italian wines can be intimidating to some oenophiles because the names are so confusing.

A front and back wine label of the Italian win...
A front and back wine label of the Italian wine Vaona Amarone Della Valpolicella Classico 2004. Pegrandi, Italy. The label indicates that this is a DOC class wine from the Classico region of Valpolicella. (Photo credit: Wikipedia)

 

English: Barolo, Piedmont, Italy - the village...
English: Barolo, Piedmont, Italy – the village Italiano: Barolo, Piemonte, Italia – il paese (Photo credit: Wikipedia)

 

In some regions, wines are named after the grape variety used to make them and in other regions, the wine is named after the village where it is made. Barolo is a village and Barbera is a grape. Sometimes the wine name combines the grape and the village, like Montepulciano d’Abruzzo.

 

Italian wine region of Piedmont
Italian wine region of Piedmont (Photo credit: Wikipedia)

 

Italy has about fifty thousand wineries. In addition, government regulations define areas where specific wines can be made using the acronyms DOCG, DOC, and IGT. There are over three hundred DOC (Denominazioni di Origine Controllata) and DOCG (Denominazioni di Origine Controllata e Garantita) wines. When  IGT (Indicazioni Geografica Tipica) wines are added, the classifications increase to over five hundred wines that help make better consumption decisions.

Pic taken outside Corropoli, Abruzzo, Italy. V...
Pic taken outside Corropoli, Abruzzo, Italy. Vines and vineyards together with olive trees and oaks (Photo credit: Wikipedia)

To complicate issues further, some vintages are much better and some wineries earn coveted awards and high ratings from wine critics. Generally, truly great wines like Barolos improve with age because they gain complexity and character, just like many people.

Read this post to learn more about the contemporary history of wine in Italy:

http://acevola.blogspot.com/2012/08/teaching-old-do-c-g-new-tricks.html

The Italian government regulates the wine industry with a rigorous controlled appellation system that imposes strict controls with regulations governing vineyard quality, yields per acre and aging practices. It provides production parameters for winemakers.

To understand these parameters, we can construct a pyramid that represents the quality of Italian wine. At the pinnacle, we will place the hypothetical best wine with the most restrictive production guidelines and at the base of the pyramid we can aggregate the table wines that do not have to adhere to stringent quality guidelines. These designations formally recognize the areas in Italy that are noted for prestigious wine production. To differentiate these wines the government has created the following evolving paradigm with rigid labeling requirements:

DOCG: Denominazione di Origine Controllata e Garantita

Bottle & glass of a 1961 Brunello di Montelcin...
Bottle & glass of a 1961 Brunello di Montelcino wine from Tuscany. This Italian wine is made from Sangiovese (Photo credit: Wikipedia)

 

Location is certified and guaranteed

Denotes the most elite wines

Provides more stringent regulations

Requires longer aging periods and lower yields per vine

*There are over 20 elite Italian wines that have earned special recognition, including:

Asti (Piedmont) Barbaresco (Piedmont)

Barolo (Piedmont)

Brachetto d’Acqui (Piedmont)

Gavi (Piedmont)

Gattinara (Piedmont)

Ghemme (Piedmont)

Bardolino (Venato)

Ricioto di Soave (Venato)

Brunello di Montalcino (Tuscany)

Vino Nobile di Montepulciano (Tuscany)

Chianti Classico (Tuscany)

Vernaccia di San Gimignano (Tuscany)

Carmignano (Tuscany)

Valtellina Superiore (Lombardy)

Franciacorta (Lombardy)

Romandolo (Friuli-Venezia-Guilia)

Albana di Romagna (Emilia-Romagna)

Taurasi (Campania)

Torgiano Rosso Riserva (Umbria)

Montefalco Sagrantino (Umbria)

Vermentino di Gallura (Sardinia)

Montepulciano d’Abruzzo Colline Teramane (Abruzzo)

Italian wine from the DOC wine region in Emili...
Italian wine from the DOC wine region in Emilia-Romagna (Photo credit: Wikipedia)

DOC: Denominazione di Origine Controllata

DOC rules describe exact geographic location of the grapes, aging parameters, permissible grape varieties that can be used in blends, alcohol content policies, pruning and trellising systems and winemaking practices.

There are about 300 DOC wines produced in the following regions of Italy. Here’s a list of the percentage of each regions DOC Wine Production:

*79.1% Trentino-Alto Adige are DOC

*60.5% Friuli-Venezia-Giulia are DOC

*55.8% Piedmont are DOC

*55.5% Tuscany are DOC

*47.3% Lombardy are DOC

*30.5% Umbria are DOC

*29.1% Venato are DOC

*22.8% Aosta Valley are DOC

*21.4% Emilia-Romagna are DOC

*19.6% Marche are DOC

*17.6% Abruzzo are DOC

*15.6 % Sardinia are DOC

*13.9% Liguria are DOC

*6.5% Latium are DOC

*3.9% Molise are DOC

*3.8% Apulia are DOC

*2.8% Campania are DOC

*2.4% Calabria are DOC

*2.4% Basilicata are DOC

*2.1% Sicily are DOC

(www.winecountry.it)

Italian wine from the Liguria region of Cinque...
Italian wine from the Liguria region of Cinque Terre and the Colline di Levanto DOC. (Photo credit: Wikipedia)

IGT: Indicazione Geografica Tipica

These wines are from a typical geographic region and adhere to less restrictive regulations. There are more than 120 IGT wines and these wines are considered better than average table wines

Table Wines: Vino di Tavola

****Remember: Wine consumption depends upon your personal preferences. A wine that you love may be an ordinary table wine, IGT, DOC or DOCG. Your pallet should be the judge, not the government’s rating system!! Some people prefer a blend to a wine that is made from only one exclusive grape. Some prefer still wine and others prefer a sparkling wine. Experiment with the local wines when you have your “Vino con Vista”—Salute!!

Dr. EveAnn Lovero is a business school professor who integrates Social Media Strategies into her courses. She also writes Italy Travel Guides @ www.vino-con-vista.com.

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The village of Ostuni in the Puglia region fro...
The village of Ostuni in the Puglia region from which the Italian DOC wine region of Ostuni gets its name. (Photo credit: Wikipedia)

 

 

 

Desert wine from the italian island of Pantell...
Desert wine from the italian island of Pantelleria (south of Sicilia). (Photo credit: Wikipedia)

 

 

A glass of the Italian dessert wine Marsala fr...
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Wine Tourism for Epicureans and Oenophiles