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Regional Analysis |
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| April 2nd 2008 |
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| Subdued optimism in Germany |
by Joel B. Payne
Riesling is strong, but rising grape prices and a weak dollar are putting pressure on everyone’s margins,” says Writers have long been fanatical about German Riesling, but the public largely ignored it, deriding it as sweet plonk. Although it is too early to celebrate, producers are pleased with the success they enjoyed in 2007.
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Martin Henrichs, sales director at the Moselland cooperative, with a hint of apprehension. “2008 will separate the wheat from the chaff.” Steven Schindler, the export manager at the German Wine Institute is more optimistic. “Not only is the export value of German wine rising, our reputation abroad is on a roll.”
That may be an overstatement, but there is no question that Germany is slowly coming of age in the wine world’s pecking order. Liebfraumilch, which accounted for 45% of all exports in 1975, has fallen to 20% and been replaced by a myriad of buyersown-brands like Gallo’s Polka Dot, colourful labels and smaller estates. Over that time, Black Tower has grown from next to nothing to a million cases a year, making it Germany’s largest wine brand, followed by Blue Nun, which has enjoyed renewed success since modernising its label and adding line extensions, in the manner of Lindemans, from southern France and Australia. “Not everything has worked out as planned,” reports Armin Wagner, export manager for Blue Nun’s owner F.W. Langguth Erben, “but demand for our off-shore varietals is rising. Consumers see us as a credible brand, but not necessarily German.”
Indeed, being German has not always been an advantage. In fact, even at home Germans long spurned their own wines and bought French labels when they had guests for dinner. That has changed, however, particularly for white wines, but it is nonetheless revealing that the two largest international German brands – Black Tower and Blue Nun - not only do not have German names, but are not even sold in Germany.
Exports rebound
According to the Monika Reule, the newly anointed manager of the German Wine Institute in Mainz, the value of wine exports from Germany increased by 13% to €635m in 2007 - and the average price rose slightly to €2.03 per litre. Export volume also increased by 8% to 3113m litres. Both figures, however, also include foreign wines re-exported by German shippers, which account for almost a third of both value and volume.
Pared back to domestic production, export volumes have been at best stable for the last ten years, but value has risen. That is because German producers have lost market share for generic ‘brands’ such as Hoch, Liebfraumilch and Piesporter quicker than quality wines have taken their place. With a volume of 55m litres valued at €85m, shipments to Great Britain account for about one quarter of German wine exports. Although the British market has shifted its attention to wines in the middle price segment, both volume and value were up considerably in 2007, but still lag behind the shipments recorded in 2000.
Increasing demand for Riesling in the US helped German winegrowers achieve both a 15% increase in volume and 25% increase in value. Germany now ranks seventh on the American import charts, with a value of over €100m, triple the value done in 2000. |
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Regional Analysis |
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Page 2 of 3 |
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In all, Germany exported some 38m litres of wine, almost exclusively Riesling, to the US, with an average price of almost €3 per litre, 50% above the norm.
In terms of value, double-digit growth was also recorded in the Netherlands. The Scandinavians and, in particular, the Norwegians, have also “rediscovered German wines”, as Chrisopher Mostue describes it, making German white wines top bill in some markets.
Although total exports rose in 2007, the elite producers of the Verband deutscher Prädikatsweingüter (VDP) did not profit from the rise. Both 2005 and 2006 were short crops, so that the 198 members, who make little more than 2% of all German wines, were hard pressed to even meet domestic demand. Last year’s yields were more generous. but it is not yet clear, says Steffen Christmann, the club’s new president, whether “our estates will be able to buck the weak dollar and pound.”
Although Reule believes the German wine industry will have further success in export markets, she points out that increasing domestic demand for German wines poses a limit to quantities available for export. For this reason, the long-term goal is not an increase in export volume, but rather a further increase in export value.
Changing colours
Although the share of white varieties has declined from 88.6% in 1980 to 62.2% today, Riesling still covers one fifth, or 21,722 hectares, of Germany’s vineyards. Worldwide, Germany has almost two thirds of the world’s Riesling plantings, leaving Australia with some 4,200 hectares in its wake. Wilhelm Steifensand, general manager of the exporter Valkenberg, is pleased with the development of German Riesling but warns: “The Australians and Americans are becoming better at the game. If you’re talking about individual styles, Germany is unbeatable, but we face stiff competition in building reliable brands for the mass markets.”
Today, though, the country has another fiddle to play. It was not the hype following the release of Sideways that brought Pinot Noir, or Spätburgunder as the German’s call it, back into fashion. It has ridden the crest of the German red wine boom, growing from some 3,500 hectares a generation ago to almost 12,000 today, the third largest plantings in the world - and far more than in Australia and New Zealand combined. Global warming has certainly favoured this development.
Although acclaimed wine writers like Jancis Robinson have embraced German Pinot Noir, the grape is only just beginningto gather the attention of foreign importers, probably because
the majority of the plantings are found in Baden, across the border from Alsace, in a part of the country most buyers have ignored in the past. That said, Bernhard Huber, one of the country’s finest producers, has already shipped a second order to China. His importer, Don St Pierre from ASC, says “it’s still a niche, but there |
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Regional Analysis |
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Page 3 of 3 |
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is definite interest for these wines.”
Changing tastes
The other unmistakeable trend in Germany is the move towards drier – or at least dryish - wines. As the German definition of dry is pinned at 9g per litre, this does leave wiggle room for producers – and off-dry Chardonnay has certainly made Riesling’s task easier. Twenty years ago, two thirds of all German wines, and 100% of exports, were sweet. Today, two thirds are dry or off-dry, and interest for them is growing in many foreign markets.
Although there is currently much talk about small producers, as in Burgundy most of these estate have only five, ten or fifteen hectares - and given domestic demand, few export more that 20% of their crop. Ambassadors like Ernie Loosen, Johannes Selbach and Josi Leitz have thus slowly moved beyond their estate concepts and now ship wines they have purchased in bulk and bottled. Loosen and Selbach are not far from two million bottles a year in export, a surprising volume that proves how important contacts are and will remain. “If you don’t see your importers and their major clients regularly,” say Ernie Loosen, “you are soon forgotten.”
Two thirds of all exports are currently moved by the ten shippers in Table 1. Interestingly, WIV from the Pieroth family,and one of the largest wine companies in the world, with an annual turnover of €470m, did not make the cut. “German wines in export amount to ‘only’ 2.6m bottles,” said Dr Johannes Pieroth. “I am surprised. I thought we sold more.”
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