Why 2018 will be the year emerging central and Eastern Europe wine countries become key global players
By Richard Siddle
You will no doubt know someone who has started the new year committed to changing their ways and trying to do things differently. You might yourself have embarked on a diet or are in the middle of a Dry January.
Or are doing the complete opposite and looking to explore new drinking options as part of what has become known as Try January. Which, back in the world of wine buying, is what an increasing number of suppliers, distributors and retailers are doing. Trying to buy and source wines from new areas of the world.
2018 looks like being the year when the global wine industry willingly breaks out of its traditional model on relying on the stronghold of the Old World wine producing countries and starts to seriously build meaningful, long term partnerships with producers, exporters and brokers in what have long been so-called emerging wine countries.
Nations that might have been making wine for as long, or even longer than the biggest producing countries, but have been kept very much on the second or third tier of actual wine supply.
Yes, 2018 really looks like being the year, harvest permitting, that the likes of Romania, Slovenia, Moldova, Georgia, Macedonia, Turkey, Greece - and others - finally get the chance to move at least one rung up the wine buying and sourcing ladder.
Sadly it’s not because their wines have suddenly become significantly better than French, Spanish, Italian, or even Chilean and Australian wine. It’s primarily because they have collectively and individually got good volumes of wine to sell.
Romania, with a harvest of 5.3 mhl, saw a spectacular 61% increase on 2016, and Hungary (2.9 mhl) were two of only four European countries, along with Portugal and Austria, to see their volumes increase in 2017 (OIV).
Which in a year, when there was the biggest global shortage in wine since 1961, really does make them flavour of not just the month, but the rest of the year and potentially beyond.
Now calling countries that have been making wine for centuries “emerging” does not really sit well. But they are when it comes to getting their names on to the charts of the world’s biggest wine exporting nations.
What makes their current “in demand” status even more significant is the quality of wine. No longer are their respective wines noticeably different from what can be sourced elsewhere.
They might not be as accepted, or as understood by the trade, or known to the average wine drinker, but they can certainly stand shoulder to shoulder in terms of quality and drinkability as their more esteemed peers. Particularly at the commercial, volume and bulk end of the market.
Highly competitive
They are also, crucially, cheaper. The cost of land, labour and production across these countries means their average prices, even in good harvests, make them more affordable and competitive. Many of these countries are also recent members of the EU and have benefited from generous funds to help replace vines and improve the quality of their vineyards.
Romania, for example, has seen 100 new wineries open up and start wine production in the last five years and 25,000 acres of vineyards have been replaced since 2010 (APEV Romania, the Wine Exporters’ and Producers Association of Romania). Its biggest winery and largest exporter, Cramele Recas, is responsible for shipping 6.4million bottles on its own.
It was noticeable at last year’s World Bulk Wine Exhibition the level of interest and hive of activity there was around the Moldovan wine producers’ stands. The 12 wineries on show, the biggest delegation from any country, had volumes of good quality wine to sell. And the promise of potentially more down the line.
Major producers such as Radacini Wines and the Dragan Group were keen to stress that they might have volumes to sell, but they were only interested in supplying quality wine and building their reputations globally that way. It is why they were both investing in planting more indigenous varieties as a balance to the international varieties they have.
If there was a similar fair for finance and investors in wine, then it would be to these countries, where your money can go so much further, that would be most in demand.
Noticeably the European Bank for Reconstruction and Development (EBRD) is investing heavily in what it terms the “second wave” of countries from central Europe. Noticeably Georgia where it has committed three billion euros for a country of 3.7 million people, which works out at around €850-900 per person.
It is why major wine businesses from other parts of the world are looking to plough their own resources in to these countries. They certainly recognise how strategically important they are going to be in the coming years. Be it supplying their current markets as well as finding new wine for increasingly thirsty countries in the world, like China, the rest of Asia, the US and Russia.
Major UK drinks manufacturer and distributor, Halewood, has invested £10m in the Romanian wine market as it believes it has such an important future. “Romanian wine is a hidden gem waiting to be discovered by many export markets,” is how Paul Murden, managing director of Halewood Wines & Spirits Romania described the country to Emerging Europe website. “We will continue investing in upgrading our production facilities and modernising the wineries and the equipment, in order to ensure a premium quality for all our wines,” he added.
Already on the rise
A quick look at the export performance of some of these countries in 2017 shows how the pendulum is, slowly but surely, changing. Albeit from, in most cases, relatively low bases compared to the giants of France and Spain.
Georgian wine, for example, enjoyed its best ever year in 2017 for exports, with 76.7 million bottles shipped to 53 countries, according to the Georgian National Wine Agency. All of which helped raise $170m in sales up by 49% on 2016, with a 54% increase in volumes. It is assured another export boost now that its Free Trade Agreement with China has started, offering zero tariffs. Its exports to China were already up 76% in 2017, making it the third biggest market behind Russia and Ukraine.
Everywhere you look across central and Eastern Europe export figures are up. Bulgarian wine exports, for example, were up 13% in the first eight months of 2017. Moldova is now close to 70 million bottles exported.
Demand for and interest in wines from these emerging countries is also feeding through to consumers, confident and reassured that they can get both quality and affordability by being braver in their wine choices. Majestic, the UK specialist drinks retailer, said it has seen an enormous growth in sales of wine from Eastern Europe. Its year-on-year figures for wines from Romania, Bulgaria, Hungary and Slovenia were up 400% on 2016, admittedly from a small base. It found British drinkers were also happy to have East European wine over Christmas dinner with a further 190% boost in sales in the run up to Christmas.
This could prove to be an important step change for these countries and their wines as it will give buyers more confidence to go out and buying them. James Reed, wine buyer at Majestic, for example, said it is not just about being able to deliver low price points per se, it is the quality at different price points that has “really impressed”. “There’s also just more wine being exported from these areas with commercially viable styles and grapes,” he added.
This switch in attention and focus on central and Eastern Europe will be there for all to see at Prowein in Dusseldorf in March. This looks like being a change in wine buying behaviour that looks like to last longer than the second week in January.