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

This yr The grape harvest is in full swing on the ever-popular Greek island of Santorini, however the outlook shouldn’t be looking good for local winemaker Yiannis Paraskevopoulos.

Extreme temperatures are threatening production of the indigenous Assyrtiko grape, which is crucial to the island's internationally acclaimed advantageous white wines. Last yr's production at Paraskevopoulos' Gaia Wines was a couple of third of 2022's output. This yr's harvest is estimated to fall to a sixth of 2022's volume.

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

According to Gaia Wine's 2023 estimates, Assyrtiko could develop into extinct by 2040. This timeline seems optimistic.

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

The Assyrtiko grape shouldn’t be alone. Global wine production fell 10% to 237.3 million hectoliters in 2023, the bottom in over 60 years, as “extreme climatic conditions” weighed on harvests. after on the International Organization of Vine and Wine (OIV).

The problems of the wineries prompted the European Union to last month to establish a high-level group on wine policy to debate the “challenges and opportunities for the sector”.

According to the OIV, production in Greece collapsed by greater than a 3rd in 2023, while production in Italy and Spain fell by greater than a fifth as wineries in southern Europe increasingly suffered from antagonistic weather conditions reminiscent of heavy rains, drought and early frosts.

Such weather events can affect not only the harvest of a selected yr, but in addition production in subsequent years.

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

“Climate change is having a significant impact on wine production and quality,” Marco Fizialetti, business director of the nearby Castello di Querceto, said by email. “This situation has caused difficulties for all producers who have already struggled with high temperatures in the past.”

Weaker production and harder production conditions are driving up costs in an already highly price-sensitive consumer market. Wine consumption fell by 2.6% annually in 2023, reaching its lowest level since 1996. This is as a result of higher production and distribution costs, which led to higher prices for consumers, OIV estimates show.

As of August 2024, a kilogram of Assyrtiko grapes will cost eight (8.9) to 10 euros, about double the value in 2022.

“These are champagne prices,” Paraskevopoulos said, noting that Gaia Wines has not yet factored the increased costs into the ultimate bottle price. But he said the corporate could have to achieve this in some unspecified time in the future, and that can hurt business.

“What is a buyer to do when a bottle is more expensive than a Burgundy? We are losing a market in which we have struggled so much,” he said.

Some winemakers are currently changing their production methods to adapt to changing environmental conditions.

At Antinori nel Chianti Classico, the latest of a gaggle of estates owned by Marchesi Antinori, one in every of Italy's oldest and largest wineries, the vines at the moment are being planted in recent directions to benefit from increased sunlight.

“Until a few years ago, the vineyards were planted facing southwest. Now you can face northeast, as you are exposed to extreme heat from both directions. President Albiera Antinori explained this to CNBC by telephone.

Other techniques the winery uses include installing trellises to improve air circulation and planting grass between the vines. Antinori said this has helped the winery improve production quality in recent years, even though quantity has declined.

However, she described this upswing as “la vittoria di pirro” or Pyrrhic victory, an achievement that exacts such a high price that it is hardly worth achieving.

Sergio Fuster, CEO of the Spanish wine group Raventós Codorniu, pointed out that many regions where he owns vineyards are in a state of emergency and that they therefore have to use water “increasingly efficiently”, for example by using underground irrigation systems.

Other growers work their fields in mid-summer to respond to earlier harvests. At Domaine Skouras in Nemea, Greece, this year's harvest began a record 20 days early. Winemaker Dimitris Skouras said a decline in fungal diseases had improved the quality of the grapes, but he expects lower yields overall.

“This yr has been exceptionally hot. The winter was unusually short and temperatures rose quickly afterward, with July being the most well liked on record. In our vineyards, we’re seeing lower production volumes than last yr, which was already quite low, especially for Agiorgitiko,” he told CNBC by email, referring to the grape variety used for the region's red wines.

Skouras is now planting vineyards at higher altitudes, where temperatures are generally lower, and he is looking for areas with better water supplies so the vines can better withstand the heat.

“There are not any definitive solutions yet, as we cannot predict the approaching changes or the weather extremes which will come our way. Our strategy is to adapt as best as possible to this recent reality in viticulture,” said Skouras, referring to the study on viticulture.

Elsewhere, however, hopes for adaptation are less high. On Santorini, for example, where grapes are grown in traditional “koulouras”, or baskets, to protect them from the island's strong winds and intense sunlight, the vines are at risk of being even more exposed to the harsh weather conditions.

“These vines have root systems that are three, four, five centuries old, and they are dying,” said Paraskevopoulos of Gaia Wine.

Extreme weather conditions are not the only problem plaguing Europe's vineyards. Increasing tourism has also led to investments and labour shifting from traditional agriculture to the hospitality sector.

For so-called agrotourism destinations such as the Castello di Volpaia in Tuscany, which has a small accommodation complex on the estate, guests' overnight stays can offset the costs of weaker production. At Marchesi Antinori, cellar tours and cooking classes are part of the offer.

“We are fortunate to live in a region and a country where we are not experiencing a decline in tourism – quite the opposite,” said Antinori.

However, Paraskevopoulos expressed concern that places like Santorini, which have ridden the wave of increasing tourism, could ultimately become victims of their own success.

“Climate change is actually very worrying, but tourism can also be in charge,” he said. “Young Santorini residents are not any longer investing in wineries because they produce other ways to earn a living.”

Given the changed situation, EU representatives and industry representatives will now meet to discuss wine policy. The first meeting is planned for next month. The group is expected 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 to the industry, which employs around 3 million people across the bloc alone and accounts for appreciated 130 billion euros to the EU’s gross domestic product.

“That's the trend line should you don't intervene,” Paraskevopoulos said of the Assyrtiko extinction forecast. “And here the query is: will we intervene in time and can we succeed?”