Some people talk of de-globalization

Author: Marco Negro

Two years of pandemic and a war in Europe have challenged many economic theories. Are we really at the end of the globalisation era? After the anxieties, what are the new opportunities for quality Italian food and wine products?

In our market analysis, we have followed Italian food and wine excellence studying, from time to time, its difficulties in establishing itself in the Chinese market, the anxieties generated by the bulletins announcing new US duties and the unknowns linked to the UK’s exit from the European common market. More recently, we analyzed the effect of the pandemic on the distribution of Italian wine. Today, a war in Europe and the senseless increase in the price of materials are again causing Italian operators to worry.

Globalization in 2022

More than twenty years ago, European wine producers imagined a distribution Eldorado in the so-called BRIC countries (Brazil, Russia, India and China), betting somewhat innocently on the enormous population of these four countries with their growing economies. The opportunities were indeed many, especially for those agri-food products that are recognized as status symbols in the world. However, the chances of success in those countries were overestimated. Some of those national economies have had uneven performances. Only in Russia it can be said that awareness of our food and wine excellence has managed to go beyond the most classic stereotypes. At the moment, exports continue with regularity. Institutional support for promotion in countries with emerging economies, instead of being based on effective communication by territorial networks, continues to be dispersed in parochial initiatives.

Road signs with 'global' and 'local' with different directions

Globalization implies that flows occur in both directions. While ‘we’ were deluding ourselves with the motto ‘if one Chinese person bought a bottle of wine’ … some powerful countries were bolstering their sales figures of goods and raw materials to Europe. China was establishing itself as the largest factory in the world, capable of producing all kinds of manufactured goods. Russia became our largest supplier of energy, fertilizers, certain metals and some food commodities. India became the largest supplier of outsourced tertiary services. On the other side of the globe, Brazil, by joining Mercosur, was limiting the expansion of its trade basin to the American continent.

Within a few years, European economies found themselves dependent on the markets they thought they were saturating with their own excellence. The pandemic and the military operation in Europe have only amplified the paradox: in order to continue producing our excellence (from wines and cheeses to canned food, pasta and baked goods) we are dependent on fossil fuels and packaging materials produced in the countries to which we only imagined we were exporting. Why mention the pandemic? Beyond any prediction, the shutdown periods were driving up demand for products bought in the large-scale retail trade. Demand for glass (bottles and jars), tetrapack, food paper and packaging board literally exploded. The production and packaging chains complained about the first significant increases from suppliers as early as summer 2021. The costs for energy supplies were already starting to rise last autumn, far from the mere idea of the current war. Speculations by fuel storage and distribution groups have defined the current inflation picture.

The lockdown of the port of Shanghai in May 2022 (700 container ships stopped at the dock) and the blockade of the Black Sea ports reminded us once again that, in the system of interdependent economies, with each event, we see global repercussions that throw entire sectors into chaos. Some are beginning to talk of de-globalization. As if to say that we have realized that the global free trade system ends up, sooner or later, heavily penalizing someone. It is difficult to indicate a balance point. Without going so far as to close ourselves within national borders, some external dependencies must certainly be reduced.

The Manufacturers’ Response

Italian companies, victims of bad information and led by an unprepared ruling class, have only two possible options. The first is to continue following the news and talk-shows, supplementing them with late and inaccurate insights from trade associations. The effects are constant anxiety and the annihilation of initiatives. A situation similar to trying to weather a storm at sea, without even attempting any manoeuvre.

Toys in the shape of an oil well, tank and bomb

The other possible answer is the search for a fixed point, a stable figure. What is clearly needed is the ability to clearly identify one’s reference customers (the so-called target) and to do something concrete to diversify one’s distribution channels as much as possible, not concentrating on sales in just one region, on exports to just a few countries, or on presence in just one channel. In short, avoiding those situations of external dependence, which is so dangerous in these scenarios of economic disorder. Some wine producers and artisans of taste are using this period of uncertainty to take a courageous leap and reposition themselves. Raising their positioning, and consequently their margins, requires entrepreneurial courage and a clear vision, as well as investment. It is an alternative answer that is within the reach of Italian companies in the wine, food and tourism sector, which are predominantly family-run and therefore endowed with extraordinary flexibility and adaptability.

While individual companies can do little to reduce dependence on the outside world for energy and raw materials, it is precisely in their courage and vision that new opportunities for growth can be seized. In this sense, some wineries and several restaurateurs have been pioneers. The genuine expression of terroir and the narrative of the territory have enabled many winemakers to establish themselves in the world’s most prestigious wine shops. Having a clear understanding of the quality level of selected raw materials has allowed restaurateurs to reposition themselves, improving ingredients, menus, and service. In the same way, some artisan producers of gastronomic specialties have courageously proposed themselves to organized distribution and are now present on European shelves.

Some stacks of coins with shopping trolleys on them

GD-DO, in fact, is reinventing itself and becoming ‘human-sized’ again. It is a phenomenon that started in Germany. Yes, the nation that thirty years ago invented the concept of ‘hard discounters’ and imposed the massification of food production, has for some years now been reintroducing neighborhood markets of 600 sqm in residential areas. In these neighborhood markets, the ‘fresh’ counter with cold meats and cheeses is back; there is now room on the shelves for imported quality food specialties. The fact that Edeka and Lidl are offering this kind of approach in Germany indicates that there are families and singles in Europe who are willing to spend a little more on quality wines and delicatessen products. An example of an opportunity close to home, more sheltered from international unrest, not yet fully explored by our producer friends. There are other new opportunities to be seized. For example, the latest versions of so-called ‘fresh chains‘. These are refrigerated logistics structures, from warehouses to delivery vans, which are able to handle nationwide deliveries of cold meats and cheeses, fresh meat, pre-cooked preparations of fine meats or smoked fish fillets, all of course vacuum-packed.

04th May 2022,

Marco Negro

Picture of Marco Negro
Marco Negro
Expert of communication of Italian wine. He has a knack for connecting people.
Picture of Marco Negro
Marco Negro
Expert of communication of Italian wine. He has a knack for connecting people.

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