Vicious circle

When the Bulgarian Cabernet bandwagon lost momentum in the late ‘80s supermarkets cut back on the shelf-space for all eastern European wines.  They’ve been clawing their way back ever since, says Penny Boothman

BULGARIAN Cabernet Sauvignon may have been the party wine of the 1980s, but wine fashions change just as fast as other trends.  Hungary now leads the way with a UK offtrade sales value of over £30 million, or 7m litres (ACNielsen MAT to w/e 25.12.04).

Bulgaria currently sits in second place with sales worth almost £25m, or 6m litres, though the two countries were almost level at £31.8m and £31.2m respectively in 2003.

Romania’s comparatively small share comes in at under half that of Bulgaria with sales value of just £10.7m or 2.3m litres, but international investment here promises big things for the future.

In fact these general statistics are somewhat misleading as some individual brands are showing strong growth.  Bottle Green’s Riverview range from Hungary is the number one central European brand by some margin, with a leap in sales of 54% year on year (ACNielsen, total off-trade volume and value MAT 25.12.04), an impressive figure in a declining category.

And yet the battle for SKUs (stock keeping units) continues.  "Among the trade they have ever-declining shelf space, which is given to growth countries, and thus they offer less and less to consumers, and so it becomes a vicious circle of declining sales," says Jerry Lockspeiser, MD of Bottle Green.

And other agents have had the same experience.  "One of my bigger customers had 10 Hungarian wines and it was reduced to two overnight," says Arabella Woodrow MW, business development manager of Myliko. "It’s marketing really.

They say ‘Okay what’s selling well? Chile and Australia, so why don’t we increase those categories and kill off something that’s declining’, and that’s usually central Europe, Germany and anything else that’s struggling a bit."

Myliko has been importing Hungarian wine into the UK since 1992.  "Generally trade and consumers have recognised an increased modernisation of quality," says Woodrow.  "The wines have improved and are much fresher, fruiter, more modern styles. Consumers are quite happy to accept them, where we have problems is with supermarket buyers.

They don’t have anything against the wines  but their rating is very much determined by market statistics, and central and eastern European wines have got a very small market share, and therefore only get a tiny space on the shelf.

It’s rather selfdefeating because how can they sell if they get ever decreasing exposure to the market?"  Increasing sales with fewer SKUs does seem like a challenge.  "I think producers are more internationally minded and consumers are more open to trying new things," says Nick Room, buyer at Waitrose.

"However, we find it difficult to sell wines from eastern Europe over £5, apart from Tokaji.  To me, Hungary has always had a solid foundation, Bulgaria is trying to come back from its low point of some years ago, Greek wines have marvellous potential (but are infuriatingly hard to sell), Romania is doing fine and so is Moldova – we have taken on three wines under the Firebird brand and these are performing quite nicely."

"There are some improved winemaking techniques as well as the use of flying winemakers which brings a New World style to Old World wines.  They need to be consumer friendly both on the palate and in name," says Sara Brook, wine selector at Asda.

"For our own-label range we focused very much on the grape varietal as opposed to the country of origin as we felt this was more important to the customer."  "What we’re finding sells best is the international varieties," comments Woodrow.

"Our Hungarian wines over the last year have grown about 20%.  Most of that is Pinot Grigio, which is the grape of the moment."  Hungary’s new EU membership also plays a role in increasing sales.

"You don’t have to state ‘Wine of Hungary’ on the label any more, as long as Hungary’s on the bottle somewhere," Woodrow continues.  "We do still put Wine of Hungary because we’re proud of it, but with Pinot Grigio you can call it an Italian sounding brand name ending in an ‘I’ or an ‘O’ or an ‘A’ and just put the word Hungary at the bottom of the bottler’s address.

So the consumer thinks ‘A bottle of Pinot Grigio, that’ll do me’.  And of course what’s in the bottle is lovely so nobody’s complaining."  And the folk at Bottle Green agree, marketing their range on its merits as a brand rather than its Hungarian heritage.

 "We don’t point to its country of origin but to the brand values, which are that it is great wine for a girls’ night in and that it’s fun and accessible," explains Lockspeiser.  "For retailer ownlabel products we emphasise the price/quality value."  Packaging is also important.

The wines need a unique selling point, something to make them stand out from the crowd that will capture the consumer’s interest, such as Blueridge’s unusual bottle shape. "It does count for a lot," agrees Woodrow.

"Especially in the offtrade where it has to stand out on shelf and there’s no-one pushing it." The Romanian River Route brand has had a recent packaging redesign across its standard range.   The new label has improved shelf stand-out and is targeted at 25-35 yearold social and frequent drinkers and reflects the brand’s easy and approachable style.  

"These easy drinking wines are aimed at the Bridget Jones generation who seek to relax and enjoy wines of consistent high quality at a very affordable price point," comments Liz Stich, Reh Kendermann’s export director for Europe and overseas.

"The restyled River Route range offers a superb combination of great tasting wines and excellent value for money."  Reh Kendermann has invested approximately €5m in vineyard plantings and winemaking equipment for its Romanian operation.

The company currently sell more than 230,000 9-litre cases of River Route wines and private label business through major supermarket and convenience store listings in the UK, its major market.

The other big international player operating in Romania, Halewood International, has been working in eastern Europe since the early 80s and started in Romania in 1987.  "In the late 90s we were approaching one million cases exported to the UK," says Dan Muntean, Romanian operations director.

"Unfortunately most of them were cheap country wine sold at £1.99, which meant we had to cut corners in all areas – cheaper bottles, cheaper wine – and unfortunately that has now given us image problems for the category as whole.

Now we feel that it is important for us to bring to the UK good quality wine, and we’re pleased by the progress, but the quantity is nowhere near [what it used to be].  We ship about 200,000 cases to the UK every year.

But the average price is higher, and the ‘country wine’ category has been abolished altogether.  "The whole global wine industry has changed dramatically.  With companies aggregating every day with bigger market portfolios.

We’re left with the problem of promoting the country as a whole. Some professional bodies have started forming, such as the Wine Exporters’ Association of Romania, and we are talking about some generic advertising in the future," says Muntean.

Exports are on everyone’s mind and a UK listing may be the ultimate goal for most eastern European producers, but Romania, in fact, exports the vast majority of its volume to Germany – over 13m litres in 2004 compared to just 2.6m litres to the UK and a surprising 4.7m litres to the Republic of Moldova.

Moldova has a flourishing wine industry of its own, and last year saw the launch of the Firebird Legend brand in the UK market.  This brand was developed by Hayman Barwell Jones in conjunction with Cellarworld International wine consultancy services, with the UK market in mind.

"Consumers have been surprised by the modern style of the wines," comments Miranda Hayman.  "We ran consumer focus groups on the Firebird packaging and Moldova and were very much encouraged by the positive reaction to the strong packaging and the willingness to learn more about such a little known country."

Berkmann Wine Cellars has recently started importing two wines from Slovenia that were produced with the Cellarworld consultancy. 

"Like any other ‘new’ area, they allow the public to appreciate a terroir which may not exist anywhere else in the world," says buyer, Jim Wilson.  "I think we have also moved away from the view of central and eastern Europe simply providing cheap versions of western varietals." 

"It’s taken a very long time to kill memories of the days when these countries could exist on tiny amounts of hard currency because their own money was so artificially low.  The wines have to compete on a level playing field in the value for money stakes," says Angela Muir MW of Cellarworld.

"We have to remember that exports don’t have to come just to the UK.  They can and do make just as much money, if not more, in other markets. Our Slovenian clients are coming here but they are doing better, much more quickly, in their neighbouring markets and the US."

It seems the future for central and eastern European wines does not just lie in British supermarkets.  Most UK importers trade only in sterling to ensure a stable price for consumers, but this can present its own problems for the producers.

"There are some very important producers here putting pressure on the national bank to buy excess foreign currency," explains Muntean.  "We’re happy to sell in euros to places like Germany, Holland and France but production is based on the local currency and the euro, and when we ship to the UK we have a problem.

"Our latest development on the local market is that the Romanian currency has appreciated 15-18% in the last three months against the dollar, the euro and the pound, which is making our wines seem more expensive," he continues.

"The other interesting thing about the currency here in Romania is that on July 1 there will be four zeros taken off the end of the value of the Lei [currency].  That will have some further impact but we don’t know what that will be yet."

Between currency fluctuations, shrinking listings and a declining category, producers would seem to have their work cut out for them.  However, with higher quality wines and a fresh focus on marketing there are plenty of new opportunities in new Europe.