Glass half empty: Italy and France seek to cut wine production to support prices

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FLORENCE / PARIS (Reuters) – Major Italian and French producers are looking to cut production of premium wines from the next harvest to support prices after the coronavirus pandemic hammered sales and led to a glut of stock.

FILE PHOTO: Bottles of Brunello di Montalcino’s red wine are on display at a wine shop in the Tuscan town of Montalcino, Italy, September 3, 2018. REUTERS / Fabrizio Bensch / File Photo

In Italy, domestic demand for wine is expected to fall by nearly a third after the lockdown forced hotels, restaurants and wine bars to close for months, with tourists still absent. Exports have also fallen and winegrowers fear a loss of around 1 billion euros this year, or 9% of total turnover.

Rome, which is targeting a production cut of around 5% from last year, has allocated 100 million euros ($ 119 million) to compensate winemakers who throw away between 15% and 50% of their grapes , but winegrower associations say it is likely to exceed available funds.

For bottles classified as superior quality, such as Chianti Classico and Prosecco, winegrowers can earn 1,100 euros per hectare of land on which the harvest is partly destroyed.

Some high-end consortia, like the one that produces Brunello di Montalcino, which sells for up to 200 euros a bottle, have set their own production quotas.

Brunello growers have agreed to a 12.5% ​​cut in production for the upcoming harvest, with an industry source saying they’ve only sold half of their 2020 target.

Compensation claims must be filed by August 10.

“The 100 million euros allocated by the government will certainly not be enough,” Luca Pollini, president of the Avito association of high-end Tuscan winemakers, told Reuters.

Tuscany also put € 6million on the table this week to help wineries build additional storage space, but Pollini said many wineries would rather throw their grapes away.

The region alone already had a surplus stock equivalent to around 2 million bottles of wine from the previous harvest, he said.

LESS FIZZ

Although France has no compensation system in place, the champagne grape harvest that begins this month is also expected to be smaller – although champagne houses and winemakers have yet to step up to the plate. ‘agreement on the amount.

The group of champagne producers CIVC estimates that no less than 100 million bottles will be unsold this year, with a turnover down by more than 1.7 billion euros.

Its data shows that more than a billion bottles are crammed into champagne cellars, representing several years of potential sales.

The Union des Maisons de Champagne (UMC), which promotes the interests of the great Champagne houses including Moët & Chandon and Dom Pérignon of LVMH, wants the maximum yield of the 2020 harvest to drop by up to 40% compared to the last year.

However, producers don’t want to cut their yield by more than 17%, according to local media.

UMC president Jean-Marie Baillière declined to comment on the negotiations, but told Reuters he was confident a deal would be reached at a meeting scheduled for August 18.

Rome and Paris have also set money aside for producers who distill excess wine into alcohol for use in hand sanitizers and perfumes, and France this week increased its financial support to producers to 250 million euros, claiming that the cash flow needs were “urgent”.

FILE PHOTO: Bottles of champagne are stacked in the cellar of Maison Mumm in Reims, France, September 11, 2018. REUTERS / Benoit Tessier / File Photo

The country’s wine industry was already suffering as U.S. tariffs, part of a larger trade dispute between Washington and the European Union, limited exports.

Italian wines were not subject to tariffs, but officials said fears likely to change had boosted exports to the United States earlier this year, pumping up inventories and lowering prices.

“The weather has been good this year so the harvest should be good but the question for winemakers is whether they can sell their bottles at the right price,” said Ottavio Cagiano de Azevedo, general manager of the wine association by Federvini.

Additional reporting and writing by Silvia Aloisi; Editing by Kirsten Donovan

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