If you want to make more profit as a wine company, focus on producing and exporting super-premium wine, and tell entertaining stories about it. That at least is the advice to be drawn from the latest Top Wines Study report by the Italian agency, Altagamma Foundation, in cooperation with EY – Parthenon.
Combining interviews with 400 Michelin restaurants in Italy, France Germany, the US, UK, China and Japan with other industry data, Armando Branchini, the coordinator of the study, and his team examined a number of factors and trends. Among the most striking was that while wine production has remained fairly stable since 2000, exports have doubled, from a 21.5% proportion of total production in 2000 to 43.2% today.
“What is noticeable from this study is that it presents the first outlook on the size of the top wines market,” said Mr Branchini. “And the result is remarkable: the Top Wines segment represent approximately 7% of the market of the 15 most important wine drinking countries.” He said that consumption of top wines if forecast to grow in the next two to three years.”
When it comes to what Altagamma terms ‘top wines’ – with wholesale prices of over €10.00 for white and over €15.00 and €20.00 respectively for sparkling and red – France is unsurprisingly the world leader. Between 14% and 15% of its wines fall into this category, compared to a global figure of 10% to 11%, or the low 5% to 6% of Spain.
Using Italian data, the report authors suggest that while producers servicing the mass market achieve a profit margin of 9.4%, companies focusing on premium wines make 24.7%. The profitability of the ones that export over 60% of their production rises still further, to 29%. Members of the wine industry based outside Italy might note that these findings are based on information about just four export-focused ‘top wine’ companies and 22 premium businesses with more limited export sales. Experiences by Californian wineries, for example, might well tell a very different story.
Where wine businesses would probably agree globally, however, is the importance of the Horeca segment which, the report suggests, represents 27% of total volume and 33.5% of value. Encouragingly, the Michelin starred restaurants expect their revenues to rise frm €8bn today to €10.1bn over the next two to three years, with wine slightly growing its 29% share of that total.
Strikingly, the most significant growth in sales is predicted to be in wines selling between €60.00 and €200 in restaurants, with sales in the €100.00 to €200.00 and over-€200.00 sectors rising by 44%. Producers with white wines in the on-trade priced at €100 to €200 will be encouraged to see that these might see slightly greater growth than their red counterparts.
When asked why restaurants list particular wines, the restaurateurs said that “news and storytelling and knowledgeable distributors were far more important than promotions, and that ‘product trial’ and ‘colleague suggestions’ are more likely to secure listings than specialised press or ‘historical success’ or ‘consumers’ requests’.” This last information may dismay producers who imagine that a good sales record and popularity with restaurant customers might help them to sell their wine.
Mr Branchini said that it’s impotant that storytelling be entertaining as well as “extensive and detailed” and include both technical aspects of the product, along with heritage. But he added that speaking about international awards, rankings and critical reactions was also important.
Commenting on the study, Matteo Lunelli, vice chairman of the Food&Wine sector for Altagamma for the sector said that it illustrates “the crucial importance of the capability of company websites and the digital channel to effectively convey values and stories: for Italians, this is a challenge that we need to win together.”