 |
Regional Analysis |
|
|
Page 1 of 3 |
|
|
Once a major producer of low cost and high volume wine for the vast Soviet market, as well as bargain basement wines for export to the west, Romania today is a country transformed. It has one of the highest economic growth rates in Europe, averaging over 6% for the last five years, and this has attracted considerable investment. Undoubtedly, Romania has benefited from pre-accession funding through the Union’s Special Accession Programme for Agriculture and Rural Development (SAPARD) programme. The wine industry received €35m ($50m) between 2002 and 2006, which has been invested into vineyard programmes and winery improvements. Moreover, Romania expects to receive further funding from the European Union, especially through the European Agricultural Fund for Rural Development.
Vanishing vineyards
Romania has long been one of Europe’s most important wine producers. Vineyard area hit a peak of 340,000 hectares in the early 1970s, when emphasis was on production of high volumes to supply the ever thirsty Soviet market. Immediately prior to the revolution in 1989, vineyard area had fallen to 277,000 hectares and this downward trend has continued to the present level of around 170,000 hectares. Due to the size of the industry and the complexity of fragmented land ownership (there are estimated to be up to a million vineyard owners), Romania’s vineyard register is still incomplete and the country has a derogation until 2010 to complete its inventory. Industry sources estimate that only some 89,000 hectares are Vitis vinifera, the remainder being hybrids that must be removed by 2014. Romania has thus negotiated the right with the EU to replant 30,000 hectares to vinifera varieties. The average harvest size over the past five years has been around 5m hectolitres, although this varies annually according to weather conditions. The harvest in 2005, for example, was notably badly hit, falling to just 2.6m hectolitres. A major concern since joining the European Union has been the issue of seasonal workers. Very little mechanization exists within the growing sector, so hand labour remains essential, but workers are increasingly finding wages more attractive in other European countries. In recent vintages, anecdotal reports indicate that sizeable vineyards have gone unpicked due to lack of workers.
Forward-thinking producers are planting new vineyards with steel posts and trellising suitable for mechanisation, should this be required in future. They have also recognised that control over fruit quality, as well as supply, is essential and have thus invested in vineyards, as well as methods for working more closely with growers (including influencing vineyard management and picking time). Industry data for 2005 shows that the most planted varieties by far are two white varieties, Feteasc Regal (17,700 hectares) and Feteasc Alb (9,800 hectares), followed by Riesling Italico. Merlot is the most planted red variety at 9,800 hectares, then Cabernet Sauvignon at 8,500 hectares. Pinot |
|
|
|
|
|
|
|
|
Regional Analysis |
|
|
Page 2 of 3 |
|
|
Noir covered just 500 hectares, while the country’s signature red, Feteasc Neagr, covered 1,300.
The domestic scene
Although the country is divided into seven major wine regions and there is an agreed list of sub-regions, outside the local market these are not widely used as a selling tool. Table wine still accounts for 75% of production, with quality wines divided into recognised geographical descriptions and the Romanian DOC (denumire de origine controlat). The Romanian wine industry is largely shaped by its strong domestic market, consuming well over 90% of production. Per capita consumption is approximately 22 litres, well below the European average of 33 litres per head. However, because of its large population, Romania remains one of the top ten world markets for wine and is not due to be overtaken by Russia and China until 2010. This domestic consumption, however, does not include homemade wines, which are still commonplace, especially in rural areas. Industry sources are anticipating that wine consumption will continue to grow by 6-7% per year, driven by increasing wealth, and by supermarkets capturing larger market share.
Analysts expect supermarkets to increase their current 30% share of food and drink sales to 50% by 2010. There are now over 900 supermarket outlets in Romania across the country, including several international groups. On one hand, producers are concerned about ever greater demands for listing fees and rebates as well as concerns about cheap imports – and hard discounters selling only a limited range of private labels. More positively, other producers see the benefits of bringing commercial wine to the public via supermarkets, with their responsibility to their customers, and switching drinkers from homemade or black-market wines sold through kiosks or at the roadside. Romania became a net importer of wine in 2006. Although a detailed breakdown of information is not available, it appears that a lot of this is cheap bulk, bottled locally, to compensate for the short harvest in 2005, especially from Moldova which lost its major market in Russia in 2006. In 2007, imports of bulk from Moldova have fallen, partly due to loss of favourable trading terms once Romania joined the EU and partly to quality concerns raised by the consumer protection office.
Other major sources of supply are Spain, France and Italy, though these have all been hit by larger harvests in Romania in 2006 and 2007, with a consequent drop in local bulk prices. At the same time, bulk prices in Italy and Spain have increased following difficult harvests and a less favourable exchange rate. Bottled imports, including global wine brands, appear to have made a huge step forward in 2007, with several major producers taking on agency portfolios. Carl Reh works with Foster’s Wine Group and has plans to import a major US brand in 2008; Halewood’s range includes Antinori, Trapiche, Villa Maria and Torres; and Cramele Recas has just launched a portfolio |
|
|
|
|
|
|
|
|
Regional Analysis |
|
|
Page 3 of 3 |
|
|
including Codorniu, Masi, Cono Sur Gonzalez-Byass, and Constellation. Pernod-Ricard is also importing Jacobs Creek through a local subsidiary, though it is not yet on shelf.
Big company dominance threatened?
Four large companies – Murfatlar, Jidvei, Cotnari and Vincon – currently dominate the domestic market, with a 69% share by value in 2006. However, it is notable that a number of boutique wineries have appeared recently, driving quality and innovation, including SERVE, Prince Stirbey, Vinarte and Davino. Exports are limited, but sales are very healthy in the domestic hotel and restaurant sector. Several of the bigger wineries have followed suit with premium offerings from vineyards such as Murfatlar’s Trei Hectari brand, Carl Reh’s La Cetate and Val Duná, Halewood’s Cherry Tree Hill and Byzantium ranges as well as Recas’s La Putere and Sole.
The most dynamic wineries have also benefited from foreign investment and international winemaking expertise, to help them to improve quality for both the domestic and export markets. The strong domestic market enables high value and profitable products to be sold, so much so that some producers have pulled out of export contracts. The downside of this inward focus is that some producers have failed to respond to changing consumer demand, and may find it increasingly difficult to compete against imported wine brands, especially if they become the fashionable choice. In the longer term, consumer tastes are likely to switch towards the style of such imports, that is towards drier white wines and a higher proportion of reds.
The export picture
As far as exports are concerned, Romania still retains its image of low-priced and low quality Eastern Bloc wine on most markets and this perception will take time to change. Germany remains the top destination for Romanian wines, with sales for first nine months of 2007 reaching 4.8m litres, predominantly in bulk, though reported to be in steep decline. Russia has taken the number two spot, and this is largely bottled wines at relatively high average prices, as a result of a surprisingly successful export promotion programme. Estonia, Belarus and Bulgaria have also seen increases in 2007, while the US, UK and Scandinavia have lost share. This is almost certainly due to the lack of attention paid to these markets by individual producers who prefer to concentrate on selling at home where prices are higher as well as due to very limited generic promotional activities. In 2007, plans were put in place for a Romanian Wine Institute to focus on wine marketing, including generic promotion of Romania’s wine culture and providing market support. The plan is be funded by an industry levy, plus government funds if EU regulations permits, though as yet no practical progress has been made.
Future Directions
The wine industry in Romania is changing rapidly, and as one of the largest wine markets in the world, it is likely to gain increasing attention from global brands seeking out a new pool of wine-drinking customers. The domestic industry will have to work hard to react to increasing competition from imports, as well as changing consumption patterns driven by increased wealth, an aspirational middle class and the increasing presence of modern supermarket retailing. Interesting times indeed.
|
|
|
|
|
|
|
|
|
