South Tyrolean wine: Markets, sales channels, prices
The wine industry, the most traditional sector of South Tyrolean agriculture, generates 12% of the value added of South Tyrol's agriculture as a whole. The share that the wine industry contributes to the total gross domestic product of South Tyrol is 0.6%. South Tyrol's wine industry is of much greater importance for the image of South Tyrol, for the traditional cultural landscape and for the South Tyrolean gastronomy, as 32% of guests associate South Tyrol with wine. International wine market Europe dominates the international wine market. Over 70% of the world's wine production (298.17 million hl) is produced in the EU. If the share of the South Tyrolean wine volume in the European wine volume is calculated, this results in a value of approx. 0.2%, and 0.7% of the Italian wine volume. Italy's wine volume, on the other hand, accounts for 28.7% of the European total. However, there is a structural overproduction of about 80 million hectoliters of wine in Europe, which is why a considerable quantity of wine has to be distilled every year, especially since European wine exports are comparatively small and have been stagnating for years at roughly the same level (about 10 million hectoliters). The same applies to wine imports. Vineyards in South Tyrol The area of vineyards in South Tyrol is 5.040 ha (year 2004), which has hardly changed in the last 10 years. However, there have been
significant changes in the varieties of vine cultivated during this period. The share of white wine grapevines has risen from 33% to 45%. Within the red wine area, there has been a sharp decline in the Vernatsch grapevine area. From 1993 to 2005, the area planted with Vernatsch grapevines decreased by 1,104 hectares. South Tyrolean wine sales volume In the business year of 2004/2005 the South Tyrolean wine producers marketed a total of 355,735 hectoliters of South Tyrolean wine. 61% of this was red wine and 39% white wine. More than 34% of the total wine volume is Vernatsch wine, whereby the Kalterersee DOC accounts for almost half of the Vernatsch wine with 60,000 hl. 77% of the total amount of wine sold are DOC wines, 13% IGT wines and 10% are marketed as table wines. Only 49% of South Tyrolean wine is bottled in 7/10 bottles, 34% are sold as liter bottles and a further 17% leave the cellars as draught wines. In the case of white wine, the proportion of 7/10 bottles is over 70%, while in the case of Vernatsch it is only 25%. Almost 50% of the total quantity of wine is sold in South Tyrol itself. 19% of South Tyrolean wine is marketed throughout the rest of Italy and 17% in Germany. Both in Switzerland and the USA 5% of the wine quantity is sold, in Austria 3%. Vernatsch and other red wines are mainly sold in Germany, Switzerland and Austria, while white wines are mainly sold all
over Italy and in the Anglo-Saxon countries. To Germany, Switzerland and Austria more than two thirds of the wine is sold in liter bottles or as draught wine. By contrast, in the rest of Italy and the Anglo-Saxon countries, South Tyrolean wine is sold almost exclusively in 7/10 bottles. If wine sales are distinguished by sales channels, it can be seen that about 60% of the total wine volume is marketed via wholesale and intermediate trade, over 30% is delivered directly to the retail trade and gastronomy, and only less than 10% is sold directly from the winery or farm. Prices of South Tyrolean wine The prices of South Tyrolean wine vary significantly, even wines of the same grape variety and with the same packaging are marketed at very different prices. The biggest price differences, however, are between the different types of packaging: If the average price per liter for the drought wine is 2 euros (ex winery, without VAT) and for the liter bottles 2.5 euros, the price for the 7/10 bottles is more than 6 euros. Significant differences also arise when wine prices are analyzed separately according to the wine description. Vernatsch wines generally have a lower price than other red wines. But the range of prices for the other red wines is much higher. In the case of Pinot Noir DOC, for example, the difference between the lower and upper price limits is almost 10 euros. For white wines, the average prices for Gewürztraminer DOC and Sauvignon DOC are above average. In the case of white wines, however, the range is much smaller than for red wines. Wine in South Tyrolean gastronomy The 5,600 gastronomic establishments in South Tyrol sell approx. 100,000 hl of wine each year, of which about 70% (70,000 hl) is South Tyrolean wine. Gastronomy is therefore of central importance for the marketing of South Tyrolean wine. However, only 38% of the wine purchased by the gastronomy is bottled in 7/10 bottles, more than 60% of the South Tyrolean wine bought by the gastronomy is sold in liter bottles or as draught wine. Wine marketing and advertising Advertising and marketing are becoming increasingly important in the merchandising of the South Tyrolean wine because it must be sold on largely saturated markets. The image of wine is therefore becoming increasingly important when it comes to purchasing decisions. The list of all expenses for advertising of the South Tyrolean wine industry shows that in 2005 the companies provided 3.7 million euros (2.3% of their turnover) for marketing measures. In the same period, almost one million euros
were additionally made available by the Province of South Tyrol for advertising and marketing activities in the wine industry. Almost all companies carry out marketing and advertising activities in direct contact with customers. Publicity measures in print media, on radio as well as television and generally a professional press work are mentioned far less frequently. The small structure of the wine sector is the reason why. Only very few companies can afford to run their own marketing department, which could carry out professional press work. In addition, only 36% of the respondents stated that they would like to spend more money on wine advertising in the future. Main conclusions −
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The South Tyrolean wine industry cannot be successful unless it is able to build a strong brand image for South Tyrolean wine. This goal can only be achieved through cooperation. No positive image can be built up with liter bottles and draught wine, and consequently it is not possible to achieve a suitable price. If the South Tyrolean wine industry wants to disconnect itself from international price competition, the proportion of liter bottles and that of draught wine must be reduced drastically. Quality wine must not be sold below its value! The very small wine sales volumes in South Tyrol make it questionable if a major expansion to more distant markets makes sense. With such small wine quantities, it is difficult to recover the large market opening costs. To become even better on the important traditional markets requires to focus on the South Tyrolean market itself. The large number of tourists in the restaurants offers an excellent advertising and marketing potential for South Tyrolean wine. For this purpose, the sale of 7/10 bottles must be increased in the gastronomy sector. The variety of wine descriptions is enormous (over 150). For a joint marketing campaign outside South Tyrol, it would be important to have a uniform and common identification mark for all South Tyrolean wine.