A visit to the Cantina Torrevilla winery south of Milan is an opportunity to experience the real problems facing this beloved ancient Italian industry. On a cloudy, damp day in October, producer collective boss Massimo Barbieri spoke with pride about the quality of the grapes for the 2024 premium vintage of La Genisia. But it wasn’t an easy feat.
Like winegrowing centers everywhere from Bordeaux to Napa Valley, the Oltrepò Pavese region of Lombardy is grappling with two historic challenges: climate change and changing tastes. This year unusually heavy rain occurred in northern Italy. The fungus attacks some vines, and must be dealt with hastily.
At the same time, major wine-growing countries like Italy have had to adapt to the declining popularity of red wine, as young drinkers opt for trendy traditional beers and fizzy whites – or abstain from alcoholic beverages altogether.
And if that wasn’t enough to overcome, today winemakers are facing a third, less explored, and arguably greater immediate threat: their soaring debt costs.
“Like everyone, we are feeling the rise in interest rates,” said Barbieri, president of Cantina Torrevilla, a cooperative of about 200 producers that makes everything from pinot nero to sparkling reds. “This affected the final distribution to our shareholders, resulting in less being distributed in the end.”
For other countries, the impact is worse than a shrinking share of profits. Castelli del Grevepesa, a fellow cooperative based in the countryside outside Florence – the heart of Chianti country – had to apply for formal debt restructuring after years of pressure. The double blow of crippling financial obligations and loss of Chianti wine market share became too much to bear.
Terre Cortesi Moncaro, a cooperative that dates back to 1864 and specializes in Verdicchio whites, is seeking court protection after two creditors filed a bankruptcy petition. The company has endured many corporate pains ranging from soaring interest costs and operational costs to management turmoil and a mold outbreak that halved wine production last year.
All winemakers in Italy started out as family concerns and most have remained that way, creating a highly fragmented industry — and producers that often rely on borrowed money to survive.
Combined, their interest costs will rise to €306 million ($333 million) this year from €126 million in 2022, according to estimates from Studio Impresa, a consulting firm. They calculate the impact on income from debt repayments will more than double from 0.92% in 2022 to 2.24% in 2024.
Little Harvest
If the spike in financial costs occurred in isolation, winemakers might not be so worried. But climate change and the appeal of younger tastes, along with older people increasingly favoring deep reds, make this challenge important for many.
Last year’s scorching September temperatures led to Italy’s lightest grape harvest in 76 years, and 2024 looks slightly better. “Sudden temperature changes are becoming the new normal,” Barbieri said at Cantina Torrevilla. “That means more care and fewer grapes.”
Meanwhile, rising inflation doesn’t just mean higher central bank interest rates. This also leaves drinkers with less money to spend on bottles.
Italy remains the world’s largest wine exporter by volume (France is larger by value), but the value of its sales to the five largest consuming markets — the US, France, UK, Germany and Japan — will fall 7.3% in 2023, according to Italian Wine Association Data. The picture for 2024 remains mixed so far.
“We are experiencing a real slowdown in both the domestic and export markets, caused by these many headwinds,” said Luca Castagnetti, who heads the country’s wine industry study center at Studio Impresa. “It’s a mix of temporary trends and others that will last longer. This has caused companies in this sector to experience financial difficulties and many do not have the managerial capabilities to overcome these obstacles.”
Even the largest and most professional companies are affected by sluggish sales. Italian Wine Brands SpA is one of two registered wine companies in the country. Owners of more than 70 brands and private labels, they want to focus on sparkling whites and premium “Super Tuscans” and Piemonte wines because younger, more discerning drinkers “buy better.” The company still had to cut its 2024 revenue guidance by 4% due to lower volume and prices.
One of the regular victims of changing tastes is the bold red wine that was once a cornerstone of viticulture in Italy and France. Exports of Italian reds with the valuable DOP label – a signal of the quality of local production – fall by 5% in 2023, according to data from the Italian National Institute of Statistics (ISTAT). For a similar IGP label, the decrease was 7%.
“The younger generation has a multi-category approach,” says Carlo Flamini of the Italian Wine Union monitoring center. “They consume wine less often because they choose drinks based on the occasion.”
Like their counterparts around the world, Italian vineyards have experimented to keep pace with drinker preferences.
“When we started to notice the increasing trend of no alcohol, we thought about it seriously,” says Marzia Varvaglione, whose family business at Azienda Vini Varvaglione in the southern region of Puglia has been around since 1921. Although her specialty is strong reds such as Primitivo di Manduria and Negroamaro, has been trying out less boozy alternatives and this year served its first alcohol-free sparkling wine and spritz.
Unfortunately for producers, diversification takes time and money, at a time when funding becomes much more expensive.
“For now, it’s still a collateral business and we’re not putting too much money into it,” Varvaglione added. “We want to wait for the right time.”
History provides at least one encouraging success story for Italian diversification: Prosecco. After the financial crisis, society tightened its belts and that’s when the country’s producers began pushing for what Flamini calls the “democratization of sparkling wine.”
Prior to 2008, the market for “fizz” was polarized, consisting mostly of luxury products such as champagne or cheap items of sometimes questionable quality. Italian growers refocused cultivation on this type of grape and Prosecco – a cheaper alternative to Champagne – emerged as a global winner.
Italian sparkling wine exports by volume more than tripled between 2010 and 2023, according to winemakers’ union data. Even French buyers have turned to cheaper Prosecco due to the impact of inflation, with French imports of the bubbly Italian white product increasing by 25% last year.
Italian manufacturers have proven “resilient and capable of change,” Flamini said.
Bottle Sharing
Changes to the industrial structure, aimed at achieving efficiency, have been slow. About two-thirds of the Italian sector’s net worth is owned by individual families, with 16.6% in the hands of cooperatives, according to a study by the Mediobanca Study Area, a research center. Financial institutions accounted for about 11%, of which 4.1% were private equity firms.
However, in recent years there has been consolidation and an influx of foreign capital. In 2022, Italian private equity firm Clessidra SpA launched a wine company, Argea SpA, to unite two acquired producers, Botter and Mondodelvino. Clessidra wants to use it as a means to take over other vineyards to create a winemaking champion. Last year they took over Abruzzo-based Cantina Zaccagnini.
Overseas investors have also started sniffing around. Beverly Hills-based Platinum Equity bought Farnese Vini in 2020, later changing the name to Fantini Wines. The group also has roots in Abruzzo but now has 18 vineyards.
“In an era of major changes from the consumer point of view and difficulties associated with the actual harvest, size, consolidation and diversification help players to react better,” said Massimo Romani, CEO of Argea.
Meanwhile, cooperatives – whose members usually have deep pockets – must look for support. Legacoop Sicilia, an association representing community groups on the island, called on the local government to offer a public guarantee to winemakers seeking financing to make investments or seek to restructure their debts and delay repayment.
If the proposal is approved, well-managed cooperatives “will be able to increase their share capital, improve access to credit and invest to increase production and commercialization of their products,” said Filippo Parrino, president of Legacoop Sicilia. “Others have to take into account their limitations.”
And if all else fails, Italy’s appeal to international tourists will wane. Italian winemakers with annual sales of more than €20 million have increased their income from tourist visits and tasting sessions by 15% year-on-year, according to the Mediobanca Study Area report.
Cantina Torrevilla’s Oltrepò Pavese base is home to a distinctive old wine tower — a way of production that now no longer exists — and the site regularly hosts kids picking grapes as well as more genteel adult wine tasting sessions. The Barbieri Collective is considering turning the tower into a museum, and perhaps adding a restaurant, a street frequented by others.
Puglia di Varvaglione winery has started offering horseback riding tours through the vineyards, followed by a picnic and a drink.
“We are experiencing an increase in visits to our cellars, even from foreigners,” he concludes. “You could make a living off wine tourism.”
