Moldovan wine goes upmarket

By bne IntelliNews May 15, 2009

Graham Stack in Chisinau -

Beyond the clamour and colour of Moldova's "Twitter revolution" in April, a silent revolution in the tiny ex-Soviet country's wine industry might change the country more fundamentally. A 2006 Russian ban on Moldovan wine forced leading wineries to raise their sights and aim for western markets.

First the bad news: Moldova's thousand-year-old wine culture has suffered three severe set backs over the last century and a half. At the end of the 19th century, it was devastated by phloxera. Then, under Mikhail Gorbachev's Perestroika-era anti-alcohol campaign, 50% of vines were grubbed up. The latest affliction came in 2006 in the form of a Russian prohibition on wine exports, motivated by Moldova's flirting with Nato.

Considering that winemaking accounts for 20% of Moldovan GDP, 28% to 30% of export revenues, employs around 27% of the labour force, and that around 85% of Moldovan wine was exported to Russia, this was more than a major problem. By January 2007, Moldova had lost an estimated $180m in sales. Wineries soon found themselves unable to service their bank debts, and 30% of them had been taken over by banks or were facing bankruptcy.

The good news, though, is that Moldova's leading private wineries used the shock to "desovietise" and began switching their focus from the Russian market to European markets, changing their product and whole business approach in the process.

More of an odour than a bouquet

Every second bottle of Soviet wine was Moldovan, but this spoke about quantity not quality. Wine in Soviet times was little more than alcoholic fruit juice to be swashed down before the real drinking began, packaged in gimmicky bottles, and vinified semi-dry or semi-sweet. Quality dropped further in the nasty 1990s. Former top Georgian politician Irakli Okruashvili infamously described the wine that Georgia exported to Russia as "shit," and the epithet could equally have applied to Moldovan produce at that time.

With economic growth restarting in 2000, Moldovan wineries started to invest in western equipment. The closing of the Russian market in 2006 then forced them to go the whole hog and try their luck on Western markets. "In 2007, six wineries formed an association, the Moldovan wine guild, to position themselves more strongly on foreign markets," says Dumitru Tcaci, marketing director of winery Ch-teau Vartely and also of the Moldovan Wine Guild. The other members include Acorex Wine Holding, DK-Intertrade, Lion-Gri, Vinaria Purcari and Vinaria Bostavan.

"These six companies constitute one-third of Moldova's total wine exports," says Tcaci. "We want to become a strong marketing organization and boost the international competitiveness of each individual member. The six companies are the leaders in supplying Moldovan wines to the European market, and have all won awards in prestigious international contests."

The Moldovan wine guild was supported by USAID, the US economic assistance agency. According to Douglas Griffith, the chief consultant employed by USAID to refocus Moldova's wine industry towards European consumers, marketing alone wasn't enough. "The product has to change as well and our work consisted of helping the wineries develop new skills and adopt new practices for producing new internationally recognized styles, such as the younger, fruitier wines produced in Australia, California, and Chile."

"The newly founded Moldova Wine Guild demonstrates the commitment of seven major Moldovan wineries to create a category of high-quality Moldovan wines that can compete internationally; and it is already putting Moldovan wine on the map.," believes Griffiths.

The basic shift was from Soviet-style sweet wines to the dry reds acceptable to European palates. This was coupled with developing internationally appealing brands. DK-Intertrade's Firebird Legend is now widely available across Eastern and Western Europe, with a UK listing. Acorex developed the "Taking root" brand.

According to Tcaci, 12% of the value of Moldovan wine exports in 2008 went to the EU, up 27% on 2007. Admittedly, almost 40% of this amount went to Poland. But the Moldovan wine guild is also aiming to break through to Western European markets. UK sales doubled from 2006 to 2007, albeit from a low base.

Moldovan wine is also gradually finding its ways back to Russia after the import restrictions were eased in late 2007. Sales to Russia grew by 50% in 2008. However, a strict new regulatory regime means additional expense, so that Moldovan wines have moved up a price category. Now they compete in the same price category as the Bulgarian, Argentinean and Chilean wines that replaced them on Russian shopshelves during the ban.

In addition, market research shows that Russian tastes are changing from Soviet to European, ie. from sweet to dry wines. So the virtues developed by the Moldovan wine guild members will be just as needed to regain their previous share of the Russian market as to crack Western markets.

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