The low price of wine in Italy was one observation I made while spending the winter holidays on the peninsula. This was most apparent at the local grocery stores. The price for a decent bottle of wine ranged from just a few dollars to approximately twenty dollars at the higher end. This is very different from my visits to the grocery store in California, where the lower end of a comparable bottle (DOC or DOCG designation) of wine starts at twenty dollars.
Why is wine in Italy so much less expensive than wine in the United States? In consultation with Tanya Morning Star, global wine educator and founder of Cellar Muse Wine School, here are some of the reasons wines are cheaper in Italy than in America:
1. No 3-Tier System
The most significant difference is that European wines are not regulated by a three-tier system as is the case in the United States. The system was developed after the repeal of Prohibition in 1933 to regulate the manufacturing and distribution of alcohol and manage its consumption. To prevent sole ownership by producers or retailers, wine is required to be distributed through wholesalers. The overhead and payroll costs of storage, transportation, and marketing of wine at this second level of the system add to massive markups to the final cost of an American bottle of wine. Another holdover from Prohibition is that alcohol is also highly taxed, often referred to as a “sin tax.”
2. Less Need for Investment
Most vineyards and wineries in Italy have been owned by the same family for decades and in some cases for centuries. There certainly are vineyards and wineries in the United States owned by the same family for generations, but many American owners are more recent proprietors. Tanya points out that they’ve paid a high price for premium grape-growing land and made substantial investments in the winery itself. These investments include equipment for harvesting and processing grapes, producing and bottling wine, as well as funds for building and operating tasting rooms. The need to recover from these investments is carried over to the wine consumer.
3. Fewer Marketing Costs
In Italy wine is not considered a luxury item, as it is in the United States. The practice of including wine with meals is tied to Italian culture, tradition, and history. Since wine is more of a commodity in the United States, a significant amount of a winery’s budget is spent on marketing, which gets passed down to the consumer. This includes advertising strategies, marketing campaigns, and wine competitions. Tanya Morning Star also points out that Consorzios, or Italian wine boards, act on behalf of the appellations and individual wineries to raise brand recognition and provide collective marketing.
4. More Government Subsidies
In Italy, the grape growing business is heavily subsidized by the government, keeping prices low similar to the extent corn and wheat are in the United States. Enzo Barbi, owner of Decugnano dei Barbi in the Italian Orvieto DOC appellation, says “In general, the government sees the agricultural business as important to safeguard the countryside. Agriculture in most parts of Italy does not have good margins, so they give subsidies to make sure that people will still farm.” The Italian Consorzio is also subsidized by the European Union, especially for the export market. As the largest wine producer in the world and the second largest exporter, this has an impact on the cost of Italian wine (Wine Production Outlook, OIV, 2022)
5. Abundance of Regional Wines
Italy is unique from other European countries in that quality wine is produced in almost every part of the country. There are 20 uniquely designated wine regions in each of the 20 administrative regions of Italy, producing 350 official wine grape varieties (Vine Varieties Database, OIV 2022). As part of the culture, wine is consumed at many meals. In support of the local trade and the quality wines in every region, Italians tend to sell and consume wine that is sourced within a few miles of where it is grown and produced. This practice reduces the cost of transportation and distribution.
Tanya summarizes the reasons as American wineries have made significant investments in land and facilities, and the pressure to be successful and profitable is critical. In addition, Italian wineries are much more part of the social, cultural, and agricultural ways of life, and therefore valued differently. Government agricultural subsidies and tax structures play a large role in making it less expensive to run a functioning winery in Italy than in the United States.
