Uncorking Romania’s wine potential(1)
The Romanian wine industry has matured considerably in the last ten years. Product quality has increased, the area of vineyards has shrunk, the number of new investments has hiked and new players have entered the fray. By Roxana Cristea
But the same problems that existed before the crisis remain: the difficult of exporting and the bad image from which Romanian wines suffer abroad. How should producers uncork the potential?
The cellar we have is a family business. We started it ten years ago when we bought many plots of land from private individuals. We had the first harvest in 2006 and we started selling the wine in 2008. But we entered the market during troubled times and we are convinced that the expansion would have been different if the crisis and all the problems had not come about,” Aurelia Visinescu, general manager and owner of wine company Domeniile Sahateni, tells The Diplomat – Bucharest, about the beginning of her business.
The Domeniile Sahateni cellar, which mainly produces premium varieties, has a production capacity of 1,000 tons of grapes, which converts to over one million bottles every year. Half of the bottles are exported and the other half are sold locally. In the last few years, more and more small businesses like Domeniile Sahateni have entered the Romanian wine market, targeting the premium segment in particular. Another such company is Lacerta, owned by a group of Austrian investors.
“The premium wine market is the most interesting for us because it largely addresses businesspeople who know dry wines from around the world,” says Walter Friedl, partner at Lacerta Winery. Although business has not gone very well and they started marketing their wares in a difficult period, both small wine producers and players with a vintage in the market are optimistic and hope that in the future things will improve. While the premium segment has not suffered greatly, overall the wine market has posted a drop of about 10-15 percent. While a few years ago the value of the market was around EUR 400 million, last year it was only EUR 360 million.
Sour grapes
“I would prefer not to talk about the crisis but unfortunately it is everywhere. All Romanian industries are affected,” says Cosmin Popescu, general manager of Murfatlar, adding that the wine market has been hit by the recession but not as badly as other sectors such as construction and automotive, where the results are dramatic.
One clear effect of the turmoil on the wine industry has been a tendency for consumers to switch to cheaper varieties, leading to a slight decrease in the average selling price per bottle. On top of that, shoppers are being more careful about where they buy, purchase decisions have become more rational and consumers have hunted promotions.
“For example, we’re selling the products with lower margins than last year. Also, people have less money, horeca consumption has suffered greatly and many consumers prefer, for the same cost, to buy two or three bottles and to drink them at home with friends rather than go to a restaurant,” says Popescu.
According to Ciprian Rosca, commercial director at Recas Winery, the market has declined for several reasons, mainly related to lower purchasing power, non-existent consumption habits (in wealthy countries it is customary to drink a glass of wine with the main meal of the day, he says) and the aggressive promotion of other beverages.
These factors have led some manufacturers to adapt to consumer preferences and launch on the market a RON 4-5 per 0.75l bottle, which brings the average retail sales down to RON 6-7 per bottle.
“The impact of the crisis on the wine industry was serious, as with any field based strictly on consumption,” Ioana Anghel, export manager at Jidvei Romania, tells The Diplomat – Bucharest. First, she cites the low-value purchases, which cut into the amount of wine sold through retail, while lower restaurant spending decreased consumption in horeca. “The fact is that people have seen their living standards decline, or started to pay more attention to their spending, which has affected us all,” complains Anghel.
Heard it on the grapevine
But the crisis is a minor speck on wine producers’ radars. Most of them say their biggest problem is that Romanian wines are not seen by foreigners as quality products. “We should have a better country image, namely the image of a quality wine-producing country. Origin is a very important aspect when it comes to wines. As much as we try to make our case at various international events, as many competition prizes as we win, Romanian wines are still viewed with suspicion. And that means there is no final consumer for them; no importers or distributors are interested,” says Ioana Anghel, adding that Romanian wine sales abroad are largely generated by emigrants.
One of the reasons for Romanian wines’ lack of renown is that wine exports in the last 50 years have not been of good quality, and now it’s not easy to convince the public that the country produces premium labels. “For example, we were not able to export to the Nordic countries until a group of foreign journalists came, visited wineries in Romania and wrote a series of articles about the wine market,” says Dan Balaban, general manager of Davino, a company that produces and distributes premium wines through horeca.
One of the ways winemakers hope to change the country’s reputation is the development of wine tourism. “Wine tourism is very good for the national economy. This is seen in South Africa, in my home country of Austria, and in Spain and Italy. In Romania this can be done easily because there are good vineyards like Dealu Mare, Dragasani, Banat and Vrancea,” says Friedl.
Another solution is to attract foreign investment, because there are a lot of funds for investors in viticulture, but to do that the market needs good examples. “I do not think this will happen very soon,” he admits. The situation is exacerbated by Romanian drinkers’ lack of awareness of quality, a result of their low incomes. This means that many poor-quality products can be found on the shop shelves, but this is not obvious from their prices. “I think producers in particular are to blame for the bad image and low exports, because the wines were on sale at standard prices. But the authorities should help us by changing Romania’s image,” argues Balaban.
Let the exports flow
“Exporting is easier than selling on the domestic market. I tell you this from experience. When you have a quality product it is easier to convince a foreign client than an innkeeper to list it. To export more we need to make a quality wine at a competitive price,“ says Aurelia Visinescu, adding that the export market is a great opportunity for Romanian wine producers. Domeniile Sahateni, the company that Visinescu leads, exports half of its Romanian output to Asia, where it ends up in Japan, China and Korea, as well as Canada and ten European countries.
Overall, in Romania exports make up only five percent of total wine production, according to the National Organization of Wine, which operates under the auspices of the Ministry of Agriculture and Rural Development. “To have more opportunities to export, Romanian wines need competitiveness, which is measured in several ways. Under no circumstances should we seek to sell the cheapest wines because we will be beaten every time on such criteria by Spain or Italy, countries which have a higher production per hectare, or certain areas exclusively for such wines. I think we should have an identity; this is what we need at the moment. Currently the perception is wrong: low quality wines in the past under communism and not enough promotion, which is essential in this market,” says Cosmin Popescu.
Most manufacturers are now targeting new destinations, especially Asia. “Everybody is looking at China as a market with huge potential. Why? It’s simple – the country’s size and the fact that incomes are increasing. They are not talking of the crisis; on the contrary,” he adds. Another key destination is the Russian market, which Romanian producers should retake.
“Now there is a great fight on. The shelves are not empty and they are not necessarily crying out for Romanian wines. But we are struggling with promotion, good distribution and many of the people involved,” adds the Murfatlar head. The situation is much easier when it comes to countries like Italy and Spain, because there are several million Romanians working there, happy to consume products from their motherland.
Withering on the vine
Romania’s total vineyards dropped significantly over 2001-2007, from about 230,000 to 178,000 hectares. Since 2007, the area has increased thanks to support from the European Union for restructuring and converting vineyards, reaching 181,500 hectares in 2011. Some 84 000 hectares consists of small plots of up to 0.5 hectares devoted to self-consumption, while the rest is in the hands of producers in various legal forms. This area produces grapes that are sold to bigger wine producers. “I think the Romanian wine market will continue the evolution that started ten years ago, which is a good thing given that the total area of vineyards is ten times less than it was 50 years ago,“ says Baron Jakob Kripp, who owns the wine area Prince Stirbey in Dragasani.
