How The Greek Wine Industry Has Responded To The Greek Economic Crisis

Just what effect has Greece's financial crisis had on the country's booming wine industry? I spoke recently with Sofia Perpera, enologist and director of the Greek Wine Bureau for North America, for some answers:

The Daily Meal: What domestic problems did the Greek economic crisis cause to Greek wine producers?

Sofia Perpera: When the economic crisis hit Greece, there was not an actual decrease in consumption domestically, just a general trend toward more inexpensive wines. More than half of the wine consumed in Greece is bulk, and during these tough times this increased at the expense of higher-quality bottled wine. The restaurant scene was obviously impacted, as people ate out and spent less, especially at higher-end restaurants. In the last couple of years there has been a revival in Greek wine bars, beginning in Athens, where people can go and get a good glass of wine at a decent price, get a bite to eat, and not break the bank. This trend is also forcing traditional taverns and café/bars to include good wine by the glass in order to compete for this segment of the market that has extra money to spend, but is looking for something different and of quality.

What about export sales?

Twenty percent of Greek wine is exported. On the export side, the economic crisis in Greece has created an even greater sense of urgency to focus on the export market. Because of their promotional activities over the last decade, many of the top wineries were already involved in exports and establishing foreign distribution networks, which helped them weather the storm at home. According to statistics from the U.S. Census Bureau, sales of Greek wine, beer, and similar products increased by 27 percent over the past five years; in Canada, Greek wine sales are up by 25 percent for the same period. The U.S. is No. 2 in terms of the value of exports. Germany is No. 1. However, there is a difference in composition. Germany is cheap wine. The U.S. is premium wine.

What has the effect been of the scramble to raise tax revenue since the crisis?

With the Greek government's implementation of a new excise duty on Greek wine, Greek wineries have been put in a difficult economic position and placed at an unfair marketing advantage compared to other European wine producing regions. Greece has been producing wine for more than 4,000 years, longer than most any other EU producing countries. For the Greek government to propose the enforcement of an excise duty on Greek wine is inconsistent not only with Greek policy, but also with the current European economic situation. The issue of imposing excise duties on wine has been extensively discussed within the relevant European Union institutions and the framework of the Common Market Organization for wine. No other winemaking country and member-state of the European Union has imposed an excise duty on wine. On the contrary, only member-states that are not producing wine, for obvious reasons, have done so. Other EU countries that produce wine have been very firm in their decisions to have no excise tax on wine. Wine is considered an exclusively local agricultural product, which is an integral part of the Greek diet. The tax would increase the financial burden to the end consumer, since it will have the largest impact on less expensive wines that make up the bulk of purchases

The Greek wine sector has several good reasons to oppose this special tax on wine. In order for the Greek government to be able to implement the collection of the tax, Greek wineries will have to create bonded warehouses. Each warehouse would require substantial guarantees through letters of credit from the banks, which are also in economic distress and are not lending to help even viable business survive these unprecedented economic problems. Since the procedure of creating a bonded warehouse takes several months, the wineries must pay the tax on the total of their stocks, which also includes older vintages in tanks, barrels, and bottles. Of course, the nature of the wine market is that the wineries might not actually sell the wine until some years in the future or not at all. The current tax requires that the wineries must pay all of the tax due at once, even for unsold wine! Most of the wineries in Greece are small, family-owned businesses that stand to be the most affected by the tax, with many projected to be forced out of business. Capital controls in July 2015 caused problems importing equipment (barrels, bottles). After one month, controls were eased.

Was there a differential effect on small versus large producers?

No.

Would devaluation have fixed the problem?

No, because 80 percent of the things used in wine production are imported — things such as corks, bottles, additives, and barrels. Although devaluation would make Greek exports less expensive, it would have increased the cost of these imported inputs.

How has the crisis affected the planning of Greek wine producers and grape growers?

It has made exports more important in their plans.

I understand that one industry response was the drawing up of a strategic plan in 2009. Tell me about what that plan proposed.

The marketing strategy for Greek wine in the most important export markets was focused on differentiation from other wine regions, with the goal of creating a separate category for Greek wine while promoting its quality and perceived value. To achieve these goals, EDOAO (the Greek National Inter-Professional Organisation of the Vine and Wine) has been managing an ambitious promotional program that included: establishing the Greek Wine Bureau of North America; creation of new educational website;  creating a social media marketing campaign; creating a 45-minute educational wine video; cooperating with major wine educational organizations and institutes in North America (Guild of Sommeliers; Court of Master Sommeliers; Culinary Institute of America in New York and California; Johnson Wales Colleges of Culinary Arts; Cornell University; Society of Wine Educators; Canadian Association of Professional Sommeliers; TEXSOM [Texas sommeliers] Conference; and others) to provide education and tastings for our sector; creating Greek wine ambassadors from key opinion leaders in the wine and gastronomy fields; starting an annual North American Winemakers Road Show for trade/media with stops in key metropolitan markets in the U.S. and Canada; participating at key wine and food festivals for trade and consumers; starting annual trade/media visits to the Greek vineyards; creating an ongoing media sampling/outreach campaign; and organizing Greek cultural events for consumers that combine Greek wine, gastronomy, and traditions in major metropolitan areas throughout North America.

Has EDOAO placed any demands on its members in order to achieve greater international success?

EDOAO has designed a voluntary agreement that it is asking the Greek wineries to sign. The agreement's goal is to standardize proper viticultural and vinicultural practices to ensure the production of high-quality wines and the added value they possess around the world. To achieve these goals, the Greek wine industry has made the following stipulations in order to protect the wineries that are using fair trade practices: Wineries must provide proof of their production declarations; donate an annual fee to EDOAO (based on production) to be used for common promotion of Greek wine and other important sectoral activities; abide by the rules of Greek and European wine legislation; commit to use only legitimate wine production practices; guarantee the accuracy of the content and the labeling of their wines, based on Greek wine legislation, as well as the legislation used in destination export markets; not participate in unfair competitive market practices; not distribute bulk wine without adhering to Greek wine labeling regulations; and accept the strategic plan as a useful developmental market tool.

What is the go-to market proposition behind Greek wines?

We have more than 300 indigenous grapes. The wines are food-friendly. Greek wine goes with food sourced from great terroir. Today, consumers take "good wine" for granted. What you have to do is differentiate your product. We should not be at the low end. For example, a white wine from Santorini should be considered as an alternative to a grand cru Chablis or a German riesling.

Should the Greek wine industry simplify the impenetrable names of Greek wine grapes, like agiorghitiko or xinomavro, to boost sales in anglophone countries?

No. Distribution networks, not names, are the big issue.

Has the Greek wine industry fully recovered from the Greek economic crisis even though the country has not?

It is one of the bright spots; 2014 was very positive for exports, creating jobs and bringing in foreign exchange.