5% GROWTH

Veneto, Italy 2020 | AGRICULTURE | VIP INTERVIEW

TBY talks to Ettore Nicoletto, CEO of Santa Margherita Gruppo Vinicolo, on innovation, export strategies, and wine tourism in Italy.

What led to Santa Margherita's growth in 2018?

Achieving 5% growth when a global economy is slowing down is a phenomenal result. Our growth is due to a combination of elements: new acquisitions and further expansion into key large markets like the US or Canada, where we have enjoyed another robust year of growth.

What is Santa Margherita's value-added proposition in the wine sector?

Santa Margherita has always been at the forefront of innovation, starting from 1952 when together with a few other wineries we discovered the potential of Glera grapes and hence Prosecco. In the 1960s, we practically invented a new way of making wine by an innovative process that became a new product called Pinot Grigio. Within Santa Margherita, there is a great deal of creativity and inventiveness that constantly helps product development. Particularly in the Veneto region, we are now adding to the value of our portfolio, which is composed of Pinot Grigio, Prosecco Superiore DOCG, and other local varieties. The competitive advantage of a group like ours is that our efficiency, effectiveness, and growth are a result of the portfolio of products that we offer. We have depth and geographical breadth, and we represent the most renowned wine growing regions of Italy. As a group, we work as a one-stop shop: one will have access to the six most important wine growing regions of Italy through a single supplier. This gives us a strong competitive advantage against our peers.

Are you planning any new acquisitions in the short term?

We have our eyes on new opportunities and are keen to explore new ideas. However, we also need to digest what we acquired in 2017. In order for us to integrate new wineries and systems in an efficient way, we need time. First, we have to complete the integration processes of the two new wineries we have, and then we can look elsewhere, not only in Italy, but in other countries, in particular the US, the largest market where we have a branch that markets all our wines.

Could you elaborate on your export strategy?

We are seriously looking at selling through the direct-to-consumer channel in the next few years, particularly in the US. The US market is still the largest market in the world for wine and one of the most lucrative due to its value chain, and we aim to be an even more significant player in that market. This means thinking about the transformation the market has undergone over the past few years. There is growing demand for sought-after wines that are not available from current lists. Consumers are looking for something special and unique. Direct-to-consumer channel is a way to satisfy these needs. We can do it through e-commerce, purchases made at tasting rooms at wineries, and clubs. That is different from our three-tier system in the US. Our strategy is to invest in a winery that will allow us to access the end users, which is something we cannot do as an importer. For us, this would be a way to learn a new method of consumer interaction in a much closer way. It would also help us better understand the market. It's imperative for Santa Margherita, which also has a strong foothold in the US market, to explore new channels.

What does Santa Margherita do in terms of sustainability and innovation?

We like saying we were sustainable before the word even became popular because it has always been a part of our culture. Our main winery runs on biomass, a renewable source. We produce 20MW, supplying energy to the winery and the glass-making factory, positioned 600m from our winery. This makes our winery unique. If you consider semi-vertical integration, on one hand we have a supplier of glass that works on clean energy and is located next to our winery, which saves on carbon emissions. On the other, the wine is processed using green energy. We calculated the carbon footprint of our Pinot Grigio, which is less than 50% the average carbon emissions in the wine industry. 10% of our total production is carbon neutral, and that is mainly what we sell in Canada. As far as our practices in vineyards go, currently 50% of our farming is organic with no chemicals used. Instead, we use natural compounds to help vines endure or prevent diseases. Where chemicals are necessary, since you cannot implement organic farming in all stages, we make a concerted effort to reduce their usage. We also reuse carbon dioxide in winery operations. We have patented a system at our Franciacorta winery that completely reduces the use of sulfur dioxide.

In Italy, wine tourism is worth EUR2.5 billion, and it attracts a total of 14 million tourists per year. Veneto attracts a third of these numbers. What initiatives are you taking in this regard?

We have a great deal to offer as a region. More can and should be done to create some ports of entry where tourists check in and are guided to what is available in a given wine-growing district. Once the tourist arrives, regardless of their disposable income, they should be offered different entertainment options or programs. This is on offer in Napa Valley, for instance, but not across Italy. As far as Santa Margherita is concerned, we are serious about hospitality because a winery experience is a magical way to make consumers fall in love with your wine. We are well equipped in all six regions where we operate with a hospitality team and a national coordinator. Not only do we simply do conventional hospitality through tours, but we also organize many events to attract people from all walks of life so they can understand our philosophy. We believe this is the best way to communicate the brand. A direct experience lasts forever. Hospitality and tourism are important levers for us in communicating the winery and the brand, and we will continue to invest in this with the same determination.

What is your take on the Prosecco Hills gaining UNESCO World Heritage Site status, and how can Santa Margherita benefit from it?

This is an incredible opportunity for the territory. It's an enchanting area with an incredible landscape, and additionally it produces a wonderful wine that has enjoyed incredible success over the past 10 years. These are all the ingredients for an extremely successful story. The difficulty lies in the fact that we have to create a network and a system to collaborate with one another. Consortia will have to work on a plan that requires the help of all the players in the region, which should put away their individualistic approach and work as a system, network, territory, and community. If we can manage this, we could double or triple the economic importance of the area.

What are your plans and expectations for 2020?

I am hopeful we will close another good year in 2019. Everyone feels a sense of precariousness due to trade dispute between China and the US. Even wine can be impacted by it. Then, there is the Brexit issue, which is extremely important since the UK is one of Italy's main wine export markets, particularly for Prosecco. The scenario is uncertain, but I am optimistic, and based on the signals from the markets in which we operate, 2020 could be a year of some growth and consolidation.