Italy Country Manager Pierpaolo Penco reflects on how the market success of many Italian wine brands seems to depend more on the ability to create categories that fill market gaps at every price point, rather than on developing corporate brands
Italy is the leading wine producing country in the world both in terms of volumes produced and exports. Yet, as reported in the Wine Intelligence Global Wine Brand Power Index, no Italian brand is among the top 20 global wine brands, and at individual market level few Italian brands can be found in the top 10. Is this due to the Italian branding model that is mainly family-based, being different from that of competitors?
The structure of the Italian wine industry does not lend itself well to the “power” brand. It is characterized by a fragmentation of both vineyards and winemaking operations, which has led to arguably a strong and diverse culture of production, but it has meant that individual producers do not have access to the sort of marketing resources (people and money) that are required to build a brand. Another factor is that the large domestic market, which still takes the majority of Italian wine production, have not shown much enthusiasm for supporting brands.
In the absence of brands in the classic sense, Italian wine has used categories and regions as substitutes – in many ways these are the ‘real’ brands of Italy. Some specific categories, in particular, have succeeded to develop their own brand (eg Prosecco or Pinot Grigio) that is often stronger than any individual company brand (with some notable exceptions, such as Santa Margherita and its Pinot Grigio in the US market).
Similarly, a ‘Made in Italy’ brand may evoke positive attributes relating to Italy as a country for many international consumers, facilitating the perception of value through the effect of association between country and product, in particular Italian fashion, culture, food and wine. In fact, the Denomination of Origin (PDO) is a collective good similar to collective brands owned by Consortia that are guarantors of the origin and quality of the product, providing the opportunity to compete on the global market even to less structured companies.
For example, we can look at Prosecco and Chianti to understand this Italian way to brands:
Prosecco, before the recognition of a broader PDO, Prosecco was identified more as a category than the traditional producing area located on the hills in the Treviso province (now recognised as ‘Conegliano e Valdobbiadene’ and ‘Asolo’ DOCGs). The impressive market success of these bubbles is not due to a few leading brands, but to the high consistency of a product and its clear USP (‘The Italian welcome’). Because of the brand of the category, some wineries are now developing their own brands. But what is the effect on the PDOs? The broader, more generic Prosecco DOC (more than 400 mil bts.) has a direct connection with the category, while the two ‘traditional’ DOCGs need to establish a differentiating strategy to have recognized a higher price point to cover both higher production costs and the intangible assets coming from heritage, history and landscape.
Chianti, on the other hand, has the best known name of Italian wine among international consumers, and is both a region of origin and a wine category. Chianti can mean two different wines, generally addressing two consumers and different consumption occasions: one produced in the historically defined area (Chianti Classico DOCG) and the later allowed to be produced in an enlarged area (Chianti DOCG).
For Consorzio Chianti Classico, the main issue is to pursue a clear differentiating strategy from the basic Chianti wine; for instance, by introducing a new iconic wine called ‘Gran Selezione’ at the top of the quality pyramid. The Chianti Classico wines are enjoying record sales, with exports continuing to boom and demand for domestic product rising as well.
On the other hand, we have the broader Chianti DOCG, that identifies a wine category (Tuscan red) more than a geographically defined region, whose wines are often sold at lower prices. In this case, the associated wineries can benefit from the generic brand awareness, but they often invested on individual brands and the so called ‘Supertuscan’ wines (labelled as ‘Toscana IGT’) to achieve a higher positioning. For example, one of the most powerful Tuscan (and Italian) brands, Marchesi Antinori (221 mil. Euros 2017 turnover), no longer has this name on their ‘Santa Cristina’ Chianti DOCG since it is managed as a separate brand. Inversely, the Antinori brand is reserved for the Chianti Classico – the superpremium and iconic labels.
There are some threats, of course: if we read the ranking of the yearly turnover we see that some of the biggest players are cooperatives or bottling groups, often suppliers of non-Italian companies or distributors that own and manage the brands (‘Ecco Domani’ or ‘Ogio’ are just two examples). While some prestigious wine brands (like Masseto, Sassicaia, Gaja, Dal Forno) have achieved an iconic positioning similar to those of French Grand Crus or Napa Cabs, the success of Italian wines comes more from a top-down successful combination between the ‘Made in Italy’ effect, the category that fills a market gap, the Denomination of Origin (when relevant) and the individual corporate brands.
Author: Pierpaolo Penco