European wineries struggle to remain profitable due to intense heat affecting production.

• Southern Europe's wineries are facing a threat to production due to extreme weather, with one fine wine grape variety on the brink of extinction.
• In 2023, global wine production decreased by 10% to 237.3 million hectolitres, marking the lowest level in more than 60 years, as reported by the International Organisation of Vine and Wine.
• CNBC reported that Yiannis Paraskevopoulos, co-founder of Greece's Gaia Wines, stated that although we believed we had witnessed the worst, we were wrong as 2024 has surpassed all expectations.

On Santorini, the wine harvest is underway, but local winemaker Yiannis Paraskevopoulos is not optimistic about the prospects.

The indigenous Assyrtiko grape, essential to the island's renowned fine white wines, is being endangered by extreme temperatures. In 2022, Paraskevopoulos's Gaia Wines produced around one-third of their current output. This year's harvest is predicted to be only one-sixth of 2022's levels.

"We believed we had witnessed the worst, but we were wrong: 2024 has surpassed all expectations," Paraskevopoulos said to CNBC over the phone.

Assyrtiko is no longer at risk of extinction by 2040, according to Gaia Wine's 2023 estimates.

Paraskevopoulos stated that it brings the trend line closer to the present.

Falling wine production

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

The European Union recently established a high-level group on wine policy to address the challenges and opportunities in the wine industry.

In 2023, Greece experienced a more than one-third decline in production, while Italy and Spain also saw a more than one-fifth drop, according to OIV. This was due to adverse weather effects, including heavy rainfall, drought, and early frost, which affected wineries in southern Europe.

Weather events can affect not only the current harvest but also future production.

A guide at Castello di Volpaia informed CNBC during a recent tour of the 12th century winery in Tuscany, Italy, that we are completely impacted by climate change.

"Wine production and quality are being significantly impacted by climate change, as Marco Fizialetti, commercial director at Castello di Querceto, stated via email. This has created challenges for producers who have already had to deal with high temperatures in the past."

Higher production and distribution costs have led to a decline in wine consumption, with a 2.6% annual decrease in 2023, the lowest level since 1996, according to OIV estimates.

In August 2024, the cost of one kilogram of Assyrtiko grapes was between 8 to 10 euros, which is approximately double the price in 2022.

Paraskevopoulos stated that Gaia Wines has not yet reflected the increased costs in its final bottle price, but he noted that it will have to do so eventually, which will negatively impact the business.

If a bottle is pricier than a Burgundy, what will a buyer do? We will lose the market we have worked hard to enter, he stated.

Changing production methods

Some winemakers are modifying their production techniques to accommodate the changing environmental environment.

In the newest estate of Marchesi Antinori, vines are being planted in new directions to maximize sun exposure.

President Albiera Antinori informed CNBC that until recently, vineyards were planted southwest facing. However, due to extreme heat exposure from both directions, they can now be planted northeast facing.

The estate is utilizing various techniques to enhance production quality, such as raising trellises and planting grass between vines. Despite a decline in quantity, Antinori stated that these methods have contributed to improved production quality.

She characterized the victory as a Pyrrhic triumph, a feat that comes at such a high cost that it is hardly worth achieving.

Raventós Codorniu CEO Sergio Fuster stated that the company's vineyard regions are in emergency situations and have had to become more efficient with water usage, such as utilizing buried irrigation systems.

In Greece's Nemea, Domaine Skouras experienced an early harvest this year, starting 20 days ahead of schedule. Winemaker Dimitris Skouras attributed the improvement in grape quality to a reduction in fungal disease, but expects lower yields overall.

The winter was unusually short and temperatures rose rapidly, resulting in lower production levels in our vineyards, especially for Agiorgitiko.

Skouras is now planting vineyards at higher altitudes, where temperatures are generally lower, and he is identifying areas with better water supply to help the vines withstand the heat.

Skouras stated that there are no definitive solutions yet, as we cannot predict the changes to come or the extreme weather we might face. Our strategy is to adapt to this new reality in viticulture as best we can, referring to the study of cultivating grapes.

On Santorini, where grapes are traditionally grown in "koulouras," or baskets, to shield them from the island's strong winds and intense sunlight, the vines are exposed to even harsher weather conditions.

Paraskevopoulos of Gaia Wine stated that these vines have root systems dating back three to five centuries, but they are dying.

Tourism to blame?

In addition to extreme weather, increased tourism has led to a shift in investment and manpower from traditional agricultural work to the hospitality sector in Europe's vineyards.

Agritourism destinations, such as Tuscany's Castello di Volpaia, offer guest stays that can offset the costs associated with weaker production output. Marchesi Antinori provides cellar tours and cookery classes as part of their offering.

Antinori stated that we are fortunate to be in a region and a country where tourism is not decreasing, but rather increasing.

Santorini, which has experienced a surge in tourism, could ultimately suffer due to its success, according to Paraskevopoulos.

"Tourism is also contributing to the alarming effects of climate change," he stated. "Instead of investing in wineries, young Santorinians are turning to other sources of income."

EU representatives and industry stakeholders will gather for wine policy discussions, with their first meeting scheduled for next month. The group will meet at least three times this year before presenting their recommendations at the start of 2025.

The industry, which employs around 3 million people and contributes an estimated 130 billion euros to EU gross domestic product, could potentially reduce some of its biggest risks through certain measures.

"If no intervention is made, the trend line predicts the extinction of Assyrtiko, Paraskevopoulos stated. The question is whether we will intervene in time and be successful."