Alcoholic drinks and brandies: a growing trend

In Italy in 2009 the production of alcoholic drinks and brandies of agricultural origin was about 1.300.000 hectanhydres, corresponding to a 59% growth compared to the previous year. The reasons for this increase are to be found basically in the significant production growth in the sector of cereal alcoholic drinks and in the heavy production of alcoholic drinks and wine distilled drinks in 2009 which have to a large extent absorbed 2008 production but which have been distilled the following year because of some delay in conforming to some distillation regulations within the CMOs of the wine market.

Coming to import figures, there has been a slight decrease with respect to 2008, with a total of 1.500.000 hectanhydres for this year, which means that the import share is definitely higher than domestic production. Coming to export figures, there has been a significant decrease (about 69%) mainly due to the fact that Sweden, the main importing country of wine alcohol used as a fuel in the past, has given up this market which is now focusing on Brazil after that at the beginning of last year the European Union has granted Sweden the authorization to import processed goods to be checked at the customs and duty-free. In order to better understand the dynamics of each sector, it is important to examine the market in detail on the basis of the agricultural raw materials of alcoholic drinks.

The production sectors

The negative trend of the sugar-beet syrup alcoholic drink market (25.000 hectanhydres for 2009) has been consolidating during the last few years. Residual quantities of sugar-beet syrup are nowadays processed by very few distilleries and come from a small quantity of the domestic processed sugar which resisted, not with many problems, to the drastic reforms carried out by the common market organisations (CMOs). In ten years the production has fallen from 900.000 hectanhydres to reach very small quantities; this proves how the impact of EU reforms can be devastating on the sectors directly linked to farm production. To this respect the data given by the European Commission during the drafting of the EU alcohol balance sheet are significant; this document illustrates the trend of this sector starting from 2004 up to present days and shows how the Italian production share has progressively disappeared while other countries, notably France, considered to be the undisputed leading country in this sector, have benefited from this situation. The Netherlands have more or less kept their production rate constant; Germany has benefited from this and its production, almost negligible three years ago, is now growing.

Cereal alcoholic drinks show a significant growing trend with respect to 2009 production, with a total of 457.000 hectanhydres (265.000 in 2008), thus marking a kind of countertrend with respect to the more or less stable trend of the last few years. This growth is mainly due to the strengthening of the production by an important company based in the North-Western part of Italy, an area where most of the domestic production is concentrated. The studying of EU data shows a general growing trend of this sector at a European level, with the strong leadership of France in this case as well, followed by Spain and Germany, and also thanks to the 27 EU members. The production of fruit alcoholic drinks is much smaller; in Italy it is progressively diminishing (15.000 hectanhydres produced in 2009 and 24.000 in 2008) similarly to the beet-syrup, also because the production of ethyl alcohol starting from this element is disappearing. Coming to fruit spirits, marking a slight growth trend, the situation is different.

Wine alcohol is the main production sector; its share is more than 60% of the whole domestic production. Italy is historically one of the leading European producers together with France and Spain. This leadership is due on one hand to the strong wine propensity of Italy and to the strong link that the distillery sector has with the farming world and on the other hand to the effects of the sharp reduction of the production levels of the other sectors, sugar-beet syrup alcohol in primis, which in the past reached and often was higher than the figures of wine alcohol. As a matter of fact, compared to the recent past, this sector is showing a production decrease, as underlined by the data available for the EU, after that the CMO reform has come into effect. There are strong worries about additional would-be drastic reduction trends, as EU funds for some distillation activities are being cut according to the present regulation from now on till 2012.

Grappa and spirits

2009 was characterized by a slight decrease in the production of grappa which passed from 120.000 hectanhydres in 2008 to 110.000 hectanhydres, because of the reduction in consumption trends caused by the global economic crisis and because of the effects of some demonization campaigns, not shared by everyone, about alcohol consumption. The most significant data relate to sales, more than to production. Data gathered by Nielsen underline a further 4,6% sale decrease compared to 2008. In terms of volumes this means that overall in 2009 about 16.820.000 litres of grappa were sold, equally distributed between the large retailers and the horeca channel, compared to 17.626.000 litres sold in 2008. Data about export figures are not as encouraging as the previous ones. The exports of bottled products were at an all time-low in 2009, about 12.000 hectanhydres, that is a 19,6% decrease compared to last year. Loose grappa shows a negative trend (-16,5%) as well.

As far as the other spirits are concerned Nielsen data for 2009 show a sale decrease for grapes’ spirits, less strong than grappa’s, that is 2,7% compared to 2008. Overall about 850.000 litres of product were sold, mainly by the horeca channel (645.000). The production of grapes’ spirits marks a stronger decrease this year (30%). The figures about the production of the other fruit spirits is following the opposite trend with a +18% growth compared to 2008 despite the fact that they are showing a reduction in the volumes of domestic sales as well (-2,4%), mainly in the large retailers’ channels more than in the horeca ones (Source: Databank). Fruit spirits show a significant increase in the exported volumes, on average +10% including bottled and loose products. This is no doubt an encouraging result, notably if compared with the other product types.

The situation about wine spirits is more complex; volumes produced in 2009 reached record figures, that is 200.000 hectanhydres, but this sector has to face serious market problems, as also proven by data about domestic sales (-4,5%) but notably by export figures. Such a significant increase in volumes can be ascribed to the strong distillation demand by the wine world which the involved sector has tried to satisfy, aware of the importance of its role and of the fact that volumes produced in 2008 have been added to 2009 volumes because of some delay in complying to the regulations about distillation for edible purposes by CMOs, as above mentioned.

Moreover 2009 has been characterized by the worsening of unfair competition by transalpine countries caused by a vast production of wine spirits using vinification by-products. This situation has been caused by the fact that some CMO wine regulations have been twisted, thus generating an unfair practice in terms of EU regulations about production and marketing. The fact that some governments in charge have supported this situation has led to a serious market disruption and caused major problems to our sector which work in fully compliance with the regulations in force. Assodistil has denounced this fraudulent practice, asked for and obtained the precious support of the Italian government to denounce this situation to the European Union.