Like wine-growing heartlands everywhere from Bordeaux to Napa Valley, Lombardy’s Oltrepò Pavese region is grappling with two historic challenges: a changing climate and changing tastes. It’s been incredibly rainy in northern Italy this year. Fungi took hold of some vines, and had to be dealt with hastily.

At the same time, great viniculture nations like Italy are having to adapt to the waning popularity of red wine, as younger drinkers opt for trendy craft beers and fizzy whites — or swear off alcohol entirely.

And if that’s not enough to contend with, winemakers face a third misfortune right now that’s been far less explored, one that arguably poses a greater immediate threat: the soaring cost of their debts.

“Like everyone, we’ve felt the rise in interest rates,” says Barbieri, president of Cantina Torrevilla, a cooperative of about 200 producers that makes all sorts of wine from pinot nero to sparkling reds. “They affect final distributions to our shareholders, there’s less to distribute at the end.”

For others, the impact is worse than a shrinking share of profit. Castelli del Grevepesa, a fellow cooperative based in the countryside outside of Florence — the heart of Chianti country — had to file for a formal debt restructuring after years of strain. The double whammy of crippling financial liabilities and Chianti wines’ loss of market share became too much to bear.

Terre Cortesi Moncaro, a co-op that traces its roots back to 1864 and which specializes in Verdicchio whites, sought court protection after two creditors presented bankruptcy petitions. It has suffered the full gamut of corporate woe from soaring interest expenses and operating costs to management turmoil and a mildew outbreak that halved last year’s grape production.

Italy’s winemakers all started as family concerns and they’ve mostly stayed that way, creating an extremely fragmented industry — and producers who often rely on borrowed money to get by.

Combined, their interest costs will rise to €306 million ($333 million) this year from €126 million in 2022, according to estimates from Studio Impresa, a consulting firm. It reckons the hit to revenues from servicing debt will more than double from 0.92% in 2022 to 2.24% in 2024.

Meager Harvest

If the leap in finance costs was happening in isolation, winemakers might have less cause for fear. But climate change and appealing to younger palates, as older fans of heavy reds die off, make the challenge existential for many.

Last year’s super-hot September temperatures led to Italy’s most meager grape harvest in 76 years, and 2024 looks only slightly better. “Sudden temperature swings became the new normal,” says Barbieri at Cantina Torrevilla. “That means more maintenance and fewer grapes.”

Meanwhile, spiraling inflation hasn’t just meant higher central-bank rates. It also leaves drinkers with less cash to splash out on a bottle.

Italy remains the world’s biggest wine exporter by volume (France is bigger by worth), but the value of its sales to the five biggest consumer markets — the US, France, the UK, Germany and Japan — fell 7.3% in 2023, according to Italian Wine Union data. The 2024 picture is mixed so far.

“We’ve had a real slowdown in both internal and export markets, caused by these many headwinds,” says Luca Castagnetti, who heads a study center for the country’s wine industry at Studio Impresa. “It’s a mix of transitory trends and others which will instead last for longer. This has led companies in the sector into financial difficulties and many don’t have the managerial capabilities to overcome these hurdles.”

Even the biggest, most professionalized firms have been affected by more sluggish sales. Italian Wine Brands SpA is one of two listed wine companies in the country. Owner of more than 70 brands and private labels, it wants to focus on sparkling whites and premium “Super Tuscans” and Piemonte wines as pickier younger drinkers “buy better.” It still had to cut its 2024 revenue guidance by 4% because of lower volumes and prices.

One regular casualty of changing taste is the strong red wine that was once the vinicultural cornerstone for Italy and France. Italian exports of reds with the prized DOP label — a signal of locally produced quality — fell 5% in 2023, according to data from the Italian National Institute of Statistics (ISTAT). For the similar IGP label, the drop was 7%.

“The younger generations have a multi-category approach,” says Carlo Flamini of the Italian Wine Union’s monitoring center. “They consume wine more sporadically as they pick their drink based on the occasion.”

Like their counterparts around the world, Italy’s vineyards have been experimenting to try to keep pace with drinker preferences.

“When we started noticing the no-alcohol trend on the rise, we gave it some serious thought,” says Marzia Varvaglione, who runs the family business at Azienda Vini Varvaglione in the southern Puglia region that’s been around since 1921. While its specialty is strong reds like Primitivo di Manduria and Negroamaro, it’s been trying out less boozy alternatives and this year presented its first alcohol-free sparkling wine and spritz.

Unfortunately for producers, diversifying takes time and cash, at a moment when finance has gotten much more expensive.

“For now, this remains collateral business and we’re not piling too much money into it,” Varvaglione adds. “We want to wait for the right time.”

History does at least provide one happy success story for Italian diversification: Prosecco. After the financial crisis, people were tightening belts and that’s when the nation’s producers started pushing for what Flamini calls the “democratization of sparkling wines.”

Pre-2008, the market for “fizz” was polarized, made up largely of luxury products like champagne or cheap stuff of sometimes dubious quality. Italian growers refocused cultivation toward this class of wine and Prosecco — a less expensive alternative to champagne — emerged as a global winner.

Italy’s export of sparkling wines by volume has more than trebled between 2010 and 2023, according to the wine union’s data. Even French buyers have been switching to cheaper Prosecco as inflation bites, with France’s imports of bubbly Italian whites booming 25% last year.

Italian producers proved “resilient, and capable of change,” Flamini says.

Sharing a Bottle

Change to the industry’s structure, in the hunt for efficiency gains, has been slower to come by. About two-thirds of the Italian sector’s net worth is held by individual families, with 16.6% in the hands of cooperatives, according to a study by Area Studi Mediobanca, a research center. Financial institutions account for about 11%, of which 4.1% is private equity firms.

Still, the last few years have seen some consolidation and outside capital coming in. In 2022, Italian private equity firm Clessidra SpA launched a wine company, Argea SpA, to bring together two acquired producers, Botter and Mondodelvino. Clessidra wants to use it as a vehicle for snapping up other vineyards to create a winemaking champion. Last year it took over Abruzzo-based Cantina Zaccagnini.

Overseas investors have started to sniff around, too. Beverly Hills-based Platinum Equity purchased Farnese Vini in 2020, later renamed Fantini Wines. The group also has roots in Abruzzo but now owns 18 vineyards.

“In this era of big changes from the consumer point of view and difficulties associated with the actual harvest, size, consolidation and diversification help a player to react better,” says Massimo Romani, chief executive officer of Argea.

Cooperatives, meanwhile — whose members typically have less deep pockets — are having to look for support. Legacoop Sicilia, an association representing the island’s collectives, is pitching the local government to offer public guarantees to winemakers looking for financing to make investments or seeking to restructure their debt and defer repayments.

If the proposal’s taken up, the best-run co-ops “will be able to increase their share capital, improve access to credit and invest to improve the production and commercialization of their products,” says Filippo Parrino, Legacoop Sicilia’s president. “The others will have to reckon with their limitations.”

And should all else fail, Italy’s enduring appeal to international vacationers will pick up some slack. Italian winemakers with more than €20 million of annual sales have lifted their revenue from tourist visits and tasting sessions by 15% year-on-year, according to Area Studi Mediobanca’s report.

Cantina Torrevilla’s Oltrepò Pavese base is home to a distinctive old wine tower — a now-defunct way of producing — and the site regularly plays host to kids stamping grapes as well as more genteel adult tasting sessions. Barbieri’s collective is thinking about turning the tower into a museum, and maybe adding a restaurant, a path trodden by others.

Varvaglione’s Puglia wineries have started offering a horseback riding tour through the vineyards, followed by a picnic and a glass.

“We’ve experienced an increase in visits to our cellars, even from foreigners,” she concludes. “You can live on wine tourism.”