September 27, 2011 / 2:23 PM / in 6 years

Italy's Masseto winemakers eye growth in Asia with caution

CASTAGNETO CARDUCCI, Italy (Reuters Life!) - Financial markets may have turned sour but well-heeled consumers, especially in Asia, are still thirsty for renowned top quality wines, such as Italy’s most expensive red Masseto, its makers say.

<p>A worker collects grapes for wine during harvest at a vineyard of the Tenuta dell'Ornellaia estate in the village of Castagneto Carducci in Tuscany September 21, 2011. REUTERS/Tony Gentile</p>

Fine wines with prices starting at triple digits have become brands like top watches or cars, whose high quality and wide brand recognition give consumers some much sought after investment security, Giovanni Geddes, chief executive of the Tenuta dell‘Ornellaia estate which makes Masseto, told Reuters.

“The fine wine market is not that different from the general luxury goods market. Demand for luxury goods, and wines, is growing everywhere, but much more so in the richest markets, such as Asia,” Geddes said in an interview.

Luxury goods makers, including the world’s leader LVMH which owns Moet & Chandon champagne and Hennessy cognac, posted forecast-beating double-digit growth in first half sales and profits while global economic gloom weighed on markets.

Masseto, with retail prices of up to 600 euros ($808) a bottle, is not a household Italian name like Chianti.

But its brand is well known among wine connoisseurs and sales have gone “from strength to strength” so far this year, according to Alex Belson, sales and marketing director at the Tenuta dell‘Ornellaia.

“There seems to be a very steadfast group of collectors, opinion leaders and wine lovers who are not affected by the economic climate. They continue to love this wine,” Belson said, declining to give precise sales figures.

Full-body Masseto, which only gets better as it ages, has a strong investment appeal particularly in turbulent market times.

Masseto was sold at auctions in Italy well above base prices when global economic crisis hit markets in 2008 and 2009 as well as earlier this year amid growing worries about weakening economies and the euro zone debt crisis, according to the firm

World stocks as measured by the MSCI index have lost about 16 percent so far this year.

EYES ON ASIA

Betting on an insatiable appetite of wealthy Chinese consumers for fine wines, Masseto makers plan to increase the share of sales on Asian markets, which now accounts for about a third of total output, in the next few years.

But Masseto’s growth on the huge Chinese market will be cautious because its makers do not want to put all their bottles in one basket and see prices surpass buyers from its traditional markets.

“Traditional consumers in Europe and North America are not ready to pay such prices, even the biggest collectors ... And what if China proves to be a bubble? And in the meantime European or American consumers would have lost habit of fine wines?” Geddes said.

There have been some alarming signs of weaker demand on Masseto’s home market where about 20 percent of its output is sold.

<p>A worker collects grapes for wine during harvest at a vineyard of the Tenuta dell'Ornellaia estate in the village of Castagneto Carducci in Tuscany September 21, 2011.REUTERS/Tony Gentile</p>

In Milan, Italy’s finance and fashion center, sales of Masseto as well as French fine wines held steady recently thanks mostly to Russian, Brazilian and Chinese customers, said shop assistants at the upscale food store Peck in the heart of Milan.

“Italians are not buying (top wines), they look for other high quality wines, not so expensive. Foreigners are ready to pay even 500 euros for a bottle,” said Andrea, who works at Peck’s wine cellar, well stocked with the world’s top wines.

In China, Masseto will face tough competition from elite French wines which have aggressively expanded there well ahead of their Italian rivals. French wines account for about 50 percent of the Chinese wine market in value while Italian wines have a modest 6 percent share, Geddes said.

Masseto’s main traditional export markets are Switzerland, Germany, Britain, the United States and Canada.

VERY SPECIAL CHARACTER

Slideshow (5 Images)

Masseto makers say its strength, which allows it to command the highest prices among Italian wines, lies in its unique character and a limited output of 30,000-32,000 bottles a year.

“It is a very Mediterranean wine. It is full of sun, very opulent, very intense, of a great concentration. But at the same time it is very balanced,” Axel Heinz, Tenuta’s enologist, said.

“It’s a wine which knows to stop before going too far.”

Masseto, a pure Merlot wine, owes its peculiarity to a very specific terrain: the vines grow on a mineral-rich clay soil of marine origin of a single seven-hectare vineyard. It lies on a hill a couple kilometers away from the sea in Tuscany.

The grapes are hand-picked and carefully selected to make wine that ages in oak barriques for two years and then in bottles for a year before it is released for sale.

Masseto makers said they do not plan to increase production despite strong demand because they do not want to compromise the wine’s unique character and high quality.

This year, the output is likely to fall by 15 percent in volumes because of dry weather, but its quality is set to be close to exceptional vintages of 2001, 2004, 2006 and 2008, Geddes said.

“We see 2011 as another remarkable year. It is a year which combines a great substance and a pleasantness which do not often go together,” Heinz said.

Italy’s total wine harvest is likely to fall 10 percent to 4.23 billion liters this year, making Italy the world’s second-biggest wine producer after France, according to joint research by farmers’ research center ISMEA and wine industry body Unione Italiana Vini (UIV).

($1 = 0.742 Euros)

Reporting by Svetlana Kovalyova, editing by Paul Casciato

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