Earn more while producing less.
It may be a CFO’s dream, but it’s far from an easy task. Yet it is exactly what the Austrian wine industry has achieved: lower quantity but higher value, to the tune of 67% cumulative growth in less than ten years.
Austria’s success has been methodical, determined, steady. And surprising.
Surprising, and record-breaking: A slow wave of persuasion is shifting the tide of opinion about Austrian wine. It is also pushing up prices – and demand – to unprecedented levels.
It seems audacious at first, to demand such prices for a relatively unpopular grape from a country with limited production that is also not necessarily top-of-mind as a world leader for fine wine.
Austrian wines account for less than 1% of total global production. It claims only a few major brands, and even fewer of those are known internationally. (Plus their labels are complicated. And they’re in German.) Add the haunting memories of a devastating crisis from 1985, when it was discovered that some wines exported to Germany were adulterated with antifreeze, and you’ll see that Austria’s success is all the more unlikely.
Yet they’re pulling it off.
In 2014, Austria exported 50 million liters of wine, with a new record high value of 146 million Euros. In 2003, by comparison, Austria exported 83 million liters of wine, but its net value was less than half, at 69 million Euros. See chart, below.
The program was ambitious: move away from cheap, jug wines (especially to its main export market of Germany) and replace it with a global distribution of higher-quality, better-value wines.
The success of that program is based on a simple formula of three steps. Set the bar high. Assure buy-in from producers across the board. Then execute consistently and over the long term.
Along the way the market determined that the quality was consistently worth the higher cost. Here are some of the numbers behind that success.
- The middle tier of producers (that is, those who produce 10,000 liters or less) has seen much of the movement. There are about half as many of those producers now as there were in 2009, meaning those who are left grew by acquisition, or consolidated with other producers, or they sold. The end result is a sharp decrease in the total number of estates at the same time that there is an increase in the number of producers who are capable of producing the quality wines the country wants to be recognized for exporting.
- There are roughly 20,000 grape growers in Austria, and each of them oversees an average of 2.26 hectares.
- In a good year, Austrians produce about 250 million liters of wine, and they consume nearly the same amount. They also import between 50 and 70 million liters, which means they need to export at least what they import in order to avoid surplus.
- Austria’s top ten export markets consume just under 50 million liters.
- “We cannot grow in the domestic market anymore,” said Willi Klinger, Managing Director of Austria Wine Marketing. “This is good. We cannot grow the quantity in Germany. And we cannot grow very much in Switzerland. Our three most important markets will not grow.” But he says that in their emerging markets, beginning with the Netherlands at number four, the growth potential is tremendous. Belgium, Scandinavia, the UK, the US, and China are also increasingly significant markets for placing Austrian wine in higher price segments.
- In 2014, the US recorded a strong increase of both volume (+18%) and value (+15%).
- Some 30% of Austria’s vineyards are planted to Grüner Veltliner. Zweigelt, with 14% of total production, is the most important red varietal.
Find Cathy Huyghe online at cathyhuyghe.com, and on Facebook, Twitter, and Instagram.
