The first half of 2021 has been characterized by a very intense Mergers & Acquisitions activity on Italian wine scene. Among the largest transactions were those of Botter and MondodelVino which passed under the aegis of the Clessidra fund, Antinori which acquired the majority of Friuli brand Jermann, from Coppo, which joined the Dosio Group, in a transaction between Langhe and Monferrato and Italian Wine Brands, which incorporated Enoitalia by Renzo Rosso, owner of fashion firm Diesel, who, with his Red Circle Investment, rose to 7.5% (and joined the Board of Directors) in Masi Agricola, in Torrevento, formerly in the Prosit Group (fund controlled by Quadrivio & Pambianco), which acquired the majority of Oria Wine.
Each of these transactions was different from the others, because of the type of players involved (in some cases, large commercial and industrial companies, in others, financial investment companies, and still others leading brands focused on production, from the vineyard to the cellar, often selling the property, but remaining in the management of the company that bought it). However, they all recount a process of aggregation that has been underway for some time on the Italian panorama. Covid and complex future market scenarios have accelerated the process further. We will also see similar companies that do not have large tangible assets such as vineyards or wineries, but have a market and critical mass product, unifying. Or market leaders, seeking to diversify and integrate territories and offers, while maintaining a consistent positioning, and working, however, on shared values. This, to enhance company assets under all aspects: organizational, managerial, distribution, dimensional. Then, there are the Cooperatives, which must maintain their aspect of social impact on the territories, but that in order to grow will have to invest more and more in established brands as well, as Caviro did some time ago with Cesari, in Veneto: incorporating a brand that is already a territorial umbrella on the supply chain. We have been registering this trend towards aggregation for years, and it will characterize the coming years even more so. We must also pay attention to the integration between different agro-food chains. We will see more and more food companies also invest in wine, where there is the possibility of sharing and integrating target markets, distribution channels and similar values. Further, we must not forget investment funds, which are continuing to look to Italian wine. Great excitement is brewing, which will be good for this sector that has suffered, but is still performing, sustainable, has medium-long term returns, and represents community and local social business, which is not at all a secondary aspect”.
It seems that aggregation is irreversible. But is it good for consumers? Furthermore, growth of mass retail and e-commerce add complexity to post-pandemic market scenarios requiring more advanced management skills than in the past. Mass retail produced record sales during Covid crisis and now has the occasion to treasure customer service policy, and to become a serious competitor versus traditional wine distribution channels. Moreover, online sales, both for mass retail and specific platforms has relatively small numbers but will grow in the future leveraging on efficient service and logistics. Wine producers will have to adapt to this change. Mass retail will be more expensive to approach because it has raised the bar, in terms of product, but not just that. Many things are changing. It is a complex scenario to read for companies, because Italian Wine industry is made by many structured companies, as well as by many that not very well organized. Small producers, even in the 100-200.000 bottles quantity bracket, are interrogating themselves on the future, since they will have to deal with new distribution models, innovation, positioning errors made in the past, on the shelf and online, as identical bottles often have significant price differences from one retailer to another, and this is confusing. Furthermore, the distribution model, by now, is a worldwide reference because this is what allows online sales.
Up to now, we have been talking about “terroir” as the target for investment, but this, too, is changing. The focus, will be on the “best in class” companies within the terroirs. Those that have strong brands, are local, have often built the territorial brand as well as their own, and have found a place on the wine lists and the most famous wine bars in the world. In some terroirs, vineyards real estate prices have fuelled speculation, such as in the case of Barolo, Montalcino, or Bolgheri to name a few. Here it is difficult to invest “merely” in a vineyard. There are a few companies within each terroir that are also leaders of lesser known Regions or denominations. These companies may have no intention or need to sell, but if there is a possibility of growing, or perhaps even opening a minority stake in their capital, they will not hold back. Again, will all this be good news for the consumer? For the educated wine-lover? Is all this really positive progress? We will see… It certainly is very profitable now for financial advisors, bankers and investment consultants. Cheers to their wallets!
