Style and Substance

As the balance shifts from own-label towards branded offerings, the Italian wine category is in good health in the UK. Pinot Grigio is still the star performer, though higher average prices would help, says Clinton Cawood

Italy’s diversity may be its greatest asset, but it can also work against its wine producers. With such a broad range of offerings, Italy is capable of meeting a wide variety of demands, but the diversity makes it difficult to market the country’s wines cohesively.

This is one of the main reasons given for the lack of an Italian generic campaign. Claudio Gambarotto, Cavit’s European export director, explains that, “The public bodies are not able, for structural, political and cultural reasons, to do so like other countries.” Damian Carrington, head of marketing for Enotria Wine Cellars, explains that it is “difficult to organise Italy” due to its various diverse regions.

Amanda Mencacci, Hallgarten’s Italian specialist, has no expectations of the Italian Trade Centre (ITC). “Their hands are tied by Rome,” she says. “It’s just wasted tastings – spending money promoting producers with no UK agents.” However, Alex Canneti, PLB’s business development manager for Italy and Spain, points out the successful generic activity in the US. “It raises questions about whether the UK is taken seriously,” he says.

The success of Italian wine in the US and Germany does not reduce the importance of the UK market for Gambarotto. “Some producers are more at ease dealing with one country than another. Some find it easier to deal with the UK than Germany. Every market is different compared to Italy’s domestic market,” he says.

As an alternative to a generic body, Mencacci believes that UK agents have been useful in promoting Italy. Carrington also puts his faith in UK agents and importers. Like many involved with Italian wine, he believes that a generic body would be a positive, useful thing, but hastens to add, “It will have to be led by us, not by Italy.”

Robert Steele, director of For The Love Of Wine, says, “Italy can provide over 700 varieties, but that education has to come from the likes of us.” He goes on to say that, “The New World is pushing Italy further down the scale, and there doesn’t seem to be an appetite in Italy to reverse that trend.” Steele stresses the importance of promotion by UK agents.

Gambarotto believes that producers are in a better position to do this, however. “The stronger producers with stronger capacities for investment – they will have to take the flag and go by themselves.” He goes on to explain the reason Italian producers cannot count on UK agents, “for cultural reasons, the agent in the UK prefers to team up with the buyer. In a normal open market, it is the opposite. If he teams up with the producer, the two can balance the power of the buyer,” he says. In the UK, Gambarotto believes, this set-up has resulted in less choice for the consumer. He gives the example of countries where wine sales are controlled by a state-run monopoly, and how Italian brands are more available in those countries than in the UK.

Italy’s presence on UK shelves
Despite this, Italian branded wine sales are increasing in the UK, with declining own-label sales. And even though there are challenges, Italy continues to be a major player in the UK market. In fourth place, Italy’s off-trade sales are up 7% according to ACNielsen (MAT 22/04/2006). Ahead of it is the US, steadily gaining on France, and all are behind Australia’s ever-increasing sales in first position. Italy has a number of strengths that give it an advantage in the UK market. Among other things, great variety consistently inspires a loyal following. “Italy does not produce rubbish. It’s not just cheap wine, or heavy expensive reds that need 25 years to settle down. There’s lovely everyday drinking wine, too,” says Steele.

Another aspect the Italians excel at is packaging. In this, “as with everything, the Italians have flair”, says Mencacci, modestly. Gambarotto points out that this strength is often wasted, however. “Most British consumers buy wine from the big retailer supermarkets,” he says, which he believes, owing to the high percentage of own labels, does not adequately take advantage of this strength. In terms of packaging, he believes, “The own labels are very simple and poor quality.”

For Steele, there is a perception problem when it comes to Italian wine. “There’s a glut of cheap, horrible wine coming out of Italy. It doesn’t help the country’s reputation.” Average bottle price is not Italy’s strongest point, but for other UK agents, this is not a major concern. It is, as Canneti says, “good for the consumer. I don’t see a major problem on the image front – at the end of the day, it is all very good wine. I’ve had really good Bordeaux at £2.49 as well.”

Stefano Tombesi, marketing director for Moncaro, would agree that average price is not Italy’s major concern. “I think it is more important to have the right bottle price than to raise it in general. Too often, prices are not at all connected to the true quality of the wine in the bottle,” he says.

Further development of brands is not an easy solution for price concerns either. As Carrington says, “It’s difficult to build big brands that would operate in that £5.99 price point” – just the right level to help raise Italy’s current average of £3.44(ACNielsen, MAT 22/04/06).

Graham Sumeray, managing director of Buckingham Vintners, does believe in the importance of building Italian brands. “It is strange that there are not more Italian brands in the top 20. Consumers have a strong recognition of areas such as Chianti and Frascati, as well as varietals such as Pinot Grigio, but there is little branding beyond that,” he says.

The recognition and popularity of Pinot Grigio is undeniable, but how this was achieved is a more esoteric topic. Steele says, “It just suddenly seemed to arrive.” Without any dedicated marketing campaign, there are several theories – the most common being a simple linguistic one. “It is easily pronounceable,” says Carrington. Simon Legge, European marketing director at Brown Forman Wines, adds, “It has a dash of Italian sex appeal, it sounds attractive.”

Mencacci says the trend started in the US, putting some of the reason down to the “clean, fresh palate”, as well as the high volume and the competitive pricing. Canneti simply says: “It’s the lager of the industry.” He hastens to add that there
are still some “wonderful Pinot Grigios”.

Gambarotto points out Pinot Grigio’s ongoing popularity in the US, as well as in the UK. “Many people have been saying that this bubble would burst, but the truth is that it is still going strong,” he says.

It looks likely that Pinot Grigio will continue to sell well, but Italy does have a lot more to offer. Opinions and speculation about the next big thing from Italy are wide-ranging. “One, for sure, that is starting from Germany, where it is extremely popular, is Prosecco,” says Gambarotto, going on to explain that Prosecco offers an easy-drinking semi-sparkling wine, ideally positioned to offer an alternative in a consolidated sparkling wine market.

The next big thing
Gianni Martini, chairman of Fratelli Martini, is also optimistic about  the future for Prosecco in the UK. He believes that increasing consumer knowledge and interest will continue to guarantee a place for Italian wine in general. In addition, he believes that “in the next few years the consumer interest will lead to more complex wines”. He goes on to explain that, “Italian wine producers, compared, for example, to French wine producers, were able to abandon the ‘old traditions’, and offer a mix between tradition and modernity both in style and wine terms.” This ability to adapt will undoubtedly characterise the next successful Italian brand.

Legge believes the next big thing will “probably be red, possibly from southern Italy, which offers a more consistently warm climate to provide a more fruit-forward style of wine to compete with New World wines.” Canneti agrees in the promise of southern Italy: “There is a definite explosion of southern varietals – in particular from Sicily.” He also predicts
an increase in the popularity of Italian blends – a logical contender, he believes, is Pinot Grigio blended with other varieties.
Tombesi, on the other hand, is convinced of the future success of Verdicchio, as it is “very Italian, with consistent quality available in big quantities”.

One export doing well in the US is Riesling, says Gambarotto, but this is unlikely to spread to the UK, he believes. Along with Germany, the US has remained an important market for Italian producers. Steele agrees, saying that, “The US market is a big player for them, but I wouldn’t be surprised if they had their eye on China as well.”

Success at the higher end
Canneti is hopeful for the UK market. “In countries like the US and Germany, Italy has the traditional place that France or Australia now have in the UK,” he says. “From a superficial point of view, those countries are more profitable for middle-sized groups. For big groups, however, as there are more and more, the UK is a better market,” he says.

As the figures show, UK consumers remain loyal to Italian wine. Carrington explains that there is loyalty to generics, but also to higher-level, quality wines – where Italy is able to provide an interesting offering. Mencacci believes that this popularity is partly driven by “a large Italian population, and influential Italian restaurants”. Legge also speaks of
Italy’s “relatively strong on-trade position via Italian restaurants, which have promoted fairly strong on-trade – and, consequently, off-trade – sales”.

There is no question that the Italian wine market in the UK faces some challenges, but on the whole the future looks promising. Whether growth is being driven by UK agents or loyal consumers, and despite the fact that the UK may
not be the highest priority for Italian producers, the category continues to grow. With such diversity in terms of grape variety, as well as a flair for presentation, Italy looks to be in good form to compete with the New World.  db June 2006