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Premiumization at the heart of long-term sustainability

In 2016, the world drank more Prosecco than Champagne and according to forecasts by Vinexpo/IWSR, the trend is set to continue. But how did Italy's sparkling success story manage to corner such a huge share of the global market and what challenges now ahead to ensure sustained success? Italian wine expert Professor Eugenio Pomarici from the University of Padova shares his thoughts with Vitisphere.
Par Sharon Nagel Le 04 octobre 2017
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Premiumization at the heart of long-term sustainability
Italian wine expert Professor Eugenio Pomarici from the University of Padova shares his thoughts about Prosecco..

Prosecco has taken the world by storm. How do you explain its incredible success?

This is something that still deserves investigation, but its success can be explained using the Porter competitiveness framework, the so called Porter Diamond. According Michael Porter, the competitiveness of a sector is sustained by: factor conditions; demand conditions; related and supporting industries; a firm strategy, structure and rivalry; government; and chance. Prosecco seized the chance to be the right product at the right time, in a world wine market in which two main, yet differing, consumption trends co-exist: premiumization and the search for easy, but cool, wine. In many markets Prosecco was discovered as cheap ingredient for cocktails but quickly traders and consumers discovered that it was also good alone. Prosecco is a really cool wine: the name is funny and the content is usually, at the least, agreeable. It is possible to ask for a Prosecco without fear and this is very important. A very sophisticated Italian wine critic, writing ironically about an occasion when he was “forced” to drink Prosecco, described the experience, explaining why it is so easy to drink Prosecco: “Prosecco went down without leaving a trace, doing neither good nor bad, appearing to me basically harmless and having more or less the same character as the mineral water…...” Additionally, Richard Halstead, chief operating officer of Wine Intelligence, can be quoted when in 2010 he predicted that the Prosecco Decade was beginning in the UK: “Consumers say they like the drink (Prosecco), because it is pleasant-tasting, low cost, but has a sophisticated image” and again: “If the previous ten years can be characterised as the Champagne decade, I think it's safe to say we're entering the Prosecco decade. UK consumers will still spend good money on still and sparkling wines, but they will need to be sure they are getting exceptional value for that spending”.


How did the other elements of the Porter diamond work?

The global success of Prosecco became possible because the other Porter elements worked well.

Factor conditions: Veneto and Friuli are regions with a long-standing tradition of grape growing and wine making; the large area under vine allowed a quick and smooth increase in Glera production, despite EU restrictions on new plantings, and there were no problems with adequate skill availability. The evolution of Prosecco supply took advantage of a widespread tacit and codified knowledge about viticulture and oenology, a fair commercial attitude and openness to innovation… Demand conditions: Veneto and Friuli are the Italian regions with the highest wine consumption. Most people still drink wine every day, also at lunch, and so daily wine drinking has a fairly widespread “sense”. Producers, therefore, are constantly under critical pressure from local consumers. Related and supporting industries: in North-East Italy there is a strong presence of producers of oenological equipment, easy access to agricultural machinery and a wide supply of services and consultancy. Firm strategy, structure and rivalry: the Prosecco industry is a broad community where hundreds of players work side by side; everyone continuously looks to changes or improvements amongst their competitors to evaluate if and how to react. Industry structure also helps Prosecco with production based on different supply chains with varying types of integration… The result is a very flexible and reactive supply system.  Finally, Government: the “reform” of the Prosecco appellation system, implemented in 2009, allowed for better governance of Prosecco supply, and more effective quality control. We would have an ocean of Prosecco-like wine around the world without that reform.


Why Prosecco and not other Italian sparkling wines like Asti?

Asti’s taste (sweet) makes it not as versatile as Prosecco. For this reason, Asti producers are now starting to offer a dry version (Asti secco). Other important, exported Italian sparkling wines, Trento and Franciacorta, suffer from competition with Champagne, due to product similarities with a second fermentation in the bottle and therefore are perceived as cheaper Champagne substitutes. Using a cheap substitute is never cool….


Vineyard area has dramatically increased to keep up with global demand. Is this likely to put downward pressure on prices in the long term?

This is a critical issue. If you look at Prosecco as a whole, you can consider it to be a “cool convenience good” and therefore the price matters, even though perception of Prosecco isn’t strictly linked to low prices. Therefore, I cannot imagine a “marketing of scarcity” for all of Prosecco supply. To ensure that production potential is consistent with demand, it is imperative to avoid the risk of overproduction.  I agree that the Prosecco industry has developed sufficient production potential and it would not be wise to insist on securing further enlargement of the production area from the regional administration. Sometimes bad signals arise from the market - some Prosecco is sold at very low prices for instance. It is not always easy to understand the reason for discounted sales: they can be the result of contingent needs by retailers or bottlers, or the omen of an imbalance between demand and supply. The Prosecco industry should monitor the market carefully to correctly interpret strong or emerging signals and develop an appropriate strategy. One of these should be not to sell Prosecco at very low prices, and if the need to reduce stock becomes urgent, then the wine should be sold without the appellation. This cannot be imposed directly, but the Prosecco Consorzia have the legal tools to constrain supply. Undoubtedly, the Prosecco industry has to learn quickly how drive and control the fabulous machine that has grown other the last 15 years without any leader…


What effect has Prosecco’s success had on other Italian sparkling wines?

Production data shows that all Italian sparkling wines are increasing production, except for Asti (stable) and Oltrepo’ Pavese (decreasing). Total sparkling production between 2015 and 2016 rose by 18%: Prosecco DOC, +21%; Prosecco DOCG, + 6%; Trento DOC: +3%; Franciacorta: +11%; others with or without appellations, +29%; Oltrepo’ Pavese, -26%; Asti DOCG: +0%. Generally speaking, the success of Prosecco is not negative for most other sparkling wines. Probably only Oltrepo’ Pavese was cannibalized by Prosecco. In Italy, as elsewhere, additional sparkling wine consumption (Prosecco or others) may not entirely substitute still wine as it seems that some sparkling consumers are “new” consumers or are switching to sparkling from beer or other soft drinks. The success of Prosecco has caused sparkling consumption to grow, mainly as an aperitif - fifteen years ago, it was very unusual to serve sparkling wine as an aperitif in Italy. Now, the number of sparkling wines made from other grapes, particularly native varietals, is also rising. Nevertheless, it is hard to refer to everyday sparkling consumption as sparkling only represents 4-5% of total Italian wine consumption. Two thirds of Italian sparkling wines are exported


Will we see a move away from technology-reliant wines to more artisanal products in the future?

I believe that in the future, we will still see the coexistence of both types of wines, likely with an increase in value and sustainability. Alongside interest in rather expensive sophisticated niche/terroir wines, interest in affordable, easy-drinking wines is also growing. Also likely is that demand for affordable wine is evolving and becoming selective, so technology-reliant wines have to improve their characteristics using technology in a gentler way, especially reducing  SO2. This is something that - I think - many Italian wineries, co-operative and private, are doing quite well.


Will Prosecco’s success be replicated by other types of Italian wines in the future?

I find it difficult to see a new Prosecco. Firstly, due to probability: it would be quite extraordinary if the “chance” element that Prosecco captured were to occur again in Italy. Secondly, because it is impossible for me to identify another Italian area with the same favourable conditions defined by the Porter diamond.


Pinot grigio’s global popularity seems to have peaked. Would you agree and is it possible to ensure a sustainable future for this type of wine?

I agree that Pinot Grigio is in a critical phase of its evolution. This is why changes in supply governance were introduced last year. In North-East Italy, the largest production area, Pinot Grigio can now only be marketed as PDO wine. Also, a Consorzio di Tutela was recently formed and can use legal tools to control supply in qualitative and quantitative terms. We will see how effective it is at adapting supply to demand and enhancing quality and image…


How can better quality versions of Prosecco distinguish themselves from the more mass-produced wines from a marketing perspective?

I studied this issue for the US market and the result is that: i) consumers need specific quality signals, such as a designation of higher quality, or an origin where Prosecco is produced with particular care (low yield etc.); ii) for consumers to pay more for Prosecco, they need a recommendation from either a sommelier or fine wine retailer, or from a critic. For a significant part of Prosecco production to move upmarket, it is therefore important to improve knowledge about DOC/DOCG rules and also the new Prosecco DOCG category “Rive” among consumers and the trade so that the market is entirely ready to seek out high quality (and price) Proseccos. Work has to be done with the trade, sommeliers and journalists etc. to make them aware of super premium Proseccos and their specific features, and encourage them to promote them. Regarding the trade, well-structured tasting sessions are needed to help them understand the production process. They should understand that the Charmat method cannot be considered a cheap/short version of the traditional Champagne method, but the optimal way to process the Glera grape, in order to obtain a wine characterized by freshness and secondary aromas.


Does the future for Prosecco lie in a clearer quality hierarchy?

Yes, for sure. If the market were to recognize Prosecco of different standards, which must always be above a relatively high threshold, the whole Prosecco supply chain would benefit. Prosecco with a quality hierarchy would be more interesting, something to talk about!


What are the major challenges that lie ahead for Prosecco?

The main challenge is controlling quality. It is crucial to increase the minimal qualitative level of supply, avoid any opportunistic behaviour, and at the same time assert a clearer quality hierarchy, improve information and communication but also share among producers the knowledge and skills required to produce larger quantities of high value Prosecco. In my opinion, all Prosecco producers have the skills to avoid producing mediocre Prosecco while the skills and competencies needed to supply high value Prosecco are not yet widespread enough. Tacit knowledge owned by a few should become general, explicit knowledge. The incumbent risk that the Prosecco community has to manage is the risk of a decline in the capital of trust it is enjoying. This could happen if bad genuine or false Proseccos were marketed. The history of wine is rife with cases of rapid ruin. About 30 years ago Lambrusco exports to the US - totalling 10 million cases a year - stopped in a few weeks due to a suspicion of fraud…


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