ITALY – INTERVIEW: Don’t G.I.V. an inch

Emilio Pedron is quite happy for his wine company to remain in the background – it’s the regional brands that he wants to shine. Because he believes if Italy loses its regional identity, it is finished

Tom Bruce-Gardyne reports

Despite being far and away the biggest wine company in Italy, Gruppo Italiano Vini (GIV) is hardly a household name. But then it is not a name splashed across billboards, TV screens or the labels of the 70 million bottles it sells every year. Like Diageo, the company prefers to leave the limelight to its core brands, of which there are 16. They range from Sicily to the Valtellina and include Lamberti, Bigi and Chianti Melini.

The company can trace its roots to the 1960s, when a Swiss bank began investing in Italian wine, owning eight large wineries by the time it sold out in 1986. By 2005, GIV’s consolidated turnover had reached €257m, a figure set to exceed €300m following last year’s joint venture with Brown-Forman to produce Bolla. At its head is Emilio Pedron, a 61-year-old trained oenologist from Trento in northern Italy.

Pedron may be the most important figure in Italian wine, but it’s not obvious on meeting this pensive, softly spoken man who became MD 10 years ago, having spent most of his career with GIV. He doesn’t play the corporate chief and is no force for globalisation like rival CEOs from the New World.

Italian identity
Pedron believes passionately in the regional diversity of Italy and the whole system of DOC(G)s. “The aim of GIV is to give added value to a denomination like Frascati with the brand Fontana Candida,” he says. He also insists Italy does not need less regulation to play Australia and others at their own game. “They are very free and we’re very tied, it is true. But we can’t just copy them. I’m against those who say they want greater freedom and fewer laws. If we stay apart and argue our differences and strategies, then perhaps we’ll win. If we want to be like the New World we’ll be out of the market in 10 years.”

For now, Pedron is reasonably upbeat about GIV. “We were worried a year ago, but we finished pretty well,” he says of the past 12 months. The domestic market accounts for 30% of turnover and is doing OK – particularly with the Sicilian and Puglian wines of GIV SUD, which are up 20-30% on last year. Next in size comes Germany followed by the UK, US and Canada, which together account for 80% of exports.

In the UK, GIV produces one in 10 bottles of Italian wine sold in the off-trade – a sector that is causing some concern due to relentless pressure on margins.

Feeling the squeeze
When I meet Pedron at the company HQ of Villa Belvedere in the vine-clad hills above Lake Garda, the cut-throat reality of the British high street feels a million miles away. Yet it is clearly on his mind, having just spent an hour on the phone with one of his UK agents. The agent suggested that one reason trading is so tough could be the influx of inexperienced buyers keen to make their mark. If they are judged simply on their ability to squeeze suppliers they have certainly succeeded with Italy.

The average Italian pinged through the supermarket till at just £3.27 a bottle in the year to last July, a mere 10p more than the average Romanian. “Yes, it’s very low,” admits Pedron. “But what’s even more sad is that they [the buyers] keep paying less, but maintain the price.” And the reward for those “lucky” enough to supply wines at this level is clearly not loyalty. At any moment, the business can be put up for grabs to the lowest bidder in one of the supermarkets’ dreaded
e-auctions. Apparently the UK is the only major wine market that uses such tactics.

Bottling out
On top of this comes news that supermarkets like Tesco want more of their wine bottled in the UK, using lighter glass to help them meet their recycling targets. That’s the official reason, but Italian producers suspect it is simply a cost-saving initiative designed to give the buyers yet more power.

“I don’t think it’s right or proper,” says Pedron. “Italian wine has particular characteristics, with every region being different, and we must preserve this diversity. We can only do this by bottling in the production zones to hang on to the wine’s roots.”
Of course the rules on bottling outside the region vary from wine to wine, but where it is allowed one wonders if UK wine drinkers are really that bothered. If the quality suffers because a cherished DOC becomes a bulk commodity traded on price, then it’s surely up to the Italians to convince consumers they should care.

Market movers
British buyers were once considered the most professional by many Italians. They would visit regularly and taste endlessly to find the best quality to fit their sacred price-points. Now they come less often and seem increasingly enslaved to the bottom line. Whisper it quietly, but they are becoming almost … Germanic!

In fact the Germans, having hit a price bedrock with their Italian suppliers, are showing the first, tentative, signs of easing back. “Germany used to be a mercato di prezzo, but it’s now looking for quality, or at least the assurance of quality,” says Pedron. “There were various scandals and this has meant there’s now much more attention on having serious, consistent suppliers.” Because the wine on the shelf was not always the same as the samples submitted, German chains are now demanding total traceability. The fact that Aldi, the biggest discount chain in Europe, is now actively courting GIV to supply them is a positive sign for Pedron.

Given time, he believes the UK market will correct itself. He blames the current situation on those supplying the wine, rather than the buyers. Once the old balance of price and quality has been restored, these suppliers will be driven out of the market. “In my opinion UK consumers would be willing to pay more for Italian wines. So we need to supply better wines at slightly higher prices,” says Pedron. With over 70% of Italian wine retailing for less than £4 a bottle in the UK, there is certainly scope for improvement.

Brand wagon

Italy is forever beaten up by UK pundits, for its lack of big brands. Rather than obsess about regional DOCs they argue, the country must stop being so parochial and give us something of substance. Simon Thorpe MW, the former Waitrose buyer now with Western Wines, is not alone in calling for a pan-Italian brand. GIV obviously has the means, but does it have the will? Pedron wearily shakes his head – he has clearly been asked this before. “We don’t want to because we were born as the sum of many different wineries in different regions – that’s our philosophy. Otherwise what is the point
of having different wineries across Italy? It would be enough to have one single Cantina,” he reasons.

GIV has been here before. In 1986, a third of group turnover came from a jug wine called Botticella. “In 1987, we took a huge risk and shut it down because we believed it just wasn’t the future,” says Pedron. Today only 2% of production is vino da tavola, with the rest split equally between DOC(G) and IGT. An updated Botticella called Vollo Rosso did hit the streets about three years ago. It was an umbrella brand created by five big Italian co-ops. According to Pedron, they blitzed the TV with adverts and aimed to conquer Italy and then the world. “They spent millions of euros on promotion, and I always said, ‘If that product succeeds, I’m changing my career’.” His faithful PA looks momentarily alarmed until reassured that Vollo Rosso is nothing to fear.

Regional variety
With Pedron in charge, the approach will remain brand plus DOC. “It is a longer and more expensive route to take, but in my opinion it is the most secure. Tomorrow Melini will still be Melini and there’s real value in conserving that authenticity,” he argues. That said, 21% of GIV’s sales are Pinot Grigio, twice that of its top-selling DOC(G), Chianti.

Yet Pedron is wary of relying on what is becoming a global varietal. “OK, there are those like us, CaVit and Santa Magherita who say, ‘Our Pinot Grigio is Italian, it’s authentic, it’s original.’ But we’re a tiny voice.”

He has similar reservations about Nero d’Avola, the hotly tipped Sicilian red grape. “So long as you can do what you want, with three-quarters bottled outside Sicily, it’s impossible to have  a basic level of quality and decent price,” he says.

Looking ahead, GIV’s first priority is Bolla, the brand it makes for Brown-Forman and sells within Italy. Whether the group will eventually take over the whole brand remains to be seen. “You do things in steps,” he says with an enigmatic smile.

As for other plans, there may be some expansion, possibly into Abruzzo, but nothing too radical. Pedron believes that GIV and Italy must maintain a steady course. “We mustn’t get distracted from our path and try a market free-for-all,” he says. “We must impose our identity to survive.”

© db February 2007