Wine Economics Stefano Castriota

Structure of the book _______________________________________________ First part: how the market works (Economics) Second part: what institutions and consortia can do to avoid market failures (Economic Policy) Policy conclusions: six key variables to survive the wine war

The World wine market after the '60s _______________________________________________ The wine geography changed Until the '60s the Western Meditteranean dominates. Afterwards … Collapse of per-capita consumption in Mediterranean Europe Aggressive entry of New World producers Decline of important producers like North Africa and Mediterranean Europe

World consumption of wine (million hl) _______________________________________________

World wine production (% of Hl) _______________________________________________

World production of wine by country (% of hl, 1961) _______________________________________________

World production of wine by country (% of hl, 2011) _______________________________________________

Convergence in consumption models _______________________________________________ Convergence involved: 1. The quantities (liters of pure alcohol drank) 2. The preferences (towards the different alcoholic beverages) Similar patterns not only in Europe (North vs. South), but also among continents Problems for Italy/Southern Europe: 1. Population is almost constant 2. We are mainly wine producers

Consumption of alcohol in Europe (L Consumption of alcohol in Europe (L. of pure alcohol) _______________________________________________

Alcohol consumption in Europe, N-S (L Alcohol consumption in Europe, N-S (L. of pure alcohol) _______________________________________________

% of alcohol consumption due to wine in Europe _______________________________________________

Differences Old-New World _______________________________________________ In Old World countries there are smaller economies of scale Strengths of New World countries: - Adoption of new technologies on a large scale - Lower costs/lower prices Weaknesses of New World countries: - (Almost) no native grape varieties - Less history and tradition Cooperatives

The six key variables (Old World) _______________________________________________ Quality  DOP rules, cooperatives, R&D Marketing and clear wine classification system  Pyramid and No. DOPs Economies of scale and competitive prices  Incentives to M&A Promotion of wine culture  Wine education and tourism Changes to the tax system  More excise duties, less VAT No. of native grape varieties (?)

Native (wine) grapes, by country _______________________________________________ Italy 341 Portugal 268 France 187 Greece 159 Spain 119 Croatia 92 Germany 40 Hungary 18

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