The news is grim: stock markets areplunging, currencies are in crisis,banks are collapsing and consumer

confidence is the lowest it has been for several decades. And there is no end insight. To find out how the crisis is impactingthe wine trade, we asked writers in morethan a dozen markets to gauge the mood.

While some remain optimistic, it’s clear thatothers are already suffering. Although it’sstill early, some general conclusions canalready be drawn: producing markets withweaker currencies are in better shape thanthose with strong currencies; countries thathave experienced severe economic shocks inrecent memory and have come out the other

side are better placed to meet the crisis thaneconomies unused to hard times; and con-sumers everywhere are trading down. Butthe real test is yet to come. Ttrading is so farstill buoyant in the run-up to the festive sea-son. The first quarter of next year, when thepost-Christmas sales are over, is when thereal shake out will begin.

The credit crisis, which began in the US last August, has become a global financial

tsunami that threatens to wreak havoc on economies everywhere. Can the world’s wine

producers and consumers hold out against the storm? We asked our correspondents.

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wines, and those who export heavily; namelyChampagne (which exported a record 150mbottles exported in 2007, around 50% of pro duction), Cognac (96% export) and Bor deaux (around 40% export, although the classi fied growths are closer to 70%).Already to date this year, Cognac sales aredown 7.6% in volume and 4.4% in value.

Allan Sichel, the president of Bor deaux’sNegociants’ Union, is being level headed butrealistic. “We are anticipating difficult times,yes, but most negociants will be well placed toweather the storm. The bigger problem is forsmaller winemakers due to the small volumeof crop in the 2008 vintage, which will be coupled with low prices. They could sustainthe low values of their wines if they had goodvolumes, but this year they don’t have the volumes and they can’t get the backing frombanks – that is going to make life difficult for a lot of small properties.” �

GERMANYRichard Grosche

The bad news first:wine imports dropped7% in volume in the 12-month to August 2008.The most dramaticdecrease was in August2008, when both vol-ume and value dropped

by over 20%. In the 11 months to August, thedecrease was in volume, with the value ofimported wine actually rising. The majorityof the drop was because of rising prices inthe bulk wine sector, mainly for table winesfrom Italy, where the small 2007 vintage,especially in southern Italy, led to risingprices: the price rose to €0.75 per litre, from€0.55 per litre. With Italy’s vintage this yearshowing significantly higher volumes,prices are expected to fall again, whichwould relax the price situation.

So much for pure statistics. But how doesthe market see the situation? René Sorren -tino from wine agency GES Sorren tino, whichspecialises in premium Italian wineries likeAllegrini, Donnafugata, Michele Chiarlo, Sella& Mosca and Berlucchi, sees a slight increasein sales despite the current financial crisis:“The volume of the average order hasdecreased slightly; however, some winerieshave continuously grown over the last few

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FRANCEJane Anson

As the world’s secondbiggest wine producer,the French wine indus-try is undoubtedly vulnerable to the globalfinancial crisis. Franceexported €9.43bn($11.7bn) of wines and

spirits in 2007, up almost 7% on 2006. TheUK and US were the leading importers, witha combined value of €2.54bn, according toUbifrance, the French export developmentagency. However, in the first eight monthsof 2008, exports dropped by almost 10% involume. The value was up 7% over the sameperiod to €4.2bn, largely due to the highlypriced 2005 Bordeaux vintage, but the positive figures are not expected to lastthrough into 2009 – due not only to thefinancial crisis, but also the strong euro inrelation to other major currencies.

The euro currency is in fact both a weak-ness and a strength – trading within theeurozone can continue without worriesabout fluctuation, but the strength of theeuro against the dollar and the pound is aproblem for exporting wine to two of theworld’s biggest fine wine markets.

Some things work in the country’s favour.For a start, the French banking system hasbeen less affected than perhaps some others, due to its inherent conservatism.President Sarkozy injected €10.5bn into thesystem, compared to £50bn in the UK, acountry with approximately the same popu-lation, reflecting the relative underlyingstrength of the French banks. In theory,according to Philippe Casteja, former headof the FEVS, this means that banks may be able to continue to lend to small businesssuch as negociants, who rely on bankadvances for their cash flow. He also saysthat the product itself can withstand the crisis: “Wines may be less affected thanother products because it is not a heavyinvestment item such as a car or a house.People can still choose to buy wine, but totrade down the price they spend.”

Equally, much of France’s production isconsumed within the country itself, giving itsome protection against a world financial crisis. The regions that are most at risk,inevitably, are those with the highest priced

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years and continue to do so even this year,and they are the engine for growth even in 2008, which will be remembered as a year of uncertainties. All in all, we are quite optimistic that we will achieve a small growthin 2008.”

Andreas Fürbach, marketing and promo-tions manager at Ardau, the Spanish andPortuguese specialist, sees insecurity andcautiousness, where “everybody seems towait to see how the situation will evolve. Weare later than usual when it comes to the giftorders [for Christmas]. In the meanwhile,customers simply seem to switch down byone category, from super-premium to premi-um-wines, from mid-price to entry levelwines. After Christmas, we will know howthe financial crisis has really affected wineconsumption.” �

ITALYKerin O’Keefe

The slowing globaleconomy, coupled withthe continued weak-ness of the US dollarand a flat domesticmarket are, unsurpris-ingly, worrying Italy’swine producers. But

two of the country’s top exporters say thatadapting to new lifestyle trends and build-ing brand loyalty are helping them keepmarket share, even as consumers world-wide tighten their belts. “In 2008, both inItaly and abroad, we’ve seen a significantshift from on–premise to off-premise salesas consumers forgo restaurants and winebars, preferring to dine and entertain athome,” says Alberto Lusini, marketing manager for Mezzacorona. The Trentino firmproduces 40m bottles annually and exports70% of total production around the worldwith principal markets being Italy, the USand northern Europe. “People are not con-suming less, just differently. And instead ofexperimenting with new names and vari-eties, they are now staying with brands thatoffer consistent quality at reasonableprices.” He says that by focusing almostexclusively on the off-trade, they’ve seensales grow in Italy, the US and Germany,adding that aggressive in-store promotionsin the US have helped grow the brand.

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DENMARKElsebeth Lohfert

The damage done bylocal and global finan-cial speculators hasbeen on the radar inDenmark for the lastcouple of months. Buthas this downturnaffected the retailer’s

wine shelves? Erik Larsen, the wine CEO of COOP, Denmark’s biggest wine retailerwith a market share close to 40%, says thatwhile sales have been down 3-5%, hebelieves it is only temporary. There are, ashe says, “many good offers in the cheapest category from 35.00DKK to 50.00 DKK($5.80-$8.40) and the consumer might justend up buying lesser amounts”.

Kristian Andreasen, division managerof wine and spirits for Super Gros,Denmark’s third biggest wine importer, seesno drop in sales, with figures similar to lastyear. He is optimistic and thinks that theprice increases he has seen from Italy andFrance in 2007/08 will come to an end,which could be to the advantage of the consumer. Marketing manager Torben RathHansen from Denmark’s fifth biggest winecompany, Taster Wine, has only seen a dropin sales in the restaurant sector and pointsout that the wine trade is traditionally relatively recession proof. Per Buhl from

Andrea Cecchi, of the Cecchi family firmknown for its Chianti and Chianti Classicos,has seen a similar shift in consumer attitudes. “Brand loyalty is now crucial,especially in key markets such as the USand Germany, where sales have remainedstable,” he says. The Tuscan producerexports 60% of its annual production of over7m bottles and core markets include the US,Germany, the UK, Holland and Canada.Cecchi has recently increased an alreadyintense schedule of in-depth presentationsto their distributors in these top markets.

The company’s recent decision to reducetheir range of wines has also been pivotal.“Eliminating our IGT cru selections allowsus to concentrate more on the quality of our DOCG and DOC wines and simplifiesour offerings for consumers,” declaresCecchi. He adds that having fewer but higher quality products has contributed totheir stable sales in most markets, as has re-designing labels, making Cecchi’s wineseasier to identify.

However, according to many industry ex perts, times are in creasingly difficult forItalian wine. In Italy, stringent new policieson drinking and driving are keeping Ita liansat home and they are spending less, thanksto the difficult economy. Consumers in manyinternational markets are also makingspending decisions based on their tighterbudgets. “Because the cost of production has gone up, from the price of grapes topackaging, we’ve been forced to marginallyincrease prices to cover our higher expenses,” says Cecchi. “Although this hadbasically no effect in the US and Germanywhere consumers are brand loyal, we’ve lostsignificant market share in the UK whereconsumers are more price sensitive.” �

AUSTRIADarrel Joseph

The US-spawned glo-bal economic crisis has not, so far, had greatrepercussions for Aus-tria’s wine industry.According to someAustrian producers andorganisation managers,

there are indications of a slight downturn inexports, especially to the US, but other

European markets, aswell as the domesticmarket, remain stable.

While figures forthe third quarter arenot available, statisticsfor January-June showhealthy sales overall.According to WilliKlinger, general man-ager of the AustrianWine Marketing Board,31m litres of bottledand bulk Austrian wine with a value of€58.5m ($73m) were exported in this period.This is a 15% increase from the same periodin 2007, when 29m litres with a value ofaround €50m were exported. On average,Austria produces around 2.5m hectolitres ofwine annually.

Austria´s top three export markets,Germany, Switzerland and the US, were animportant part of the sales rise between thispast January and June. Sales of bottledAustrian wine to the US – perhaps Austria´smost visible cheerleading export market, asGrüner Veltliner enjoys vast popularity inmany key cities there – totalled 932,400litres, with a value of €4.3m, up from the863,000 litres sold with a value of €4.2m dur-ing the same period in 2007. Klinger saysthat although there have been sporadic casesof lower sales in the US over the last fewmonths, “the sales remain good there, and Iam confident that Austrian wine sales overallfor 2008 will break all previous records!”

Some prominent producers, such asEmmerich Knoll IV in the Wachau regionsay they have not yet experienced any salesdownturn. “All of my export orders havebeen picked up, so I haven´t noticed anyproblems yet,” says Knoll. “But I have heardfrom some other producers that they areshipping lower amounts.”

Kerstin Klamm, export manager forDomäne Wachau, adds: “We are lowering ourvolumes to Germany because of the [lower]price pressure there, and redistributing toother markets, especially Scandinavia, theNetherlands and Switzerland. And with thisexport strategy restructuring, our exportsales are growing by 40-50%!”

Domestically, sales remain firm at thewineries as well as in wine shops. But thereare some noted changes in consumer buying

habits. According to Hans Martin Gesell-mann, manager for the country’s largestretail chain, Wein & Co: “Some customersaren’t buying the very expensive wines likebefore. They still buy wines from theirfavourite wineries – but maybe not the mostexpensive labels.” �

Willi Klingergeneral manager, Austrian Wine Marketing Board,

“I am confident that Austrian wine sales overall for 2008 will break all previous records!”

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www.winesfromaustria.com

WHERE THE SOIL NOURISHES THE SOUL

Laudrup Wine, whichprimarily deals withHoreca and privatecustomers, has not yetexperienced a drop insales, though there isa lull and some restau-rants are having prob-lems paying bills.

Brand managerMorten Berg-Stærkfrom AMKA is also notreporting any decline,and believes that if Danes make spendingcuts, it won’t be to wine. Gert Carl, the managing director of Chris Wine, is of thesame opinion, except that he sees theDanish consumers trading down in price.Instead of four bottles for 100 DKK ($16.80)he now sees offers of five for 90 DKK in thesupermarkets.

Lars Bo Henriksen, sales and purchasingmanager of H.J. Hansen, Denmark’s seventhbiggest wine importer, has also noticed the same downwards movement in his 41spe cial ist stores. Consumers that formerlypaid 100 DKK for a bottle now go for the lower segment, priced between 50-75 DKK. �

POLANDTomasz Prange-Barczynski

Wine bars in Warsaw,Kraków and other big-ger cities in Poland arestill full, despite every-body talking about thepossible consequencesof the world’s economiccrisis. The Polish news-

papers are filled every day with analyses ofthe global financial situation, while theWarsaw stock exchange had some significantdrops in October. The Polish currency, thezloty, lost the strong exchange rate againstthe euro and the dollar it had last summer.

Nevertheless, there are no signs of realrecession on the wine market. “We are un -touched by all the crisis rumors,” de cla resRafał Araminowicz, who is responsible forthe wine department in Makro Cash & CarryPolska, one of the biggest wine distributorsin Poland. “There are no signs of crisis so far, but I cannot exclude some drops in salesin the next months.”

Adrian Atkinsonwine development director, Pernod Ricard UK,

“We’re definitely aware of lifegetting suddenly tougher, butfor the moment it looks asthough strong brands likeJacobs Creek and CampoViejo are holding up well.”

Robert Mielzynski, the owner of the eponymous wine importing companyand trendy wine bar-boutique in centralWar saw does see some decline inChristmas orders from institutional clients,compared to a year ago, with orders forless, or slightly cheaper, bottles. But thereis no panic among individual clients, soeveryday sales stay at the same level asbefore the crisis. Mielzynski expects to seesome signs of recession next year, but hebelieves Poles will then explore the better‘best value’ shelves.

On the other hand, restaurant owners saythey have less guests since the beginning of the crisis rumours. But, according to mostcommentators, Poles will not give up spend-ing money in restaurants so easily. It’s atrend of the last couple of years – a sign ofwellbeing in a society that has been benefit-ing from joining the EU in 2004.

Overall, the economy is growing, thebank system is relatively safe and people also personally less indebted than inWestern Europe or the US. Nevertheless,the Chief Central Statistical Officeannounced in October that consumer confi-dence felt down to minus 13 points, the lowest rate in more than a year. �

HUNGARYCaroline Gilby MW

Hungary has be -come another nation toreceive a bail-out fromthe IMF to shore up its troubled bankingsystems and the forint,its currency, which hadplunged in value.

Hungary’s economy has been under pres-

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sure for a couple of years, but until recentlythe wine industry had seemed relativelyimmune to the economic crisis.

A number of shiny new wineries com-plete with all the latest computer-controlledwinemaking toys, and tourist facilities haveappeared across the country. These comewith premium wine prices, aimed at theaspirational middle and upper class andbooming restaurant culture.

But since late October, the industry hasexperienced a brutal reality check. AsAngela Gere of Gere Winery points out:“The economy is really in a bad situationand innovation and development in theindustry will be very difficult. It is more andmore difficult to get loans from the bankand they raised the prime rate from 8% to11%.” Several producers admit that plannedinvestments may not go ahead.

“We are all trying to survive (and post-poning investments if possible)”saidMonika Debreczeni of Vylyan Winery.Many wineries took out large loans in thelast 10 years, especially ahead of EU acces-sion, to pay for equipment and new vine-yards, and repayments are now falling due.Frequently these investments were part-sponsored by EU and funded with long-termloans calculated in euros. These havebecome more expensive to pay back in capi-tal terms, though the interest rate is morefavourable compared to loans in forints.

For wineries with significant exports, theweakened forint could be an opportunity.Although some are reporting falling ordervolumes, gaining revenue in euros makesup for some shortfall. Indeed, some largerwineries had been suffering significant debtproblems due to the over-valued forint, andtheir reliance on exports, and this devalua-tion may give them breathing space.

Opinions vary about the effect in thedomestic market, where over 80% ofHungary’s production is sold. For ZoltanHeimann of Heimann Winery, the recessionwill mean immediate cutbacks in consumerspend, “mostly in the low and mid-pricerange. I see cutting back of low quality production and many of these producers fac-ing the dark shadow of death.” Reports indi-cate that small grape-growers in Eger forexample are likely to go out of businessbecause Egervin, the volume producer inthe area, did not buy its usual grapes.

Izabella Zwack of Zwack-Unicum notes that“the only thing I can foresee is that saleswill move more to the off-trade, to home consumption as people go less to restau-rants. Also, sales might move towards lowerprice ranges.” Several wineries have alreadynoticed cancelled orders for festive gifts, butremain optimistic that people can still affordto drink (to cheer themselves up in hardtimes). Debreczeni says “I hope that thedomestic market will be resilient enough tokeep us going...“. �

MOLDOVACaroline Gilby MW

Moldova’s wine in -dustry has been facingtough times since theRussians banned theirwines in 2006 and itlooks set to get evenworse with the globalcredit crisis. One

source reported: “The mood is not good inthe wine industry. The financial situationfacing the wineries in Moldova before the

BULGARIAElissaveto Velianova

The Bulgarian winetraders had a happy firsthalf of 2008 – many ofthem reported an in -crease in the wine con-sump tion in the catego -ries above Leva 8 (€4)while new wine ries and

importers stepped into the market. However,international news about unstable financialmarkets, the credit crunch and a slowdown inconsumer spending is already having a psychological effect in Bulgaria. While theBulgarian wine market is not gloomy yet,people are preparing to spend less. TheBulgarian government has also revised its2009 GDP growth and inflation projections.

Despite its strong export orientation, withover 80% of wines exported, there are morereasons for concern over what will happendomestically. Russia is the largest internation-al market for Bulgarian wine and its ownfinancial instability could, paradoxically, begood for Bulgarian wine. The low-price appealof Bulgarian wine and bottom of the marketpositions may shelter them, although thereare competitive pressuresfrom the comeback ofMoldovan wines.

Domestically, thereare no indications asyet that less wine isbeing consumed. Thereason is the highshare of ‘grey’ economymoney in consumerspending. Only atsome places are on-and off-trade owners

worried that the real estate boom, which pro-duced a healthy number of domestic million-aires, is over. This could reduce the numberof clients for exclusive imported and domes-tic wines. Also, while producers of low andstandard priced local wines are still gettingby, the importers, which rely on US dollarrelated contracts, will have to narrow theirmargins. The reason is that the Bulgarian levis pegged to the euro, while the US dollar’svalue is currently appreciating.

It’s still speculation as to what will happenif, and more precisely when, the economicrecession hits Bulgaria. The immediateimpact will be a shake-up of the industry andstart of a real competitive battle. This couldcause re-distribution of shares between thedifferent price categories. Those who had nowine know-how but relied on generous EU funding to enter the wine business, andwho based their marketing concepts onexclusivity, limited domestic distribution andpremium pricing, will be the first to lose out.Therefore, this crisis might be healthy in a way that it can provoke more realisticthinking on the part of many involved inwine production and sales. �

Tim Howeformer chief executiveMajestic Wine Warehouses,

"We took over Majestic WineWarehouses in 1991, duringthe last big recession, and Ithink this looks to be worsethan that. I wouldn't want tobe selling by the bottle onthe high street today.”

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RUSSIAEleonora Scholes

The question thatpeople are asking nowis not whether thefinancial meltdown willaffect the wine busi-ness in Russia, butrather how great thisimpact will be.

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global crisis was bad. They weren’t gettingloans. Moreover, the banks have started toreally put pressure on the wineries to settletheir debts from before the Russian ban. Thecredit crisis hasn’t really yet hit Moldovadirectly, however buyers from Ukraine andRussia have been hit and therefore this iscoming back to Moldova indirectly.”

Unfortunately for Moldova, wine is economically critical. It was the country’sbiggest export earner in 2005 prior to theban, and around a quarter of the populationhas links to the industry. The Russian banlasted from 2006 to November 2007, andcaused losses of $180m, with numerousbankruptcies. Exports to Russia had beengrowing again (to around $35m), in spite ofthe stringent conditions imposed byRospotrebnadzor. However, another sourcepoints out that “basically, many Moldovancompanies have been sending shipments to

Russia without pre-payment. Many of thoseRussian importers are also dependent onbank loans – with the credit squeeze andruble crisis they have not been able to makepayments to Moldovan suppliers.” Moldovawas also struggling to regain its former customers, as Russian and Bulgarian wineshave filled their price niche, while higherprice points have been taken by Spanish,Chilean, French and Italian wines. SorinNastas (Salcuta Winery) notes: “Moldovanwineries do not have enough money for marketing in Russia, while Russianimporters do not hurry to invest money inpromoting Moldovan wines.”

Ironically, the MDL (Moldovan leu) hasappreciated by around 20% against the eurothough it has fallen against the US dollar.Many wineries switched export prices fromUS dollars to euros, and are now losingmoney at the current exchange rate. Anotherwinery reports: “The minimum interest onbank loans is now 27%, but loans are not avail-able to us in practice. In this situation, thewine companies have no money to procuregrapes or to finance any marketing support intheir outlet markets.” In fact this year’s harvest is reported as good both in yield andquality but, due to low demand (resultingfrom the lack of funds), the average price ofgrapes was 50% lower than last year.

It seems likely that the industry will seea further round of bankruptcies in early2009, while almost all wine companies arelooking for investors. The IFC (InternationalFinance Corporation, part of the World BankGroup) took a $5m equity stake in VinariaBostavan in February this year, and anotherwinery is in negotiation with EBRD. Thisseems a major challenge, because neitherRussian nor European businesses are in ahurry to acquire wine assets in Moldova’sinvestment environment. �

“A year ago I was focusing

on getting Pinot Grigio drinkers

to try Grüner Velt liner and

Albariño. Today, it's much more

a matter of persuading them

to carry on drinking wine!

Britain has lost 230,000 wine

drinking households over the

last three months – people

who’ve simply stopped.”

Dan Jagoead of beers, wines and spirits, Tesco

The largest Russian restaurant compa-nies, through whom the premium wine offeris predominantly channelled, have alreadysuffered a drop in demand. Their sales wereon average 5% down in September-October.The number of business guests and touristsin restaurants decreased, the former due tocompanies cutting down on corporate enter-tainment and the latter as a result of peoplepreferring more democratic eateries. As weenter the first months of 2009, when restau-rants traditionally see fewer customers, theymay well see their business reduced by asmuch as 15-20% – double the usual figure.Russian restaurateurs have already startedto lay off up to 30% of their staff and put onhold the development of new projects.

The situation appears even more criticalin supermarket chains where over half of allwine volume is moved. Historically, most ofthe multiples relied heavily on extendedbank loans for their operations. With thecrisis hitting sales, they have found them-selves struggling to pay off debt, thoughthere are a few lucky ones who have beenrescued by financial aid from the state andcan claim relative safety.

Where does this leave Russian wineimporters? Some businesses are alreadytumbling, particularly those who aggres-sively expanded through heavy bank borrowings. One importer with the largestmarket share is known to have stopped hisoperations at least until the New Year, send-ing an alarming message to the market.Many companies have adopted a policy ofwait-and-see, even if their businesseshaven’t yet been affected. Advertising budg-ets are on hold, and companies are refusingto supply bottles for the wine press,although this type of promotional activity isusually very popular with the trade.

Demand may not slow until January, asthe final few months of the year are tradi-tionally the busiest period for the winetrade. However, it is likely that people willbe counting their roubles more carefullyand the Russian trade is preparing for ashift in demand towards less expensive bottles, with an optimal price/quality ratio.

The crisis may bring bad news to many,but not to all. Some Russian wine importersremain upbeat as they see the current situation as an opportunity to consolidateforces and increase their market share. “We

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CHINAChantal Chi

“China will be thelast country to beaffected!” said the man-aging director ofSopexa China, CharlesDelamalle.

As yet, the financialcrisis has brought no

hint of change to daily life, or to wine consumption. Stores are still full of customers and restaurants are still over-booked, although some high-end Westernrestaurants have been mildly affected: “Ten percent decrease only,” says Franck

Crouvezier the manager of Shanghai’sKathleen’s 5 in Shanghai. “We are slowingdown but the business is still doing well ingeneral,” says David Chow, general man-ager of Mercuris, a young player in wineimports. The big names are feeling morestressed by the crisis. “Instead of more than40% of increase, we only reach 10-20% ofgrowth, compared to the same stage of2007,” as Carrie Xuan, general manager ofASC Beijing said.

This year, several significant events haveaffected the wine market: the earthquake,the reduction of duties in Hong Kong, visaissues and the Olympics, all of which gavefood and beverages people a headache.Importers and hotels saw a pick-up inOctober, but now come new challenges.“Well, foreign guests order more wine byglass then by bottle in our hotel; neverthe-less, local customers keep ordering expen-sive Chinese liquor,” explained TK Chong,the food and beverage manager in Shangri-la Xian, one of the mainland’s top touristdestinations. The situation is likewise com-fortable in Changzhou, less than two hoursfrom Shanghai, where fine wine specialistAussino has recently opened, to soaringsales. As the director of food and wine atTraders Fudu hotel in Changzhou said:“Compared to Shanghai or Beijing, we aremore local market focused, therefore wehave less connection with ‘outside’, so feelless impact from this crisis naturally.”

As for Chinese wine producers, those whoare focusing on premium wine production feelconfident about the future. The nouveau richeof China are wealthy enough to buy luxurybrands – which means the economic crisis ismore likely to affect middle class consumers.

“The tsunami will take more effect afterChinese New Year which will be in late

USAMaggie Rosen

New York City stilllooks the picture ofprosperity, with moth-ers and nannies steer-ing well-dressed chil-dren along the pave-ment, jostling for spacewith bankers and

lawyers. Upon closer inspection, however,something’s rotten in the Big Apple. A lot of those bankers and lawyers are surfingthe Internet at Starbucks at three o’clock inthe afternoon. And thousands of square feet of retail space stands empty.

But it gets worse: “You can get into anytop restaurant any night – except maybeFriday – with a couple of hours’ notice,” saida concierge at the Jumeirah Essex House, afive star hotel on Central Park South. “Thisis not a good sign.”

Closely linked to the hospitality industry,the wine trade is feeling the pain. “Ourretail business seems to be about 10% downfrom the same time last year,” said JohnKapon of Acker Merrall & Condit, retailerand auctioneer. “Everyday walk-in trafficseems to be holding up, but customers aregoing for less expensive wines rather thanthe fine and rare wines. For the first time inas long as I can remember, we’re conscious-ly trying to lower prices to keep things sta-ble and healthy. People are very consciousof their buying power at all price levels.”

Along the East Coast, the market for wineabove $50 has all but dried up, though salesof wine under $25 – all brands and regions –appear to be strong. Anecdotal evidence saysthat 2008 sales as of October are anywherefrom flat to down 20% year on year. The

exception appears tobe the secondary mar-ket, where Bor deauxfirst growths and topBurgundies continue tocommand record prices– though clearancerates have in somecases fallen to 70%.

Doug Polaner, part ner in importers Po laner Selections ofMount Kisco, New York,whose wines retail from between $7.00 to$700.00, said it was too early to panic. “Wehad two really great years in 2006 and 2007,so the whole year has been a little bit slow incomparison – though there’s been a moresignificant decline since the economic melt-down,” he said. “We took delivery on a lot of stock in October, so we’re going to be verycautious going forward. When I visit mywinemakers I’m telling them ‘we’re going toget through this but we need to co-operate.I’ll need some help on pricing. The rules ofthe game have changed’.” Re gardless of whatsector they operate in, and what demographicthey serve, all cite global economic woes, theweakness of the dollar for much of 2008 andthe high price of fuel as culprits which indi-vidually, might have been manageable buttogether are toxic. “This doesn’t look any-thing like previous downturns,” said BrianLarky, head of Dalla Terra Winery Direct, asole agent for several Italian wineries. “It’sas if there’s a storm on the horizon, and ithasn’t fully hit yet.” �

Brian Larkyhead of Dalla Terra Winery Direct,

“Only those who over-deliveron quality, price and serviceare going to survive.”

can hire professional staff for lowersalaries. Our mood is very positive – thanksto effective anti-crisis management and thearrival of new opportunity to capture a larg-er market share”, says Alianta Group CEOArmen Grishkian. This is the third crisisthat the Russian wine trade has to deal within a ten year period. Though one may neverget used to such things, it can be arguedthat Russian importers know better how todeal with them. But what is true for every-one is that only the fittest will survive. �

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January 2009,” says Alberto Fernandez,general manager of Torres China. It’s apoint of view shared by many wine profes-sionals. But how serious will the effect beon the wine market in China? Nobody cangive numbers or time frames. All we canhope is that the tsunami disappearspromptly, and that China remains the landof hope to so many. �

KOREAJung Yong Cho

Korean wine im por -ters and retailers areclearly worried that aworldwide downturn is severely affecting the demand for wines.Accor ding to Ji-HoonYoo, a wine buyer for

Hyundai Department Store: “Our sales havestarted to become sluggish due to the eco-nomic depression. Our wine sales hadincreased in 2007 by 35%, but this year wecan’t help but make the sales target lower.Our continuous three quarters number in2008 is satisfactory, but we are nervousabout the rest. We pessimistically expectonly a 10% increase in 2008.”

In the first eight months of this year,$119.8m worth of wine was imported, a25.3% increase in value on the previousyear. On the other hand, the volume wasreduced by 9.4%, to 19.9m litres. The reasonvolumes are down is that Korean wine consumers can recognise wine quality andare choosing better wines.

Cheol-Hyung Lee, president of national-wide retailer Winenara, predicts that ourmarkets have become so volatile and com-petitive that even bestselling wines couldlose their positions. “High exchange rate,recession and attention to quality can makemarket turmoil, and then the market can bereshaped,” he said. “There are opportuni-ties as well as threats.”

The problem is not 2008, but 2009 andafter. If the global economy is still hurtingand the exchange rate still going up, theKorean wine trade will be in a big hole. Newimporter Dong-Jo Huh, who managesSunkey, said: “I sometimes wish that wineproducers could lower export prices, so thatwe can sustain ourselves in this hard time.”

SINGAPOREJenny Tan

A financial tsunamihas hit the world, andAsia is being affected.Most Asian stock mar-kets are down 50-60% inUS dollar terms in theyear to date, accordingto The Business Times.

How has this affected the wine industry inSingapore? Most of those hit were those deal-

“Systembolaget, the monopoly,

bought 30% less exclusive

wines (those above €20) in

September. The big crash

was in October, so it will be

interesting to see what will

happen with October figures.

People are just standing

shaking their heads. I think

Sweden has been doing well

compared to other countries,

but now people are saying we

should have joined the euro.

We haven’t yet seen if

restaurant sales are dropping,

but we think they will.”

Daniel Esbergmarketing managerPrimeWine, Sweden

ing in luxury wines and the private saleschannel, who were affected because of corpo-rate freezes and cost-cutting. However, thosewho offered affordable, value-for-moneywines found that sales have either remainedthe same, or even increased. The general consensus: the tsunami may hit the winebusiness only after February, when the festive seasons have passed.

“Most of our business in on-trade, but weexpect corporate spending to drop,” saysFlora Log, director of Top Wines, a medium-sized distribution company. “Customers arenow asking for value-for-money wines fortheir daily and entertaining consumption.” Tobuffer the impact, her company has plannedpromotions with various F&B establishmentsuntil the end of the year, and they have alsoworked out incentive programmes to sendthe restaurant/hotel staff on winery trips, inorder to encourage the staff to push theirwines and increase sales.

Melvin Goh, senior wine buyer for super-market chain Cold Storage Singapore (whichoffers a budget to premium supermarketrange of wines), said there has been no dropin sales, although he predicts the next sixmonths will be volatile. Tng Ah Yiam, director of integrated purchasing for NTUCFairprice, said that its weekly promotions onimported wines, and its JustWine club thatoffers an 8% discount on all wines, along witha selection of wines in the $15-$35 range,has helped keep wine sales regular.

However, those dealing in premium wineshave been the biggest hit. Lee Chee Wee,general manager of Auric Pacific Fine Wines,which represents the likes of cult CalifornianHarlan Estate and does business mainlythrough direct channels, said that Octoberhave fallen 40% from September, and 20%against last year. The company, however, had“seen this coming” and have prepared for thisdownturn by stocking up on value-for-moneywines. Clinton Ang, managing director ofHock Tong Bee/Cornerstone Wines, said therehas been a 20% drop in turnover, and esti-mates that its corporate accounts businessmay drop 25%-50%. However, this is nothingnew to the wine business in Singapore, as thelong-term players have already endured the1997 Asian financial crisis, September 11, theBali bombings and the tsunami. As Ang said,“Weathering through this will separate themen from the boys.” �

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AUSTRALIATony Keys

Exports account foraround 60% of all Aus -tralian wine sales, withthe UK and USA themajor markets. Whathappens in these twocountries will ultimatelyaffect the domestic mar-

ket as much, if not more than, the local finan-cial pressures caused by the global crisis.

The high cost of production has alreadyforced the Australian wine industry torethink its positioning in various markets,with exports declining in both volume andvalue as Australia withdraws from unprof-itable sectors. Lawrie Stanford, managerinformation and analysis at the AustralianWine and Brandy Corporation (AWBC), sayshe is witnessing an overall decline in bulkwine shipments, as the dumping of excessstock from the large 2004, 2005 and 2006vintages ends. He says he wouldn’t be sur-prised to see an increase in bulk wine ship-ments at profitable prices for buyers-owbrands and possibly for other Australianbrands looking to save money throughcheaper overseas bottling costs.

In September the export price per litreof bulk wines was a profitable A$1.24($0.84); however, there was a 32% declinein bottled shipments above A$5 per litre,plus a 5% increase in the amount of bottledwine shipped below A$5 a litre. StephenStrachan, CEO of the WinemakersFederation of Australia, along with JohnGrant the CEO of Constellation WinesAustralia, believes that global wine consumption will not necessarily result involume decline, but that trading down will happen.

SOUTH AFRICAMichael Fridjhon

Those who survivein the often tumul-tuous South Africaneconomy have becomeinured to the shock-waves which have trau-matised many of theworld’s econo mies. If

anything, they have been strengthened byseveral quite recent crises and may there-fore be better prepared than many to faceover the next few years.

Firstly, rising interest rates (which haveincreased the cost of borrowing by some50% in the past three years) had alreadythinned out the more inefficient from their ranks. Domestic inflation, which has

doubled over the same period and a newNational Credit Act – which has made it harder for consumers to use debt to fund their lifestyles – have cooled an over-heated economy. Housing prices havedropped (but not dramatically) and lendersappear to have kept a reasonable check onclient risk profiles. Long-term exchangecontrol regulations also constraineddomestic banks, largely keeping the sub-prime contagion away from the SouthAfrican economy.

At present, the stock market is around30% off its peak but it’s no longer in freefall. The currency has stabilised at levelsthat are about 20% down on a year ago –and 20% up on the worst levels of last month.

The sense of calm may be temporaryand uncertainty (exacerbated by a loomingsplit in the ruling ANC) ever-present – butthere is a feeling that the worst of theimmediate storm has been weathered.Financially literate South Africans believethat, relative to America and Europe, we’vehad a lucky escape. The consumer confi-dence index is down (it’s currently runningat 2003 levels) but it is likely to bounceback before year end.

There is nevertheless a palpable cut-back in consumer spending. Retailersreport some buying down in the winesand spirits sector, though WineX, thelargest consumer wine show in the coun-try, reported a 25% increase in sales overthe four day event which ended on 31 October. Imported liquor specialist,Carrie Adams, maintains that their festive season turnovers are holding up,though corporate gift-giving is likely to be less visible and less ostentatious thanit was in 2006/7.

The wine industry is therefore dealingwith a reduced – but not seriously threat-ened – domestic market. On the other hand,the weaker currency and a strong genericexport campaign has provided producerswith something of a windfall. Year on yearexport growth has ranged between 10% and20% for the past two years. There’s simplyno bulk lurking in the pipeline.

Moreover, the hard currency price pointsof South Africa’s major trading partnershave produced a 20% increase in rand revenues. The situation is summed up in

The latest figuresavailable (August) fordomestic wine salesshow a 2.1% increaseon August last year.This should not betaken as a sign thatthe Australian con-sumer is drinking lessor trading down, asfigures for the Junequarter show thatdomestic sales of

Australian wine decreased 2.4% whileimports increased 82.6%. New Zealand topsthe import list, with an increase of A$60m($39m) in value over the year to July 2008.

No hard evidence has yet emerged aboutthe effects of the crisis on the domesticwine market, but anecdotal reports fromrestaurants and independent retailers sug-gest some trading down has begun and islikely to accelerate through the Christmas/summer period.

The current weakness of the Australiandollar is good for a wine industry that relieson exports, as well as for the domestictourism industry. In summary, wineexports are falling; however Australia wasalready gearing up for a change in itsexport mix so there is a good chance it willsurvive the global recession – battered but not defeated and in better shape than many. �

Jim LedwithHellion Wines, UK

“As a small independent merchant, I think people aredefinitely looking to spendless money - to judge by theconsumers I saw at thisyear's Wine Show in October,and comparing them with thepeople I saw there last year.

For further details on CAVIT wines:sales@boutinot.com0161 908 1300

C R E D I T C R I S I S

the Richards Walford country report on SouthAfrica, penned by Richard Kelley MW: “At this time of uncertainty and interna-tional crisis, South Africa, amazingly as itmay seem, could be well placed to takeadvantage of the misfortunes that otherwine producing countries now find them-selves facing.” �

ARGENTINADaniel Lopéz Roca

Argentina is start-ing to feel the impactof the world financialcrisis and local compa-nies are rearrangingtheir plans to sufferthe effects in the leastpossible painful way.

However, the wine business in Argentina isin a euphoric mood that not even the deepcrisis produced by major strikes earlierthis year could deflate. Argentina’s wineexports, insignificant 10 years ago, became3.9% of the wine world market this year,with exports growing an average of 45%monthly in volume and 36% in value onaverage in the first half of the year com-pared to last year. The crisis also findsArgentinean wineries with fewer debts.

Sergio Villanueva, the manager ofUnion Vitivinícola Argentina (UVA) andsecretary of Corporación VitivinícolaArgentina, among other roles, says that,“the competitive advantages that pesodevaluation in 2002 allowed was diluted byinflation in the last years and the actualexchange situation is leading to a new balance. We will see how it stabilises in the near future.” This could make winesmore competitive.

That Argentina has a strong domesticmarket for its own wines, of more than1,100m litres, is the major differencebetween it and most other New World countries: three of every four litres of winemade in Argentina are sold within thecountry. In terms of direct sales, domesticconsumption is worth about 5,500m pesos($1.6bn) in 2007.

After the internal crisis this year, every-body expected a greater impact on consump-tion, but it is down just 3.38%, and that is not considered a critical situation. �