Local wine producers have the bottle to do battle on global market

Newsroom 08/11/2010 | 09:15

From acknowledged potential to international awards, Romania has all the required ingredients to brand itself and become globally known as a wine producer. But it has failed to do so, lacking a national promotional strategy and coherent support from the authorities. Against this backdrop, local produces are struggling to make a name for themselves and uncork international markets.

Simona Bazavan

Local wine producers haven’t been toasting 2010, with the Romanian market estimated to have dropped by as much as 15 percent against 2009. The blow was even harder for premium and medium wine segments as Romanians, mostly unsophisticated wine consumers, bought less or shifted towards cheaper and sometimes counterfeit brands.

Mature markets have been less affected by the decline in purchasing power. “Unlike Romania where there have been significant drops in wine consumption, external markets have remained constant, proving well established and traditional consumption patterns,” said Jean Valvis, president and GM of Valvis Holding.

There are world-famous French, Chilean, South African and Australian wines but very little is known about Romanian labels. The lack of a national promotional strategy for this industry has left local producers to do battle on the global market alone.

“Competition on external markets is fierce and it makes it very difficult to sell a lesser known wine, even though as far as quality goes that wine is at the level of those produced by top players on the world market,” Dan Muntean, general director of Cramele Halewood, told Business Review.

Change can happen only with long-term strategies and considerable financial efforts on behalf of local producers, added Ioana Anghel, PR Manager at Jidvei Romania.


China promises days of wine and roses

More and more local wine producers are turning their attention to Asia, driven by the opportunities of its emerging wine markets, with China the most alluring for Romanian companies by some way.

“China is a huge market which hasn’t yet been affected by the economic crisis. Estimations indicate a market volume of about 91 million liters, approximately 121.4 million bottles with an average price of USD 3.12 per bottle, according to market research by Baharat Book Bureau,” said Angela Mares, marketing director of Vinexport Romania.

Recently wine producer Tohani took its interest in the Chinese market a step further and announced plans to build a wine factory in China following a EUR 20 million investment. “This is the largest Romanian investment in China so far and we will start producing next year. We have 600 ha of land for the vineyard provided by the Chinese authorities who have also thrown in a five-year tax exemption,” Virgil Mandru, main shareholder of Tohani, told BR. The winemaker is still negotiating a subsidy for the factory building costs with the Chinese authorities. Tohani brings three premium wines to China, The King’s Wine, The King’s Treasure and Tohani Castle. A fourth could soon follow, “as soon as we find a proper way to translate ‘Sange de Taur’ into Chinese!” Mandru added.

Until 2012 when the factory should be finished, Tohani will continue exporting to China. Before considering this investment, Mandru said that the company had looked at various strategies to boost exports which were unlikely to success because of the obscurity of Romanian wines.

Tohani is planning a similar EUR 10 million investment in a bottling facility in Poland. The two projects are being developed in partnership with local companies, with Mandru financing 50 percent of the two investments. He added that the two locations were chosen for their potential and easy market access.

On the local market Tohani is preparing for a fall this year. “We expect the local market to drop by 12 percent this year against 2009. The drop will be more significant on the medium and premium segments,” Florin Timau, marketing director for Domeniile Viticole Tohani, told Business Review. As for 2011 the company is forecasting that the internal market will level out and perhaps even resume growth.

The company’s most famous brands are Sange de Taur, Domeniile Tohani and Princiar and Tohani estimates that it has a 5 percent market share (0.75 l bottles).

The wine producer has seen its business grow by 40 percent in the past five years. After posting a EUR 14 million turnover in 2009 the company is expecting lower results in 2010. Last year Tohani exported wine worth EUR 500,000 to the USA, Germany, Italy, Norway and Spain.

Local wine producer Vinexport Romania plans to increase its exports to the Asia-Pacific region in the following months, targeting sales worth EUR 1 million on the Chinese market by the end of the year. And this is only the beginning, the producer says. Sales in China, the company’s main export market, represented 2.8 of the company’s turnover last year.

For 2010, the company plans to increase this share to about 10 percent. Vinexport produces the Gurban, Vinul Vanatorului, Puterea Ursului, Putna, Centenar and Weisser brands, all of which are exported to China. By 2012 Vinexport plans to supply 1 percent of China’s wine imports (in 0.75 l bottle).

Local winemaker Jidvei is also putting China on its to-do list. The company is currently exporting to the USA, Germany and Japan among other markets. “Until recent years we hadn’t focused on exports as internal sales were enough for our production. This is why we exported only 3 percent. Things have changed lately and not only due to the economic situation,” says Anghel. Increased capacity production and the success enjoyed after winning international prizes made the company consider a more aggressive export strategy.

Jidvei has a production capacity of 10 million liters and is best known for the Dry Muscat (“Fata-n iarba”), Feteasca Regala (“Tarancutele”), Riesling (“Banuti”) and Sauvignon Blanc (“Premiat”) wines.

Elsewhere, Murfatlar Romania is also setting high objectives for the Asian markets. “We plan to increase exports at fast pace by focusing on the market where we are already present, especially China and Russia and by considering new ones such as the Central European countries”, said Laura Musat, PR manager at Murfatlar Romania.

Currently, the wine producer exports about 15 percent of its production (it reached 30 million liters in 2009) but estimates that in the next three years exports will count for as much as 40 percent of its turnover which this year will amount to EUR 32 million, an increase of about 14 percent against 2009.

Murfatlar Romania produces the Trei Hectare, Zestrea Pinot Noir, Zestrea Muscat Ottonel, Eticheta neagra and Lacrima lui Ovidiu brands and it is market leader with Babanu on the 2 liter segment. “We are market leader in Romania with 25 percent market share”, says Musat.


Like good wine, profits get better with time

Jean Valvis, creator of the Dorna and LaDorna brands, says he has invested EUR 12 million so far in the grapes and wine industry at Samburesti vineyard.

This summer the company launched three wine varieties, Domeniile Samburesti (premium segment), Samburel de Olt (medium and superior segment) and Chateau Valvis (an exclusive collectable wine). “We are still in an early stage. Exports are an important objective for us and we are currently prospecting potential markets such as the USA, Europe and Japan,” Valvis added.

Wine producer Halewood said it was trying to keep a balance between exports and the domestic market. “Exports have gone down in the past few years as some of our clients have been hit by the economic crisis much harder than Romania,” Muntean added. The producer exports to about 40 countries. About 15 percent of its exports go to Asia but Muntean says that now the US has the potential to become the largest wine market. “Along with five other wine producers we have set up an association to access European funds for the promotion of Romanian wine in the US,” the MD said. The project is estimated at a value of around EUR 2.5 million and will involve a three-year promotional campaign.

Halewood announced a 2.3 percent turnover increase for 2009, taking the figure to EUR 9.8 million and this year it expects to make EUR 10 million. Among its best-selling labels are the Prahova Valley Reserve, Special Reserve, Halewood Special Reserve Feteasca Alba and Feteasca Neagra, Private Reserve Feteasca Neagra , Rhein, Hyperion and its HoReCa brand, Single Vineyard Selection.

In spite of the bleak market results in 2010, especially on the premium segment, some businesspeople are still venturing into putting money into wine producing. Newcomer WineRo is the company behind the creation of a new Romanian wine, Alira. The markets that the new brand will target, besides Romania, will be the same as those for EniRa, the Bulgarian wine that WineRo distributes in Romania (as they are part of the same group, Bessa Valley).Out of the total volume, 20 percent will be exported to France, Luxemburg, Great Britain, Germany, Switzerland, Czech Republic, China, South Korea, Taiwan and Japan.

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