For Italian Winemakers, It's a Very Good Year

They're modernizing fast-and grabbing more of global sales

The Sicilian field hands at Fazio Wines balked when the vineyard's owners asked them to snip off one-fifth of their grapes a month before harvest. Brothers Vincenzo and Girolamo Fazio knew that pruning would intensify the flavor of the remaining grapes and help transform the family's table wine into prizeworthy vintages. But to their workers, it seemed like a waste of good fruit. "They thought we were completely crazy," recalls marketing director Lilly Ferro Fazio. So in the early 1990s, the Fazios grabbed clippers and headed into the fields, hoping to win over skeptics. They did--and now their winery, with $2 million in annual sales, is enjoying international acclaim.

Fazio is but one of 16,000 small, family-owned Italian wineries stretching from Turin to Trapani that are helping themselves to a bigger share of the $150 billion global wine market and wresting dominance from the once-invincible French. The Italians' strength is especially clear in the huge American market, where wine consumption is growing faster than anywhere else. U.S. sales of pinot grigio have doubled in three years, to six million cases, challenging the primacy of chardonnay. In the 12 months ended June 30, the value of Italian table-wine exports to the U.S. jumped 21%, to $621 million, surpassing France for the first time.

That's certainly a milestone worth toasting for Italy's $9 billion wine industry, which has traditionally emphasized quantity at the expense of quality. Italian winemakers are finally reaping the benefits of years of investment, gaining global market share at every price level. Even Italy's southern regions, once known for their unremarkable, cheap wines, have spruced up their offerings. The elegant chardonnay and sirah from L'Azienda Agricola Spadafora in Sicily will soon grace the wine list at Alain Ducasse's eponymous restaurant in New York, selling for $66 a bottle. "Italians have spent the last decade reinventing themselves as makers of modern, sophisticated, new-style wines," says Rich Cartiere, publisher of Calistoga (Calif.)-based Wine Market Report. "We are at the leading edge of a big [export] wave that will hit worldwide markets."

Leading the charge is the next generation of Italian wine growers. They are adopting new cultivation techniques, blending local grapes with better-known varietals, and tapping the expertise of leading enologists worldwide. "[Italy's] image in the 1970s in Bordeaux was 'last in the class,"' recalls Marco Pallanti, partner and winemaker at award-winning Chianti maker Castello di Ama, who made several pilgrimages to France during the 1980s to study with French masters.

Wielding Bordeaux's vaunted techniques, Pallanti replanted 50,000 vines and invested in new equipment, such as stainless-steel, temperature-controlled fermentation tanks and French oak barrels for aging. Now, Castello di Ama, with $3.5 million in annual sales and located near Radda, exports 40% of its annual 300,000-bottle output. Pallanti's full-bodied Chiantis and merlots retail for up to $150 a bottle in the U.S.

Not even nature can shorten this winning streak. Poor weather, including hailstorms, will reduce the 2002 vintage by about 20%, crimping production of some superpremium wines and forcing prices higher. But Italian wines should continue to make inroads into foreign markets, particularly the U.S., where distributors and restaurants are enthusiastic about their value compared with increasingly expensive California wines. "They have four or five excellent vintages behind them and plenty more in the pipeline," says Cartiere.

Sensing opportunity, deep-pocketed U.S. producers are muscling in on the Italian wine landscape. Both Robert Mondavi Corp. (MOND ) and Kendall-Jackson Wines Estates Ltd. have acquired vineyards in Tuscany. But don't expect the Italians to yield easily. The new generation of winemakers has only just begun savoring its success--and it is aiming higher. "France started making wine 200 years ago and arrived at the top. But I don't believe France is the best place for making wine," says Alessio Planeta, who has boosted exports from his family's Sicilian winery to 50% of output. A growing number of wine lovers are tipping their glasses in agreement.

By Gail Edmondson in Erice, Italy

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