be distilled for the sole intention of collecting EU subsidies. By providing technological guidance and matching grants, the EU had helped make viticulture and vinification processes more efficient. Mechanization in vineyards and wineries, often subsidized by EU programs, lowered production costs. These factors not only contributed to the huge oversupply of wine but also made it possible for wine producers to profit substantially even when they sold their wine to the EU for distillation. The industrial production of wine with the express intent of selling it for distillation became both pervasive and perverse in Sicily, reaching its high point from 1986 to 1988, when nearly five million hectoliters (132,086,026 gallons) of wine were distilled each year, the same annual amount that had been exported for sale almost a decade earlier.
COOPERATIVE WINERIES
The wine-producing facilities in Sicily that became the principal protagonists in the making-wine-for-distillation industry were the cooperative wineries. In Italy, a cooperative winery is usually called a cantina cooperativa or a cantina sociale. Cooperatives seem, at least in theory, to be constructive and durable enterprises. Governmental or political bodies provide organizational support to farmers to help them set up cooperative wineries. Participating farmers become part-owners based on an initial contribution of investment capital and the subsequent dedication of all or nearly all of their grape harvests to the cooperative. The cooperative thus has fixed sources of grapes. The winery uses its income to cover its operating expenses and capital costs or to pay farmers higher prices for their grapes. As a result, its taxable profits are usually small. Moreover, cooperatives typically receive tax breaks because they are perceived as providing social benefits to their members. Italian cooperatives are often recipients of subsidies from the EU, the Italian state, and the regional governments (such as that of Sicily). Because cooperatives can deliver large numbers of votes to politicians and their affiliated parties, many become political protectorates. Using their connections, cooperatives tend to have significant leverage in getting regulatory issues decided in their favor.
The cooperative movement arose out of socialist sentiments that were popular in the late nineteenth and early twentieth centuries. The cooperative movement in Sicily got off to a bumpy start. The cantina sociale II Lavoro formed at the end of the nineteenth century but dissolved several years later. The first successful one in Sicily and one of the first in Italy was Cantina Sociale Marsalese, which was created in 1914. This dissolved in 1930 over a scandal regarding the illegal distillation of its wine stocks. Using the same facilities, in that same year, another cooperative formed: Cantina Sociale UVAM (Unione Viticoltori Agro Marsalese). It was unusual in that it was started solely with the capital of its farmer-partners. For twenty-five years it was the only cooperative in Sicily. At the end of the 1950s, only 6 percent of the Sicilian grapes made into wine were processed by Sicilian cooperatives, and nearly all of that by Cantina Sociale UVAM. While the growth of the cooperative movement had been slow in Sicily during the first half of the twentieth century, on the mainland of Italy it was much more successful. As of 1956, there were 169 cooperatives throughout Italy.
The fragmentation of large Italian landholdings into small ones helped set the stage for the rapid growth of cooperative wineries in Sicily. From 1950 to 1962, land redistribution reforms cut sizable chunks off large landholdings (latifundia) for this purpose. For example, Regaleali, Tasca d'Almerita's vineyard and winery site in central Sicily, was downsized from twelve to five hundred hectares (2,965 to 1,236 acres). The appropriated land was redistributed to landless farmers, many of whom took control of land on the farms where they had previously worked as sharecroppers. The Italian government also set up the Fund for the South (Cassa per il Mezzogiorno), which operated from 1950 to 1984. This was a development fund that supported land redistribution and farm and village construction projects; agricultural infrastructure projects such as the creations of dams, dikes, and reservoirs, largely for irrigation works; and the introduction of new agricultural techniques and equipment. The resulting increase in landholdings of smaller dimensions, combined with financial and technical support from the Fund for the South and subsequently from EU programs, stimulated the creation and expansion of cooperative wineries. In Sicily the coincidence of an oversupply of grapes, the rapid proliferation of cooperatives that could process these grapes into wine, and the cooperatives’ low costs of operation, which reduced their bulk wine prices below those of their competitors, made feasible the Sicilian export boom of the 1970s and the “wine lake” distillation saga of the 1980s.
The cooperative movement bettered the lives of innumerable poor farmers. Before the existence of cooperative wineries, growers had been at the mercy of merchants’ agents. These agents often ruthlessly took advantage of a buyers’ market for grapes. An agent, for example, would typically agree to buy a farmer's grapes at the harvest, then intentionally arrive late, after the harvest, when the grapes were on the verge of becoming unsalable. He knew that at this point the farmer would be desperate enough to sell at well below the agreed-upon price. Before the 1970s, small grape farmers made a precarious living in an inhospitable business environment.
The downturn in the mid-1960s of the Marsala industry, by far the largest purchaser of bulk wine in Sicily, left farmers in the island's west, where most of the grapes for Marsala were grown, in a desperate situation. Cooperatives allowed them to organize, to work in an organization that understood their interests, and to take the first step toward self-determination. The vast storage capacities of the cooperatives also let them concentrate large volumes of wine in one location, helping them to benefit all the more from the opening of the French market in the 1970s. The merchants’ agents who preyed on small farmers gradually disappeared. So did their employers, many of them small companies making Marsala. Large merchant concerns, some on mainland Italy and some in France, took their place, sending representatives to Sicily, usually to cooperatives, to purchase and arrange for the transport of large volumes of bulk wine.
Though the fragmentation of land ownership was one of the conditions that favored the creation of cooperative wineries, it also remains one of their innate weaknesses. Fragmented ownership obstructs the realization of the economies of scale possible in large agricultural operations, particularly those that involve mechanization. At cooperatives, 90 percent of the viticultural work is manual labor. The cost of the grapes is higher (by about 50 percent) than it would be if the cooperative could take advantage of economies of scale. Fragmentation also leads to disparities of grape quality among cooperative members. Farmer members by nature resist changes that markets ask for, demand, or necessitate. A lack of collaborative behavior stymies development. Extrafamilial collaboration is challenging for many Sicilians. They have historically preferred to work alone or within a family structure. In a cooperative, the farmer-owners meet regularly and elect an executive committee and/or president from their ranks. Typically the committee or president then selects a managing director, who hires a technical and marketing team, and fills all the other positions necessary to run a winery. Unfortunately, with the exception of the technical team, these positions customarily have been handed out as favors to influential farmers, politicians, and friends and relatives of the executive board. The selection process typically takes little account of training, experience, or talent.
Sicilian cooperatives largely sell grape juice (must) and wine in bulk. The must is mechanically concentrated into a syrupy sweetener called concentrated rectified must. In 2006 this accounted for 25 percent of the Sicilian wine grape harvest. EU subsidies supported the production of the must as a means of venting excess juice and wine. Italian wine law requires wine producers to use concentrated rectified must as the means of enriching grape juice to achieve higher alcohol levels in the finished wine. Cooperatives unload must and wine quickly at low margins rather than bottling, branding, and selling their wines to specific markets. Even if cooperatives wanted to take advantage of the profits associated with selling wine in bottle, the characteristic incompetence of their untrained marketing teams would doom such initiatives to failure. Even so, loans for cooperative development and creation have often been secured based on business plans that feature increased profits from bottling and merchandising. The weaknesses of the marketing team become a problem only a decade after a cooperative's founding, when stocks of bottled wine remain unsold, loans have dried up, and debts have devoured
