Falling sales, dwindling margins: according to surveys by the economic monitor of Unione Italiana Vini (UIV) and Vinitaly, 2023 will be tough. Due to the cost explosion, which could hardly be buffered by price increases, the gross operating margin will be shrinking, and this already starts in 2022. It is expected to decline from 25% in 2021 to 10% and thus will be even lower than in loss-making 2020, when profitability was still 17%.
The scenario is gloomy. Although costs will be reduced by around 11%, sales losses of 16% are to be expected, margins will fall to 4%. As a consequence, profits will plummet from €1.4 billion in 2022 to €530 million in 2023 – and these €1.4 billion are already light years away from the €3.4 billion in 2021.
Declining profits in 2022
According to UIV and Vinitaly, the 2022 fiscal year will end with a 1% drop in sales to 41.4 mill hectoliter, which will only be offset - thanks to an increase (6%) in HoReCa sales and direct sales - to a 1% increase in value (€14.3 billion).
According to the UIV/Vinitaly study, the export business will achieve a value increase - due to inflation - of 10%, despite a slight decline in volumes. But food retail sales in the main markets - U.S., Germany and the U.K. - are distressing, which were down 10% in volume and 6.5% in value (as of Sept. 30, 2022).
In addition, the large harvest of more than 50 mill. hectoliters led to a 15-20% drop in bulk wine prices. The overproduction and unsold wine have negative consequences. A reduction of 3 mill. hectoliters could relieve the industry of the surplus and release new energies on the market, according to the final analysis.
The study left open whether distillation was among the options for regulating volumes. Rather, the approach to solving the surplus focused on re-regulating the numerous DOCs and IGTs, many of which are barely certified. Furthermore, it demanded to maintain the maximum yield for generic wines at 30 tons – and to do this without exemptions. More than 300 municipalities had been authorized an increase to 40 tons in May 2022. (VC)