Wineries in Italy, Greece, Spain struggle with extreme heat, lower production

This year’s The wine harvest is in full swing on the perennially popular Greek island of Santorini, but for local winemaker Yiannis Paraskevopoulos, the outlook doesn’t look good.

Extreme temperatures threaten the production of the native Assyrtiko grape, crucial to the island’s internationally recognized fine white wines. Last year’s production at Paraskevopoulos’ Gaia Wines was about a third of 2022’s output. This year’s harvest is estimated to fall to a sixth of 2022’s levels.

“We thought we had seen the worst. But no, we hadn’t: 2024 exceeded all expectations,” Paraskevopoulos told CNBC by phone.

According to Gaia Wine’s 2023 estimates, Assyrtiko could face extinction by 2040. Now, that timeline seems optimistic.

“It brings the trend line even closer to the present,” Paraskevopoulos said.

The Assyrtian grape is not alone. Global wine production fell by 10% in 2023 to 237.3 million hectoliters, the lowest level in more than 60 years, as “extreme climatic conditions” weighed on the harvest. according to to the International Organization of Vine and Wine (OIV).

The issues facing wineries have prompted the European Union to last month set up a high-level group on wine policy to discuss “challenges and opportunities for the sector”.

Production in Greece fell by more than a third in 2023, while output from Italy and Spain fell by more than a fifth, according to the OIV, as wineries in southern Europe increasingly experienced adverse weather conditions such as heavy rainfall, drought and early frost.

Such weather events can affect not only the harvest of a given year but also production in subsequent years.

“We are absolutely affected by climate change,” a guide at Castello di Volpaia told CNBC during a recent tour of the 12th-century winery in Tuscany, Italy.

“Climate change is significantly affecting wine production and its quality,” Marco Fizialetti, commercial director at nearby Castello di Querceto, said by email. “This situation has created difficulties for all producers who already had to manage high temperatures in the past.”

Weaker production and tougher production conditions are driving up costs in an already highly price-sensitive consumer market. Wine consumption fell by 2.6% annually in 2023, reaching the lowest level since 1996, as higher production and distribution costs led to higher prices for consumers, according to OIV estimates.

As of August 2024, a kilo of Assyrtiko grapes cost eight ($8.9) to 10 euros, roughly double 2022 prices.

“These are champagne prices,” Paraskevopoulos said, noting that Gaia Wines has yet to reflect the increased cost in the final price of the bottle. However, he said he will have to eventually, and that will hurt business.

“When a bottle is more expensive than a Burgundy, what’s a buyer going to do? We’re going to lose the market we struggled to get into,” he said.

Some wine producers are now changing their production methods to adapt to the changing environmental landscape.

At Antinori nel Chianti Classico, the newest in a collection of estates owned by the Marchesi Antinori, one of Italy’s oldest and greatest winemakers, vines are now planted in new directions to take advantage of increased sun exposure.

“Until a few years ago, you planted your vineyards facing southwest. Now you can plant them northeast because of the extreme heat you’re exposed to” from both directions, President Albiera Antinori told CNBC by phone.

Other techniques used by the estate include raising pergolas to increase air circulation and planting grass between the vines. Adinori said it has helped the estate improve the quality of production in recent years, even though the quantity has declined.

Still, he described the push as “la vittoria di pirro,” or Pyrrhic victory, a feat so costly it’s barely worth winning.

Sergio Fuster, CEO of Spanish wine group Raventós Codorniu, noted that many of the areas in which he has vineyards are in a state of emergency and therefore had to become “increasingly efficient” with water use, for example using buried irrigation systems.

Elsewhere, other winemakers are working in the fields in the height of summer to meet the previous harvests. At Skouras Estate in Nemea, Greece, this year’s harvest began a record 20 days earlier. Winemaker Dimitris Skouras said the reduction in fungal disease has improved grape quality, but he still expects lower yields overall.

“This year has been exceptionally warm. The winter was unusually short and temperatures rose quickly afterwards, with July being the warmest on record. In our vineyards, we are seeing lower production levels than last year, which was already quite low, especially for Agiorgitiko,” he told CNBC via email, referring to the grape variety used in the region’s red wines.

Skouras now plants vines at higher elevations, where temperatures are generally cooler, and locates areas with better water supply to help the vines withstand the heat.

“There are no definitive solutions yet, as we cannot predict the changes that will follow or the extreme weather events that we may face. Our strategy is to adapt to this new reality in viticulture as best we can,” said Skouras, referring to in the study of cultivation. grapes.

Elsewhere, however, the prospects for adjustment are less clear. In Santorini, where grapes are grown in traditional “koulouris”, or baskets, to protect them from the island’s strong winds and strong sunlight, the vines are at risk of being even more exposed to the harsh weather conditions.

“These vines have root systems that go back three, four, five centuries and they’re dying,” said Gaia Wine’s Paraskevopoulos.

Extreme weather is not the only problem plaguing Europe’s vineyards. Increased tourism has also seen investment and manpower displace traditional agricultural work into the hospitality sector.

For so-called agritourism destinations, such as Tuscany’s Castello di Volpaia, which houses a small complex of accommodation on the estate, visitor accommodation can offset the costs associated with weaker production. At Marchesi Antinori, cellar tours and cooking classes are part of the offer.

“We’re lucky to be in a region and a country where we’re not seeing a decline in tourism – quite the opposite,” Antinori said.

But Paraskevopoulos said he fears that places like Santorini, which have ridden the wave of booming tourism, could eventually become victims of their own success.

“Climate change is certainly very worrying, but tourism is also to blame,” he said. “Young Santorinians no longer invest in wineries because they have other ways to make money.”

The changing landscape will now see EU representatives and industry stakeholders gather for wine policy discussions, with their first meeting expected next month. The group is due to meet at least three times this year, before presenting its recommendations in early 2025.

It is hoped that such measures could reduce some of the biggest risks facing the industry, which across the bloc alone employs around 3 million people and contributes is appreciated €130 billion in EU gross domestic product.

“This is the trend line if you don’t intervene,” Paraskevopoulos said of the Assyrtikos extinction forecast. “And that’s the question: are we going to intervene early and succeed?”