So ESG finance cultivates the value of wine companies

We Wealth
Fabrizio Guidoni
Read Time: 3'
Creating fine bottles in Italy that are sustainable-even on the economic front-often requires the support of virtuous finance that produces targeted solutions. As in the case of minibonds specialized in the wine sector. Here's what they are and how domestic first issues work
ESG financing, i.e., credit and debt solutions that are aimed at supporting sustainability projects or achieving virtuous targets for a company, is now an increasingly popular tool even in some sectors related to pleasure assets, above all the prestigious wine company sector. Aiding their development is the presence of multiple specialized financial players. Along with the banking channel, which sees large institutions such as Credit Agricole, Intesa Sanpaolo, and Unicredit supporting the excellence but also all the leading companies of one of the successful sectors of Made in Italy in the world, the world of private investment is also proving to be an active player in financing the world of wine and in particular of Italian fine wine, where minibonds stand out as a solution. Valuable financing solutions for a world of top Italian wine, which has more sustainable growth, need to be supported.

ESG financing for circular economy projects.

"Also under the recent political-economic directions outlined by the European Green New Deal and Next Generation EU," said Fabrizio Negri, managing director of Cerved Rating Agency, "expectations about the emergence of a market for debt instruments qualifying as green/sustainable minibonds are high. Cerved Rating Agency, also active in the ESG Rating segment, estimates the market potential for green minibonds to be €7.2 billion. And a pool of potential issuers interviewed said 97 percent were interested in the instrument for financing circular economy and energy efficiency projects."

Why finance ESG growth in wine and fine wine

There are many reasons why financial players are responding to the growing demand from wine companies for resources to finance sustainable growth. Rome Business School recently published the study "The wine business in Italy. Exports, future challenges and new professionalism," which analyzes the development of the global wine market post-pandemic, Italy's leading role in the worldwide wine scene, and examines wine consumption at the national level. What emerges is that there is an urgent need to develop an organic and articulated idea of the Italian wine sector for the next 10 years, also taking into account the new trends accelerated by the global crises, in which the different wine models contribute, where appropriate, to the enhancement of existing human and physical resources with an increasingly high attention to sustainability, understood in its different aspects (environmental, economic and social). "It will therefore be necessary," the report says, "to prepare effective support strategies - of a regulatory and spending nature - aimed at seizing the opportunities of the different territories, thus supporting the various production models in a manner appropriate to the circumstances. And in the support strategies, ESG financing can therefore fit right in. But there is more. Financial-type support also goes toward wineries' sustainability and social responsibility goals, which, as the Rome Business School report shows, will be an increasingly important driver in the decision of buyers in the sector. Experts point out that, today, more is needed to be good at making wine but to produce something that meets the needs of customers while also using fewer resources, thus reducing time and costs. Companies can rely on technology through digitization, automation, and artificial intelligence to meet these new market needs. All of these activities require financial resources to implement.

The importance of managing the financial variable

Confirming how important proper financial management is, starting with keeping debt under control and the ability to leverage, are the financial statements of some of Italy's leading fine wine wineries. One example is Terra Moretti. "The 2021 results anticipate by one year the already ambitious targets set in the business plan presented last June, paving the way for new scenarios," says Massimo Tuzzi, CEO of Terra Moretti Vino and Holding Terra Moretti. The numbers for 2021 and the first four months of 2022, when compared to 2019, show that we are facing progressive and constant growth for our group. This a solid trend, despite the outcomes of the pandemic and the international events, proving that the goals we have achieved are not the result of fortuitous events but the synonym of a well-delineated project, a well-rooted governance, and an industrial plan capable of sustaining the uncertainties of the markets and of enhancing the full potential of our wineries, prerequisites for qualitative and dimensional growth in the future." It is no coincidence that a decidedly positive balance sheet presented Terra Moretti Vino at the consolidated 2021 level, the wine division of Holding Terra Moretti, a diversified business group owned by the Moretti family, which operates in the construction, wine, and hôtellerie sectors. The Terra Moretti Vino sub-holding is headed by six wineries located in three wine-producing regions: Bellavista and Contadi Castaldi in Franciacorta - Lombardy; Petra, Tenuta La Badiola and Teruzzi in Tuscany; and Sella & Mosca in Alghero, Sardinia. The 2021 fiscal year ended with net revenues of 78.6 million euros (2019 at 64.5 mln and 2020 at 53.2 mln), the value of production at 83 million (2019 at 70.6 mln and 2020 at 57.26 mln), Ebitda of 16.4 million (2019 of 14.5 mln and 2020 of 3.2 mln), and pretax profit of 9.8 million (2019 of 5.2 mln and 2020 of -3.8 mln). But it does not end there. It stands out that bank debt has decreased: as of December 31, 2021, it was 81.5 mln compared to 94.7 mln in 2019 and 90 mln in 2020. On the contrary, investment this year doubles: while in 2021 it amounted to 4.2 mln, eight mln is planned for 2022.

The Social factor remains central in the world of wine

As communicated by the Terra Moretti Group, its wineries employ a total of 450 employees, including an average of 234 casual and permanent workers dedicated to the countryside. One thousand one hundred fifty-four total hectares are planted with vines, of which 896 are owned, 35 are leased, and 223 are in partnership with historical winemakers, for whom Terra Moretti Vino manages all campaign activities. Total labor costs for 2021, including direct labor and casual laborers in the countryside, stood at 19 mln at the same levels as in 2019. In short, prestigious numbers benchmark the entire sector in Italy, which needs to continue to grow with new financial resources, even better if under the push of ESG sustainability.

Support from the banking channel with dedicated financing

"The Italian wine sector," explained Niccolò Ubertalli, Head of UniCredit Italy during the last Vinitaly in Verona, "is now facing new and unpredictable challenges, as witnessed by the entrepreneurs with whom we spoke at eight regional tables in a run-up to Vinitaly. I am thinking of the geopolitical context, which has impacted wine exports of more than 400 million euros for our country's businesses, or the surge in commodity prices. This is why UniCredit has decided to intensify its efforts to support the world of Italian wine, which we already support with loans of 900 million euros. This logic includes the extraordinary ceiling of 1 billion euros we have allocated to help agricultural businesses meet their growing current expenses. In addition to this, we have come up with specific solutions for the sector and for individual territorial realities, such as the 'Supply Chain Basket Bond' program, which led UniCredit in recent months to subscribe, as the first tranche of a 200 million euro plan, to bonds issued by wine companies."

Resources to buy wineries

ESG financing for circular economy projects. The need for financing in the wine sector arises not only to find resources to support a wine company's liquidity and operations or investments to improve its sustainability and ESG efficiency. The world of investment finance is thirsting for financial resources for operations to purchase estates as a real pleasure asset to hold in the portfolio. News from this summer, White Bridge Investments moved to try to enter with a controlling stake in Tenuta Ulisse, a winery in Abruzzo that would be valued by the fund at 43 million euros. At the time of the fund's interest, 100 percent of the capital was in the hands of the Ulisse family. Tenuta Ulisse was founded in 2008 in the province of Chieti. It has 25 hectares of vineyards plus about 30 under a long-term lease and produces white, red, sparkling wines and a passito. Sixty percent of revenues come from foreign markets.

The Italian branch of the Edmond de Rothschild Group supported the Bellarosa and Tosanotti families as financial advisors in the sale of 100 percent of the shares of Casa Vinicola Caldirola, a company based in Missaglia (Lecco). The company boasts more than 50 employees and closed its 2021 financial statements with sales of 40.3 million euros and earnings before taxes and interest of about 2.2 million euros.


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