Wineries in Italy, Greece, Spain battle extreme heat, lower production

This year’s wine harvest is in full swing on the perennially popular Greek island of Santorini, but for local winemaker Yiannis Paraskevopoulos, the prospects do not look good.

Extreme temperatures are threatening production of the indigenous Assyrtiko grape, critical to the island’s internationally recognized fine white wines. Last year’s output at Paraskevopoulos’s Gaia Wines was around one-third of 2022 production. This year’s harvest is estimated to fall to one-sixth of 2022 levels.

“We thought we had seen the worst. But no, we hadn’t: 2024 has gone beyond all expectations,” Paraskevopoulos told CNBC over the phone.

According to Gaia Wine’s 2023 estimates, Assyrtiko could face extinction by 2040. Now, that timeline looks optimistic.

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

The Assyrtiko grape is not alone. Global wine production fell 10% in 2023 to 237.3 million hectolitres, the lowest level in over 60 years, as “extreme climactic conditions” weighed on harvests, according to the International Organisation of Vine and Wine (OIV).

The issues facing wineries prompted the European Union to last month launch a high level group on wine policy to discuss the “challenges and opportunities for the sector.”

Production in Greece plunged more than one-third in 2023, while output from Italy and Spain dropped by more than one-fifth, according to OIV, as wineries in southern Europe increasingly experienced adverse weather effects including heavy rainfall, drought and early frost.

Such weather events can impact not only a given year’s harvest but also production in following years.

“We are absolutely affected by climate change,” a guide at Castello di Volpaia told CNBC during a recent tour of the 12th century winery in Tuscany, Italy.

“Climate change is significantly influencing wine production and its quality,” Marco Fizialetti, commercial director at nearby Castello di Querceto, said via email. “This situation has created difficulties for all producers who already had to manage high temperatures in the past.”

Weaker output and more challenging production conditions are pushing up costs in an already largely price sensitive consumer market. Wine consumption was down 2.6% annually in 2023, hitting its lowest level since 1996, due to higher production and distribution costs which led to higher prices for consumers, OIV estimates showed.

As of August 2024, one kilogram of Assyrtiko grapes cost eight ($8.9) to 10 euros, around double 2022 prices.

“That’s champagne prices,” Paraskevopoulos said, noting that Gaia Wines has not yet reflected the heightened costs in its final bottle price. However, he said it will have to do so eventually, and that will hurt business.

“When a bottle is more…