Italian wine industry reels from coronavirus but hopes demand returns

Italy’s winemakers had already had a difficult year in 2019, contending with floods, heatwaves and storms, and then the coronavirus pandemic came along.

A strict lockdown in Italy, and in most of Europe, put a stopper on demand from restaurants and bars for wines. Although life is getting back to normal, industry experts are forecasting a tricky year for Italy’s winemakers.

“All-in-all, the near future for Italian winemakers isn’t looking too bright at the moment,” Daniel Mettyear, a research director at IWSR Drinks Market Analysis, told CNBC.

“To begin with, the domestic market has been very hard hit by the effects of the coronavirus outbreak and subsequent lockdown period. Over 50{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of still wine consumption in Italy takes place in bars and restaurants, and there is up to a further 15{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} that takes place in smaller specialist and neighborhood shops that have all remained shut during the heavy lockdown period.”

Italy is the top wine-producing country in the world. And like other top producers, it saw wine production levels fall in the year before the pandemic struck. In 2019, production in the country fell 15{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} compared to the year before.

Estimates from the International Organisation of Vine and Wine suggest that global wine production in 2019 had fallen 10{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} from the previous year, to between 258 and 267 million hectolitres, and was back to the average level of recent years after an “exceptionally high wine production volume in 2018.”

OIV said the 2019 declines for Italy, Spain and France (the three countries account for 80{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} of the EU’s wine production) were mainly due to adverse weather conditions, notably a very cold and rainy spring followed by an extremely hot and dry summer.

Now, after the coronavirus crisis, winemakers are expected to be hit harder still, especially in Italy which was the epicenter of the outbreak before it spread throughout the European continent.

The IWSR forecasts that Italian still wine volumes will decline by 9.54{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} and that Italian sparkling wine volumes will fall by 16.86{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f} in 2020, driven by high double-digit declines over most key markets.

Although alcohol consumption at home has risen during the crisis, “any growth in consumption through the supermarket sector will fall well short of recovering the losses elsewhere in the market,” the IWSR noted, adding that prospects for wine exporters globally are now mixed for 2020.

“On the export front, while certain key markets such as the U.S. and Canada are expecting relatively soft declines and some are even expecting growth (still wine in Sweden, and sparkling wine in France, Australia and Mexico) the overall expectation is of significant decline as the effects of the pandemic, lockdown and the economic fallout to come have and will lead to a significant dampening of demand for wine,” IWSR’s Mettyear said.