Ep. 79 Monty Waldin interviews Enrico Zanoni (CAVIT) | Italian Wine Coops

Italian wine podcast. Chinching with Italian wine people. This podcast has been recorded during Vivite an event organized by the the alliance of Italian Corps. Hello. This is the Italian wine podcast with me Monty Walden. My guest today is in Rico Zanoni. Is that okay? It's from Cabot, which is short for or stands for Cantina, VITico Tori Delrentino. Correct. So what is Cabot? Is it a cooperative, a group corporatives? Yeah. We are what we call a cooperative of second level, which basically means we are an aggregation of different cooperatives, particularly ten cooperatives, basically basically based in Trentino, their cooperatives cover almost seventy percent of the total Tarantino production. And, that's huge. Yeah, they supply to us almost eighty percent of their production. So we have a strong relation with the territory, a strong social responsibility. Because as I say, seventy sixty percent of the total production, great production in the region, basically is, let me say sold in brackets through our organization. I mean, how much responsibility do you feel that you have for the local economy? Yeah. We have a a huge responsibility. Is Cabot just wine, or do you do it fruit and other products as well? No. You're just wine. We are just wine. We have, indirect it through our cooperative sisters as unregulated. We had the grapes coming from four thousand five hundred wine growers. So an important part of the income of the region is, made by our our results. Yeah. So we have an organization, which is started in fifties. At the beginning, we have the main purpose of technical assistance to the single going over. Then, fifty seven, we had the the sales service responsibilities. In the seventies, let me say the commercial part, became more and more important. Somehow in some extended, and maybe say the tech ecular system was relatively, reduced. So you said the seventies, things were shaped. Was that a move to more bottled wine rather than say bulk wine? No. We started moving, bottle wine. We were one of the pioneer, exporting and the late seventies. Exporting to US, mainly pinot grigio, which is our main variety. And we started in seventeen ninety eight as the export to US. Now we are the number one Italian brand in, in U. S. Market, focus in, not just in pinot region, mainly pinot region, and also other varieties like pinot noir riesling, muscato, chardonnay. So what is your main pinot grigio brand? We have Covid collection, which is main And we have Botega Vinai, which is our, our premium brand. So we we propose different appelation. We have, as a premium product, the appelation DOC Trantino, so you may the population of the region, then we have another, price level with the adjusted or muted or might. And then we have what was before IGT, the eleven eighth, and now it's DOC eleven eighth. So we a segmentation in Pinoverito starting from the peak in quality and pricing, which is ERC twenty, you know, feel that the more affordable premium product, we've, with the DOC delaware and we have, specific brands for a single, price segment. I mean, Peana Grigio is a little bit like prossecco in the sense that everybody's heard of it. How difficult is it to get people to trade up to not just always buy the cheapest pinot grigio that they they see on a on a rest in a restaurant list, on a on a shelf in a supermarket. Yeah. I would say there are some differences between pinot region and prosaicinor, pinot regio has a longer history on the market. As I said before, he started messaging early seventies, and it boom in early nineties. So it's in a more, I wouldn't say mature phase, but it's definitely a more, solid business. It's the number forty five title in US market. It's one of the first in UK. So it's in a different stage of aero evolution where you have more opportunity for segmentation. And, there is room for different premium branded products. Our brand is recognized as a one of historical, with a solid reputation made in the in the years. Thanks to the fact that we never so we always, being reliable and, we how do you maintain that how do you maintain that reputation in terms of what are you doing viticulture in the vineyards to make sure that you keep the edge? How difficult is it to convince the growers? Listen, we want a few less kilos from you, but higher quality. How does that message go down? Yeah. No. We hardly work, with the support with your wine growers. We have a team of, fifteen agronomists. We have a very sophisticated tools in terms of, we have a platform, a digital platform with all the information about It's single, a small piece of land of our wine growers. So we combine a lot of information in this platform, like, kind of soil, average temperature, solar radiation, that give us the opportunity to really give to divine growers precise indication to have what is called, precise opportunity to have a very good segmentation of what is supplied to the sellers, and we have a perfect traceability from each single small piece of vinyl to what's is in the bottle. We have also all the kind of different certification like VRC, but now, from his ear, we will start with this, certification made by Italian It's a And the BRC you mentioned is that's the British Retail consortium, Saudi agency. Now all the data that you've got at this precision Viticulture, are you being able to map changes in in the climate as well with that? So what's going on? Yeah. In fact, if we make a long term analysis, we have for sure an increase of average temperature, which is bringing different approach. We are, thanks to god, mostly of each quarter of mountain. So we are in a good position to face the challenge of the of the temperature increase, the global warming, but it is changing the, also, the way to to work in in the liner and to to have a different approach in terms of, defense for, for, pesticides. Exactly. So what do you what do I mean, what changes are you seeing? What are the growers doing to combat climate change? Yeah. The first very simple impact is the fact that there the RV is is getting more and more anticipated. So Oh, yeah. Yeah. Yeah. Also, the trace of the maturity and the way to price the wine broker is changing because it's based on different parameter that he used to do to be in the past in order to have the grapes coming in in the winery with the right condition to obtain the wine that you would like to have in terms of characteristic objectives. So in the old days, they say be paid on sugar content potential alcohol. Are you switching that now to to, like, pH and Tinto acidity? Exactly. So how can they bring grapes into your winery that that has that, the required acidity level given the acid of a city gets burnt off, the hotter it gets. What are they doing in the video? Are they changing their pruning, trellising, leaf cover? Yes. The assistance that we need to them is based on this, objective, like teaching how to prune in a more clear in the way with the the evolution of the situation, and also the our team of, grown on this. They trace the evolution of the age and the grapes. And so we give size indication, what, when is time to our list? What what happens if they don't listen? If you come to my vineyard and and you say, look, Monte is getting hotter, can you leave a few more leaves during the spring season? Can you prune a different way? And I don't listen to you. But my numbers are still good. Do you still pay me for my grapes, or do you say, look, you didn't follow the protocol, even though your grapes are good, we're not gonna bet you. How does that work? No. What we can do is to advise them. We we cannot force, in any case. So usually, we prove in the last years, then the advice was right. And so we we gained, trust and, confidence. But they can also not follow some indication then it's up to them, and they will be awarded or not awarded according to the quality of graves that they will bring to the suburb. So do they see you as like the wise grandfather? The old old chap looking over at what do they see you? Do they see you? Is it an interfering so and so? Right. Good question. I would say in a lot of cases, the study that we made in the last, when you say five years, they significantly prove what the experience of the grandfather and the father of the grandfather they had in in in the last thirty years. In other case, we were able to add to the experience because if you take the our wine growers, usually, they own the the land since, five generations. So there is now no no exchange of weather in terms of transaction, economic transaction. So our tools, our indication, they add to the experience. They didn't substitute the experience. And I think it's a very good combination. I I tend to say that our model is a caveat It's a very peculiar business model, I see. Everybody claimed to be peculiar, but I think we are really peculiar because we combine then you said the artisanal touch of the small wine grower. Keep in mind that our wine grower, they have one one actor of ownership, so very small land. So they can really take care in a very artisanal way. While we have also very good state of the art in technology, in our and we seller takes to the size that we reached in the last year. We are in the in the ranking of the of the sellers in Italy. We are number three. Number number three, number five. So we are In terms of sales, in terms of size, to know. Deal growers also have, like, through trees like apples and other crop mists, they just focus on grapes. Focus just on. Is that because it pays more money? Because Pina Greegreejay is worth all the time. The original mission was there, and we stick to the original mission. So it's Carvedita, as Vitas as in why not car bomb as in an apple. So that, okay. Now in terms of, global markets, what what are global trends? And we tend to think that we're drinking better quality, but maybe a little bit less wine. This emerging market, obviously in Asia, America's got a very strong wine market now. Where where are the future opportunities gonna come from, either in terms of your styling or the way that you you you brand? Firstly, we export eighty percent of our turnover of our production. First, market is US. Second market is Italy, so we cannot forget our domestic market. Third market is UK, then Germany, Canada, then we have, Mexico, Russia. So our approach, we thanks to our size ten to the fact that we cover an important piece of, vinyl. We can have a very segmented offer. So we we can offer the very premium specific product coming from the region with the typical characteristic of local upgrades. While we we can have also why they try to match the consumer the local consumer expectation. So we have some products that are just dedicated to the US and Canadian markets. Some other products, they are dedicated to the Chinese market. So, Who are the toughest negotiators? Yeah. Good question. I will tend to say Chinese. Really? So, I mean, when then when you're negotiating with the with the Chinese client, is it about the price? Is it about the packaging, the product? What are the key key things that you're having to deal with? It's a mix of different stuff. So It's a difference in this is also a culture approach that you have to respect and to understand. It's a good way of doing business. Yeah. We have to do business. And, also, the distribution in China is very complex because you have a lot of passages to reach the final consumer. So it's Does that make dining wines hard? If it's if there's a this big sort of gap between you and and the person that's drinking the wine, maybe in America, it's it's easier to that you know that when you sell something, it's gonna end up with a certain type of demographic drink the wineries in China, maybe. That's correct. That's correct. So we we have less information about demographics or about expectation, about consumer trust us. So it's more difficult. And in addition, if you take the current situation or Chinese market, it is eighty five percent red wines. Why, I don't know if it will remain in that way for the coming years because it was, you know, we said, somehow, we should cycle because everybody say Chinese they drink just red wines and so we offer just red wine. And that kind of style of red wine, white is is like the agender chicken. So I don't know how we'll evolve the market, but I tend to believe that the will move to, more, more complex markets. So the white grapes, they will decrease. Sparkling wine will decrease in the, in the Chinese market too. What about with monopolies, like the Canadian monopoly and the Scandinavian monopolies who are huge buyers. And they have do I mean, I I'm into organics, as you may know. They do seem to be into organics and encouraging sort of organic products. How do your growers feel about that? Do they think it's a waste of time too expensive, impossible to do, or worth considering. No. There is a trend in direction of the organic. As a matter of fact, if we take the percentage of how much it's accounted to market is still quite low. If you take percentage of growth, they are very high, but the base the starting base is still quite low. So it's a trend. It's a trend that you cannot ignore. We consider the trend. As a region, we are focused on a very sustainable agriculture. Right now, the biological is a choice of the wine rollers. We have in the organic product range. We are studying some. Would that be a Peter Greek would it be a Teroldigo? Would it be like a chardonnay? About a peanut burrito for some markets, and we we have some market tests right now. In terms of cost, how much more would it take you the cooperative to to put a bottle on the shelf? So many extra costs will be the vineyard because the bottle is gonna cost the same. What I can say right now, it's a matter of, evaluation that we are doing right now. Farfetch is not ready to pay what is the real extra cost of the production. She wants an extra ten percent cost one of it's one of the challenges because if you did what really recently happened in the US, after the Amazon bought, real food retail chain, they they reduced the price of the organic products, and then they put pressure on on the cost of organic wine. So that's, consumer tend to expect to have a, an organic product on the same price of conventional wine. So it's one of the challenges. Yeah. No. That is tough. Yeah. Yeah. Yeah. They got a huge, obviously, huge power. Obviously, you work for one of the largest cooperative groups in the world effectively for wine, for high quality wine. How do you see the future of cooperatives. And cooperative is an idea of people putting together, people working together, people sharing, whereas our culture is now about the ego, me, I, the individual. How are you gonna how are you gonna re act or cope with that with that situation. Yeah. Firstly, I think that cooperative model and the wine is winning models because several reason, because to master the production is key and this it will be even working in the future and is the key strategic factor of cooperatives without having too much invested capital because the land belongs to the wine grover. So you can have a very good control with the production To spend money on a huge wide range and a possible time. I think that that is the starting point crucial for the future. But in the meantime, we have to add more competencies in commercial aspect, walking production aspect. And I think as a caveat, we are a good example of some action that must be involved in the future. I tend to say that we are a sure of example, of network of companies or chain of companies because I think that, one of the issues that the copartic unit at least they have to face in the coming years is the size because they tend to have a small size, which is, not a positive aspect to compete in the global market. So I think in here, aggregation of cooperative respecting the original natural rich single corporates has to be, to say push in the future because it would be a good way to combine the spirit. The original spirit of comedy with more economic advantages, economy of scale, but aren't we seeing that though in the Italian cooperative sector where we've seen cooperative groups, individual coopters joining together, pooling their resources in terms of marketing and distribution channels, rather than having five export managers maybe have one export manager and an assistant, which obviously is gonna save save money and it's not just a a matter of save money, but it's also better to have the best companies possibly and more volume for the more volume to have a a more huge portfolio. I've had more gaining power to more service. But wouldn't they then say to you that that's fine. The idea is great, but then when we as a group run up against Amazon that now own toll foods in the USA, they know that they can beat us down on on price because they know that we've got the volume Yeah. That that's the where is the limit? The cash flow too, isn't it? Exactly. So I think that is another element because the the power of the trade is huge. And also the fact that in the wine industry, the the weight of the brand equity is relatively low. So that tends to push the producer like we are to have very low margin. At the end, as the point of equilibrium is really to maintain to the wine growers, the right income, to look at the future and to keep the vinyl in some case, to push, if you look at the income per sector in some areas, doesn't allow to look at the future and to keep the production and call the implication because means to keep the territory in a good, in a good shape with, the controls of all the elements, related to to a territory. Let me say something that in the future is one of the other challenge. So to find in the value chain, a better way of the different, reward on the single piece of the chain. Yeah. No, sir. I mean, the thing with wine we always use it on making widgets, making, like Coca Cola cans, for example. You have a machine and it will work twenty four hours a day. It's always predictable. Whereas in wine growing, the weather ultimately. Right. So you've got always got a flexible fixed cost. It's a fixed cost, but you got flexible cost in terms of how many grapes you're gonna get, how much juice they're gonna give you, and how much wine you can buy. Okay. Fascinating talking to you. I just wanna say thanks very much to Enrico Zanoni, who is the director. General manager at Cabit, which is probably Italy's most important cooperative group. Can I say that? Is that accurate? One of? Okay. One of. We've seen some okay. Fantastic talking to you, covered a lot of ground, and, hope to come up and see you in Trentino sometime. Yes. Of course. You are always welcome to visit us. That's right, Kyle. Thank you. This episode has been brought to you by the Italy twenty eighteen, taking place in verona from April fifteenth to eighteenth. 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