Profile of the Italian Wine Consumer

Traditional Method cellaring

Earlier this year, the survey “Mercato Italia, gli Italiani e il vino” (Italian Market, the Italians and the Wine”) carried out by Vinitaly with l’Osservatorio Vinitaly-Nomisma Wine Monitor was presented at the Verona Fair. It refreshed some assumptions about the profile of the Italian wine consumer and checked the pulse of the market in the largest producing country in the world.

Re-thinking the profile of the Italian wine consumer

Italians are drinking less. The analysis has shown a -26% reduction in volume compared to twenty years ago. Drinking has become more responsible throughout the country: the average is of 2-4 glasses a week, consumed mainly at home (67%) and in particular by baby boomers (55-73 years, at 93%). Nevertheless, relevant shares have been increasing through all generations with millennials (18-38 years) showing a penetration rate of 84%.

A big contribution in the drop in consumption came from changes in the life style of Italians (increased attention to health, working habits, etc…) and increased rigour on the traffic laws regarding limits of alcohol consumption before driving.

Even if Italians are drinking less in average, the market holds and produces a consumer value estimated in approximately 14.3 billion Euros (2018). That translates into a growth of +2.8% vs. 2017. The estimated volume sold was of 22.9 million hectolitres, which is rather stable vs. 2017 (-0.3%).

Shifts in Preferences

Interesting perceptions between drinks and social occasions were brought up on the survey. For most of the people interviewed, wine is tradition, elegance and culture, as opposed to spirits, associated with fun and monotony, or beer, where the link with friendships and everyday life prevails.

While it is true that red wine remains the favourite on the table, preferences change along the Italian peninsula. These shifts are rooted on changes in consumer habits as well as the dominant grapes and styles in the region.

Red wine lovers drink at least 2-3 times a week in 50% of the cases, while for the other types the consumption is more sporadic and happens often out of home. In metropolitan cities, the penetration rate is slightly higher than the Italian average (91% in Naples against 88% in Italy) and the average age of consumers is lower. Rome drinks more white than the Italian average (25 % vs 18%) while the reds dominate the preference in Naples. In Milan, the consumption of sparkling and rosé wines is well above the country average.

Through out the country, the spritz is the king of the aperitivo and whenever a glass is served out of home. The spritz is now a true initiation rite on wine for the younger palates. Some see it as a popular trend that bridges the first cultural introduction towards the more traditional product.

The consumption of spritz takes off especially in Lombardy and Veneto, with around 40% of the consumption out of home. That trend is also observed for other wine mixes in the big cities, where the propensity to wine tourism is bigger, especially in Milan (36% ). Red, the first in consumption, dominates the South, Piedmont and Tuscany. Veneto stands up with the concentration of sparkling (contribution from the being the center of prosecco production). 

Passing the wine knowledge test

The survey also pointed that rather than dig deeper on wine knowledge, the average Italian wine consumer is more focused on the satisfaction of the senses. Only a quarter of consumers say they can recognize what they are drinking.

The share of “connoisseurs” rise in males (33% against 18% of women), in the North-West (31%) and in a manner directly proportional to income (45%) and education (39% graduates). 

When selecting the wine, the survey revealed that the production area, denomination and grape variety are the dominant criteria. Together they add up to 61% of the answers and prove to be much more important than price, company brand, sommelier advice and green features. 

The survey also asked which trends the consumers believe will get stronger in the next 2-3 years. They have indicated the autochthonous (28%), the organic (19%), the Venetian, Piedmontese, Tuscan, Apulian and Sicilian wines and the light, easy to drink.

The knowledge gaps regarding great vines are a bit more evident: when asked to indicate the regional provenance of Amarone della Valpolicella, Brunello di Montalcino and Franciacorta, only 1 Italian out of 4 responded correctly. In a geography of responses that rewards the Venetians (38% of answers without errors), followed by Lombardy (34%), while Sicily and Campania fall behind, with the threshold lowered to about 20% of respondents.

What’s in the price of a bottle of wine?

Barolo wine cellar in Piemonte

When blind-shopping for wine, we silently hope that each extra dollar will convert into an extra nugget of quality. If you’ve been through that road before and all you tasted was disappointment, you are not alone. If the dollar x quality ratio was true, a bottle priced at $100 would be 10 times better than one of $10. It would be the much easier to pick wines from the shelf.

In the end of the day it bothers me how much more we end up thinking about the price of the bottle than the taste of the wine in our glass.

Very often two questions come up when taste, price and wine are in the same discussion:

  • Why is that wine so expensive?
  • How much is enough paying for a good bottle of wine?

Before digging deeper, a distinction must be made between value and price. I might be willing to pay a higher price if a bottle is perceived as higher value to me. That could be either because it is hard to find, or I have a special story attached to it, or because I am preparing bistecca alla Fiorentina for dinner and no other bottle would make a better pairing for me.

Common sense and perception of value. Everyone has one of their own.

Value is a highly subjective concept. Every person has different criteria on what composes value when it comes to wine. Price, on the other hand, is a more defined aspect. It can be measured by the digits plugged on the tag of a bottle. That will be the focus of this discussion.

What are the costs behind a bottle of wine?

To get down to the cost breakdown of a bottle, we’ll take a use case. I’ll pick a wine bottle that has a retail price of $100, to simplify the view. Let’s pick for this study a premium bottle of Cabernet Sauvignon, from California, Napa Valley 2016. Those can easily reach three-digit figures. We will get the details and average prices of the grapes from the California Grape Crush Report 2016.

According to the report, Cabernet Sauvignon grapes was traded in average for about $6.85K/ton in 2016 in Napa. Considering it would take about 1kg of grapes to make a premium bottle of wine, we land at about $6.85 in grapes per bottle. For the barrique we will choose new French oak for a single use, which costs about $800. Each barrique holds 225 liters of wine, that translates into 300 bottles (ignoring losses). This way, the barrique will add $2.7 to the cost of each bottle.

Let’s consider a small to medium size winery for the fixed costs. Based on a report from the UC Davis Department of Agriculture (2008), and adjusting to today’s rates, we can estimate that the costs of wine making operations, utilities and personnel contribute in $8.90 to the cost of each bottle, for our use case.

With the glass bottle, labels, capsules and marketing we find that our 2016 Cabernet Sauvignon from Napa Valley would have a total cost of about $23. The average margin of a boutique producer with a good demand on the market is on the rage of 100% to 150%. Taking the upper limit, our bottle finds its first price out of the winery, of about $58.

Before you pop open that bottle, it will still have its price inflated by the margins from the wholesales and the retailer. My estimate is that by the time it reaches the shelf of your preferred wine store, that bottle will be priced at about $99.50. There we have, our $100 wine bottle. (see details on the breakdown at the spreadsheet at the end of this post).

What if, due to a family event, you end up ordering that same bottle for dinner in a restaurant instead? We are talking about an extra 30-50% markup. Depending on where the restaurant is located and the profile of its target public, it can reach even higher numbers. With that, our Cab will contribute in $150 to the bill of the evening.

Price of a bottle of wine

How much is enough paying for a good bottle of wine?

After all this drafting, the second question from the beginning of the post becomes even more relevant. How much is enough to pay for a bottle of wine?

According to statistics, published by the Vivino website, an average bottle of red wine (3.6 rating) costs $15.66 USD while a very good bottle of wine (4.0 rating) costs $32.48 USD on average. The curve of price vs average rating becomes rather steep after that.

Is it fair to say that around $30 is a good spot to be, before the price skyrockets and you won’t get as much for that extra dollar?

That still depends. Once the price is enough to cover for a good quality (or to produce a good wine with typicity), the overhead will be due to specifics of that wine. There are a few factors than can segment wine into price ranges. The main ones are the location where the wine is produced, weather in a given year, how particular is the production method and gaps between supply and demand. Aging potential can also play a role on price tag. Those factors are not mutually exclusive. In fact, they often come in different combinations between them.

Value and price. It comes down to the balance between how much value you perceive in a wine bottle and how much are you willing to pay for it.

Now, that math exercise makes me wonder… when looking at those bottom shelf bottles of $2, is it really wine they put in it..?