Wine shouldn’t be about politics,” a Moldovan winemaker said recently, but that seems an impossible dream in a country where wine has so often been used as a political football. It’s one of the few Moldovan industries that can earn significant export revenue, or at least has done in the past, in this tiny impoverished country that imports 70% of its consumer goods.
Wine crisis
Moldova continues to be battered by financial and political challenges, often beyond its control, and wine gets caught up in all this. Wine accounts for around 7% of exports and over 14% of agricultural GDP, and employs around 250,000 people in wine and related industries. Back in 2005, wine was the biggest export earner after expat workers, mostly going to Russia, with a value of around $300m. The Russian ban in 2006 cost the industry an estimated $200m in direct losses, with stock confiscated and destroyed (even when it hadn’t been paid for) and around 60 wineries forced out of business. When this ban was lifted in 2009, many wineries returned to Russia, a market they understood and were set up for. The second ban of 2013 is proving tough across the industry.
Dmitry Munteanu, managing director, National Office for Vine and Wine, says, “Our exports dropped by 30%, because Russia remained the key market for our wines even after the first embargo in 2006. So we have estimated that due to the second embargo the Moldovan wine industry lost another $200m in sales. And we have some unsold stocks from previous harvests, and these stocks cause pressure on wineries: they have bank loans and debts for purchased grapes.” He adds, “Growers are affected to. Demand for grapes and prices per kilo went down. Many wineries last year processed only their own grapes, and did not buy any grapes from winegrowers.”
It’s worth a look at the wider political and economic situation in Moldova to understand why wine is so critical. Moldova officially has a resident population of just over 3.5m, but up to one million people work abroad, sending home remittances worth $1.6bn in 2014. Two-thirds of this money comes from Russia and this fell 20% in the last quarter of 2014 due to the collapse of the ruble. Earnings at home have also been hit by the recent devaluation of the Moldovan Leu (MDL), which has fallen by around 36% in the 12 months to February 2015. The average monthly wage in Moldova is 4,865.00 MDL, or around $260.00 — much less than before the currency crisis, while the minimum wage more typical for vineyard workers is just 1,800.00 MDL or $96.00 per month. With even bulk wine in supermarkets starting at around $1.05 per litre, it is still an unaffordable purchase for many Moldovans. The country has a GDP of close to $8bn, while exports are worth just $181m. To add to its woes, this troubled country has been hit by massive bank losses. Unsecured loans worth 10% of GDP to banks with links to Russia were transferred out of the country, forcing several banks into administration. This leaves the country with reserves of less than $2bn, leaving it unable to act to limit currency devaluation and seeking a possible bailout from the IMF or World Bank.
On top of the financial troubles come inevitable concerns about Moldova’s neighbour Ukraine. It was previously an important export market for Moldova but, due to the war, “There has been a decline of exports to this country of both bulk and bottled wines, about 70% and 25%, respectively,” says Munteanu.
Conflict zone
Standing in the vineyards at Purcari highlights quite how close by this vineyard zone is to both Ukraine and the breakaway region of Transnistria, with the border just a few kilometres away. Unconfirmed reports suggest that Transnistria has asked to join Russia and its new customs union, which gives Moldovans concern that any moves in this direction would provide a foothold for Russia to move on western Ukraine. One winemaker with friends in Transnistria believes that Moldova is talking up these concerns to secure more support from Europe, “We had our war in 1992 and no one wants to go through that again,” he says.
The pro-Russian autonomous province of Gagauzia is another concern. Munteanu says, “I hope that Gagauzia will not be another break-away region. Russia is trying to ‘drive a wedge’ between Gagauzians (which mostly are pro-Russian) and pro-European Moldovans by giving a special regime for export of their products. For example, wineries from Gagauzia have the permission for export to Russia from Russian authorities.”
Even developing new PGIs for Moldova gets political – it seems the key towns of Comrat and Vulcănesti would prefer their own PGI rather than being part of the southwest region of Valul lui Traian, according to Gheorghe Arpentin, MP and president of this PGI. And there is some concern that Moldova’s south-eastern Stefan Vodă region could be cut off by these two regions turning east. On the other hand, neither Gagauzia nor Transnistria have any direct border access to Russia without going through western-friendly countries, and in reality, while five wineries in Gagauzia have the right to sell in Russia outside the embargo, they donʼt, because the Russian market is too hard to get back into given the poor reputation of Moldovan wine there.
So returning to wine, some wineries have been hit harder than others, according to Ruxanda Lipcan of Fautor, “For wineries who had laid hopes on the Russian market, things are grim, others who had ignored Russia are OK.” Victor Bostan, owner of Bostavan, formerly called Purcari, says, “We didn’t go so massively back into Russia but we had gone back – Russia took 14% of our exports, though this time we made sure our stock wasn’t liquidated and our payments were mostly secured.”
Improvements being made
There are several aid projects working with wine in the country, including Filière du Vin, a joint government and European Investment Bank project worth €75m over 12 years. Its aim includes helping to restructure the industry through providing loans for investments by Moldova grape-growers, winemakers and supporting industries, plus offering technical assistance from foreign experts in winemaking, viticulture and wine marketing. As Graham Dixon, a winemaking expert to the project, points out, “Some Moldovan wine exporters have re-oriented successfully to Western markets since the first Russian embargo in 2006, and are offering wines at least as good as other exporters into Western Europe. However, most are still marooned with business models and wine styles tuned to the traditional Russian market.” And by this he means, “Inappropriate wine styles for priority markets. For example, sweet reds, from grapes often picked under-ripe, that the Russians used to appreciate.” And Gheorge Arpentin, winemaker and politician, adds that there is a considerable amount of stock of this unsaleable wine in Moldova: 1.8m hL of declared stock holding at end of August 2014, added to by the production of 1.1m hL from the 2014 harvest. Arpentin says, “This should be distilled as it is often undrinkable and was made for bulk markets like Russia.”
Munteanu admits that Belarus, Russia, Kazakhstan and Ukraine remain the main markets for Moldova’s wines – up to 70% for bulk wines, up to 50% for bottled wines, and up to 80% for wine distillates. “But in recent years our exports to other markets continue to grow,” he says. “In 2014 we increased our exports of bottled wines to Europe by 11% in volume and by 25% in value.” He says the top European markets are: Poland, Czech Republic, Slovakia, Romania, Germany, Latvia and Lithuania. “We have also increased sales in the US, China, Japan and Nigeria.”
There is starting to be positive news for some producers in key export markets. The Fox News programme highlighting US Senator John Kerry’s visit to Moldova has helped some – Alex Luchianov of Et Cetera sold some of his Cuvee Rouge to the US after it appeared on the programme and he also reports that Angela Merkel has asked for a wine shop in Berlin to import it, too. “Word of mouth is key to us,” he says.
In the UK, Beth Willard of Laithwaiteʼs has imported Albastrele wines for over 10 years, but she is listing a new Cabernet Sauvignon from Château Vartely for both the UK and US businesses and will take some top-end wines from Purcari too. “We want to engage our customers with not just the wines, but the region, people and history,” she says. “We think there is scope to do something on a big scale this year and the new release from Château Vartely will form the basis of a renewed focus.” She adds, “It’s more than just offering a great value wine or a new variety. Moldova gives us something to talk about and champion. With the bans imposed by Russia, and the war in Ukraine, Moldova has lost its export markets. This doesn’t just mean difficulties for the wineries themselves, but also for all the people involved in picking the grapes, processing them, working in glass, cardboard and label production.” Willard says she really likes the idea that “we can help bring a region’s wines to market and help support the local economy.” Martin Hudson MW of Berry Bros. & Rudd has taken on several wines from Purcari, including the legendary Negru de Purcari and intriguing local Rara Neagra, and a parcel of Freedom Blend – “a great wine and a great story,” according to Hudson. This is a blend of three native grapes from the three former Soviet states that are being oppressed by Russia (Saperavi from Georgia, Rara Neagra from Moldova and Bastardo Magarach from Ukraine). Hudson says, “Negru de Purcari, at a higher price point, is more of a hand sell, but we do see repeat business once consumers have tried it, and all the wines are starting to attract interest in the more innovative sections of the restaurant trade.” Asconi Winery has found a UK importer in C&O Wines under the Merry Mole label, but for them Czech Republic followed by Poland are the most important markets. China is also growing, taking, “Ninety percent fruity reds, but the south is also starting to buy whites to go with food,” says winemaker Ion Mereuta.
Communication has to be a priority for the Moldovan industry looking to the future. “We are focussing on markets like Poland, Czech Republic, Romania, China, USA, where we believe we can have good results,” says Munteanu. “We are going to implement some integrated marketing campaigns. So in the long term we would like to reorient our exports to stable developing markets, to build brand awareness of Wine of Moldova, and a positive image of our wines and added value, in order to give possibilities to Moldovan wineries to sell their wines at better prices.”
The challenge is for Moldova to reinvent itself properly this time, as a modern European wine country finally free from the chains of its Soviet past. It won’t be easy, but it has no other choice.
