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Commercial sEUicide?

Published:  23 July, 2008

As Hungary prepares to join the EU in the spring of 2004, Robin Young and Jack Hibberd look at the possible effects of EU entry on the country's wine industry and examine the performance of Hungarian wine in the UK

Hungary was once the third force in winemaking, a country with a classic winemaking tradition that yielded pride of place in books of wine reference only to France and Germany. But that was in the century before last, and how the mighty Magyars have fallen. Apart from the great botrytis wines of Tokay (which are a case apart) Hungary is more famous for its high suicide rate (reportedly the highest in the world) than the quality of its still, dry wines. Bull's Blood (which, despite its name, is often rather thin and weak) is probably Hungary's second most famous vinous export. Unfortunately for its producers in the region of Eger, the former high street favourite has now rather fallen from grace. Rupert Lovie, marketing manager at D&D Wines (the importer of a Bull's Blood sourced from Egervin, the region's largest producer), says pushing Bull's Blood is not something we spend much time on'. The type of customer who buys Bull's Blood tends to be the older customer. They make repeat purchases and are pretty loyal, but there aren't that many of them.' Hungary now accounts for just 1.5% of the UK's wine imports and languishes in 10th position by value, and 11th by volume, among this country's wine sources. Furthermore, the latest Nielsen figures (September 2003) are showing a drop of 3.5% by volume (to 8.15 million litres), with value dropping by 3%. Wine is no longer regarded as a significant contributor to Hungary's agricultural export earnings, with the average price of a litre of Hungarian wine leaving the country, according to the Hungarian government's own figures, now just E0.62 (43p). Even the country's most serious winemakers find it almost impossible to sell anything in this country at a retail price exceeding 3.99 a bottle. Furthermore, Hungary's hectareage under vine has diminished from over 100,000ha in 1995 to less than 80,000ha now. Nevertheless, Hungary still exports more wine to the UK than New Zealand, despite the latter's high profile, and a similar amount to the country of the moment, Argentina. Its wines are seen as good, if generally not great, and the whites especially, can represent terrific value. At least two companies in the UK, Myliko and Bottle Green, have developed a strong branded presence with their respective main brands, Chapel Hill and Riverview. And as David Gill, sales director at Bottle Green, says: The drops in sales of Hungarian wine have, for the most part, been due to a drop in the number of supermarket own-label wines and a general squeezing of the fixture. Riverview sales have been going very well.' Add in the strong domestic demand for Hungarian wine and decent sales to Scandinavia and Germany (in volume if not value terms) and the situation for Hungary's wine industry might not be quite as bad as it first seems.

Joining the club The impending entry of Hungary into the EU club in the spring of 2004, however, has meant a few clouds of anxiety are hovering over Hungary's vineyards and wineries. A number of quality winemakers are concerned that when the country accedes to the European Union next year (and more rigorous standards of quality control and traceability are introduced), the standard of its mediocre, and too often fraudulent, bulk wines will trigger a major, and perhaps terminally damaging, scandal. The Socialist-led government has nonetheless committed itself to promoting wine once again as an image-raising flagship of quality production, even though at present Hungary's appellation system, with unpronounceable names and no fewer than 22 separate wine regions, has no statutory means of quality enforcement. Dr Tibor Szanyi, state secretary at Hungary's Ministry of Agriculture and Rural Development, says the government believes the only way forward is to ban the exportation of wine in bulk and to insist on quality enforcement and bottling of all wine production at source. Wine exported in bulk, he says, is too easily relabelled fraudulently once it has passed beyond Hungary's borders. The state secretary readily admits, though, that the vested interests opposing such an initiative will be formidable. Unless we can get this sorted out by next year,' says Zoltan Heimann, a tenth-generation wine producer in Szekszard, the scandal caused by Hungarian wine frauds could engulf us.' Heimann, a personal friend of Dr Szanyi, goes so far as to say that at present some Hungarian wines are of such dubious quality that he doubts they are even made with grapes, and he fears that the closer attention paid to wines of Hungarian origin after EU entry may show up the shortcomings of the worst rather than highlight the attractions of the best. The other fear is that when EU legislation that guarantees a relatively free market comes into force, a flood of cheap, bulk wine from the New World will rush to fill Hungary's hitherto protected supermarket shelves. Zoltn Blo, export director for the German-owned Hungarovin, by far the biggest producer in Hungary, isn't too worried: I don't think there will be a problem,' he says, I can't see Hungarians rushing to drink Australian wine, which would probably still be more expensive than the home-grown product anyway. Commercially, it will make little difference, and personally, I like it that we are becoming part of a group of developed nations.'

A premium problem? The producers who have most to lose, however, are not giants such as Hungarovin (which dominates both the still and sparkling sector domestically and exports large amounts to Scandinavia and the UK through Myliko), but smaller producers in the emerging premium wine-producing regions such as Villny. High demand for quality reds in Hungary, particularly from the on-trade, has caused prices to rise. Attila Gere, a key producer in Villny, has a spanking new state-of-the-art winery, and at present commands premium prices (E10 ex-cellars for gutsy Kkfrankos, E8.5 for Cabernet Sauvignon from barriques and E13 for Cabernet Franc). So does his neighbour, Jozsef Bock, who is also extending his winery (from E5 for light, everyday Kkoporto to E11 for Cabernet Franc and over E32 for his top Capella Cuve). Villny certainly has more to lose than most. Its Cabernet Francs so impressed Michael Broadbent MW that he told the producers: Cabernet Franc has found its natural home with you.' But will they be able to maintain such prices when Common Market competitors at present largely absent from Hungary's Tesco and Auchan hypermarkets sweep in? Similar doubts hang over the serious wineries constituting the Guild of Eger, producers of the country's best Bull's Bloods (Egri Bikaver), such as Galbor Pincszet (established in 1993 by Sassicaia's creator, Nicolo Incisa della Rochetta, and Tibor Gl, the Hungarian who was formerly winemaker at Tenuta dell'Ornellaia in Tuscany), Pok-Polonyi Pince and the highly reputed family winery of Vilmos Thummerer. Recently Hungary's premium exporters suffered another blow when the leading British specialist importer for Central and Eastern European wines, Wines of Westhorpe, went bust. We were asked to take over the business,' says Eva Keresztury, the dynamic director of Hilltop Neszmly Ltd (a company which produces over 10 million bottles a year and exports no less than 88% of them to the UK, where they are sold through Bottle Green under the four-strong Riverview label), but we found they were supplying the Gay Hussar, London's solitary Hungarian restaurant, and that was about it.'

Image? What image? For the big guns of Hungarian wine in the UK, EU entry and problems at the premium end are of little concern. More important is raising the profile of Hungary as a whole and, ultimately, keeping their wines on supermarket shelves. At present we sell Hungarian wines in Britain despite the fact that they are Hungarian, not because of it,' says Keresztury. Blo points out that Hungary doesn't suffer from the same negative connotations that stalk Romania or Bulgaria, it just doesn't have an image. If you go to the "average" UK consumer they don't really know anything about the country,' he says. Hungary was on the news a bit when the Iron Curtain fell, but that was 12 years ago now. Maybe when we join the EU our profile will rise.' Budapest, beautiful and interesting though it is, hasn't experienced the same tourism boom as, say, Prague, which in turn has massively raised the profile of the Czech Republic's main alcoholic export, beer. We should encourage people to come to Budapest for long weekends,' says Zoltn. But it is a lot cheaper to fly to Prague than Budapest, and the Czech tourist board has been a lot more active than ours in countries like the UK,' he adds. The Hungarian government has increased funding for the Hungarian Food & Wine Bureau (after two years of limited activity), which is run in the UK by the promotional agency RGS. Patrick Gooch, who fronts the Bureau, says that generic activity should step up in 2004. There will be in-store promotions and a PR campaign,' he says, along with a generic tasting which should take place in March.' But the problem is not just how the consumer views Hungary, it is also how buyers view it. It is an uphill struggle to get supermarkets to give Hungarian wine much prominence, admits Dr Arabella Woodrow MW, once chief buyer for the Co-op and business development manager at Myliko. These days Hungarian wines are as likely to be hidden among the American or the Spanish as among their Central and Eastern European neighbours,' she says. Even when they are shelved separately, there are so few that they are easily overlooked. But to get a wine as obscure as ZZ Pzmndi Zenit-Zefir [a distinctly unusual, full-bodied and aromatic white] into Booth's, where it sells at 3.79, does give some small encouragement that all is not yet quite lost.' Myliko also has a number of other Hungarian wines with listings on UK supermarket shelves. The majority come from either the Hungarovin-owned Balatonboglr winery (and are sold under the Chapel Hill label) or from the privatised co-operative Nagyrede. Quality from both these sources is extremely good, especially at the price they sell for. Flying winemaker Clive Hartnell is carrying on the improvement work started by Kym Milne MW - who introduced cold fermentation, the chilling of juice, the use of nitrogen to prevent oxidation and a host of other winemaking improvements - and vine doctor Richard Smart is also working with the Lake Balaton-based winery on new trellising systems. Myliko's latest move was a redesign for Chapel Hill (3.39 to 3.99, widely available), and Nish Kotecha, marketing director at Myliko, says sales are holding up well in a declining category. We have just added a Pinot Grigio to the range, which will go into Waitrose,' he says, we are seeing a lot of demand for Pinot Grigio at the moment and Hungary has a large amount of high quality Pinot Grigio at a good price.' Kotecha highlights the Nagyrede winery's Cabernet Sauvignon Ros as another success story: Sales are currently around four times ahead of forecast,' he says. While the other wines in the N' Nagyrede Estate range, a Pinot Grigio, a Chardonnay and a Sauvignon Blanc (RRP 3.99, with full margin', according to Woodrow) are also holding up well. Other wines imported into the UK by Myliko include two sparkling Chapel Hill wines (a Chardonnay and Chardonnay/Pinot Noir); a red and a white designed to be drunk with spicy food, which are sold under the Spice Trail brand name (3.99, widely available); and a number of own-label wines.

Value, value, value Myliko and Bottle Green also provide wines for the Thresher Group's new merchant brand, Talaris, a four-strong Eastern European brand that incorporates three Hungarian wines. Balatonboglr is providing a Pinot Noir, Hilltop a Sauvignon Blanc and Nagyrede a Chardonnay. Eastern Europe has the ability to produce fresh, fruity wines at very competitive prices,' says James Griswood, the buyer responsible for the range. The idea behind Talaris was to get the best of these new-style wines and group them together under one brand, which consumers could be confident about choosing.' The most successful Hungarian wine in the UK, however, remains Hilltop's Riverview. Gill says that the brand sneaks into the list of the top 20 wine brands if you group together all the wines that sell under a single brand name' (such as Stowells, Hardy's, etc). We're actually the number three brand from Europe, after Piat d'Or and French Connection,' he adds, which is pretty amazing when you think where the wine comes from.' Gill also says that Hungarian wine is as good as it's ever been, and wines like ours are simply brilliant value. If you look at the quality/price ratio they make a mockery of some of the wines from Australia.' As good as the wines provided by Myliko and Bottle Green are, raising prices above 3.99 is probably impossible in the short to medium term. Nevertheless, sales remain relatively healthy in the face of unprecedented competition and, realistically, even a static sales position can be seen as a success. If the Hungarian industry can get through EU entry without committing vinous suicide, the future for Hungarian wine looks stable, if not exactly ripe for growth.