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Regional Analysis |
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One of the world’s least-known wine producing countries, Moldova is one of 15 independent states that emerged from the collapse of the Soviet Union. It is probably unique in exporting 99% of its wine. For much of the 20th century, most of that went to the Soviet Union. Although it was sometimes swapped on a litre-for-litre basis with petrol in the late 1980s, Gorbachov’s famous – or, in Eastern Europe, infamous – efforts to combat alcoholism almost crippled the industry. So, even before Moldova gained independence in 1991, there were hopes that western markets might prove as fruitful as they had already done for Bulgaria, Hungary and Romania.
In 1988, a visit for British buyers, and this writer, led to the export to the United Kingdom of small batches of mature red wine from Purcar, which attracted favourable critical comment. A few years later, Southcorp the giant Australian company, believed in the potential of Moldovan wine sufficiently to launch a joint venture with the Hincesti cooperative in which the New World company initially exchanged equipment (in the shape of a new bottling line) and expertise (from the flying winemaker Hugh Ryman) for wine. The project almost foundered because a rival firm, employing another flying winemaker, Jacques Lurton, was under the impression that it had secured an exclusivity agreement for all of Moldova’s non-Russia-bound export wines.
In the event, it was established that the government official (still involved in the Moldovan wine industry) had no prerogative to make any such exclusive deal and over 150,000 cases of joint venture Hincesti wines were produced and exported. Initially these had to leave Moldova under armed guard to protect them from potential interference, but they made it successfully to the UK where they were sold under the Hincesti label, and to the United States where they were branded as Hickory Ridge. After three vintages, however, the Australians decided the combination of quality control issues and the difficulty of selling Eastern European wine at the target price of £3.99 in the UK and under $5 in the US made the venture unappealing. As Michael Paul, then head of Southcorp Europe recalls. “we were making good wine, but we were pulled down by the low price image of other wines from the region”.
Southcorp’s competitor also floundered and outside wine companies unsurprisingly lost attention for Moldova as a potential supplier of wines to the west. In 2004, less than 2.5% of the volume was exported beyond Russia and the Commonwealth of Independent States (CIS). Under half of that went beyond the old Iron Curtain, as Poland, Lithuania and Romania remained loyal customers.
Decline and contraction
In the 1990s, Moldova went through a dismal period. Its economy shrank by 60%, rural illiteracy tripled and life expectancy dropped by five years, partly as a result of soaring rates of diseases like typhus and tuberculosis. The wine industry |
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Regional Analysis |
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also suffered, as elsewhere in this part of Eastern Europe, from the way in which land was privatised. Unlike some other regions, Moldova had a system of collective farms, or kolkhoz, which allowed villagers houses and small plots of land on which they could farm vines, other crops and livestock. After 1991, instead of returning land to its original owners or their heirs, Moldovan land was redistributed to the collective members who were given unworkable and tiny non-contiguous plots plus shares of the collective winery and its fittings. There were widespread stories of windows, doors and pumps being removed by the new owners, who sold them to make up for the income they were no longer earning.
The low point of recent Moldovan history was in 2001, just before the election of a new communist government. Since then, thanks partly to grants from richer countries, the picture has looked a little rosier, with GDP growing from nearly $1.3 to $2.9 billion (€2.1b) in 2006. Moldova is now a little healthier economically than it was when the Iron Curtain came down, though it remains one of Europe’s poorest countries. According to the World Bank, 2005 GDP for each of the 4.6 million inhabitants was just $811.50, with an average monthly salary of $105, less than a third of the $324 earned in neighbouring Romania. Around a million Moldovans – a quarter of the workforce - live outside the country now, and contribute to their families’ livelihood at home, but Moldova has not yet created the kind of middle class consumer economy that is seen elsewhere in the region. The country’s first hypermarket only opened recently in the capital, Chisinau, a full decade after the citizens of Bucharest were first introduced to this aspect of western capitalism. Sales of wine to Russia were still crucial to the economy.
Gorbachev Plus
This was the background to what one Moldovan ironically called “Gorbachev Plus”, the decision by Vladimir Putin to ban Moldovan and Georgian wine imports ostensibly on grounds of their dangers to health, but in reality in an effort to force the governments of these republics to pay increased prices for Russian petrol. Although the ban on Moldovan wine was lifted early in 2007 following a failure to support any of the accusations against its producers, it seems that Russian officials are still being rather more obstructive than their president’s
pronouncements might lead one to expect. The impact of Russia’s bullying behaviour is all too evident from 2006 export statistics. In that year, Russia bought only a quarter of the wine and brandy it had been shipping and total exports amounted to $187m, compared to 2004’s high of $411m. The volume of exports to non CIS went up to 34% that year, but the value of those exports was, at $0.65 per litre, low compared to the dollar a litre traditionally commanded by these products. Another weakness of the industry is the prevalence Vitis labrusca vines, whose wines, though |
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Regional Analysis |
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internationally unacceptable, traditionally suited the Russian market.
A large question mark hangs over Moldova’s ability to rebuild its Russian market. According to Dinara Smardakova, import buyer of Dionis, a company that produces wine in Moldova, Georgia and other countries, while many Russian consumers will have discounted government-fed media stories about the dangers of drinking Moldovan wine, perhaps as many as 25% may still believe it. And, though Ms Smardakova doesn’t say so, the fact that similar accusations about Georgian wine received independent support may lead some people to imagine that the presence of smoke may indicate a smouldering fire.
Even more significant has been the speed at which wine producers in other countries have moved to fill the vacuum created by the absence of Moldovan and Georgian wines. Russia’s increasingly sophisticated wine drinkers are being treated to an ever broader range of wines from countries like Greece, Portugal, Chile and Australia. Spain is now the largest single volume supplier to Russia. Precisely the same phenomenon is to be seen elsewhere in Moldova’s traditional Eastern European markets, some of which are part of the European Community. This is the unprepossessing context against which a group of Moldova’s biggest and most dynamic independent wine producers formed a promotional Wine Guild along the lines of Portugal’s vinous G7. So far, the Guild has exhibited at events such as the London International Wine Trade Fair and Vinexpo. Reactions to the wines were mixed, with the age of some of the white wines attracting coment, along with the need need to adapt labelling to export markets. While opinion was mixed about the export potential of traditional grape varieties, there were positive comments from buyers such as Nick Room of the British retail chain Waitrose, which has sold Moldovan wine under the Firebird label for two years. The range was created with guidance from British consultant Angela Muir, who now has better knowledge of the Moldovan wine industry than any other outsider. Room said the 2006 Firebird Merlot rosé “was a delight and shows just what potential there is in the eastern block”. He was also impressed by the 2006 ‘Taking Root’ Bastardo Cabernet, produced by the giant Acorex in conjunction with UK importers PLB. Modern wines like this and the ISO-standards to which the top producers now aspire, should help Moldova to build a market beyond Russia. But the size of that market remains to be seen.
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