Introduction
Wine production globally is a well-established industry operating for thousands of years. Wine as a beverage is made out of fermented fruit, popular across the world (What exactly is wine?, n.d.). Romania produced 5,088.2 thousand hl in 2018, marking the state’s efforts to increase its production capacity (APEV 2019a). Moreover, Robinson (2015, para. 5) refers to the country as “a land of hope” because it has more area under vine than any other Eastern European state, and wine production is a tradition that defines the state’s culture.
Wine production regions in Romania are Crisana and Maramures, Banatului Hills, Transilvanian Plateau, Muntenia, and Oltenia Hills, Sands, and other areas in the South, Dobrogea Hills, Moldavian Hills, and Danube Terraces (Winemaking in Romania, n.d.). The climate in Romania is a relevant factor for wine production, with an average temperature of 16℃ and the overall temperature ranging from 0℃ to 25℃ (Climate of the world: Romania, n.d.).
The annual rainfall in this state is estimated at 700 mm, while in the mountains, it can average at 1000 mm per year (Climate of the world: Romania, n.d.). The geographic region characteristics relevant to the wine production are the Carpathian Mountains and the Balck Sea.
Most notably, the soil composition of the foothills is suitable for growing vines (Everything you need to know about Romanian wine, n.d.). The Black Sea does not affect the environment significantly, allowing for a dry and continental climate. Potential weather hazards include freezing winter, rain during the flowering season, and harvest, which affect the taste of the grapes. This report aims to investigate the specifics of wine production in Romania, including a SWOT analysis, and present recommendations for a boutique wine producer.
Overview of Wine Production in Romania
Overview of Production Area
Wine production is an activity, sometimes referred to as vinification, which incorporates the processes of selecting fruit, fermentation, and bottling of the final product. In Romania, wine production is one of the significant driving economy sectors (Wine production in Romania, 2019). Romania is a relatively new state, which emerged in 1877 and entered the European Union (EU) in 2007. The wine production industry is one of the major economic sectors of the country, accounting for 30.4 million euros of profits in 2018 (APEV 2019a, APEV 2019b). The EU support and governmental programs that target wine production in the state allow Romanian wine exporters to flourish and develop their facilities.
The production area incorporates all the processes and elements of manufacturing that allow an organization to produce the final product, which in case of the wine industry, combines growing grapes, using fermentation to develop wine, and bottling the product. According to APEV Romania statistics, this state has the 5th position in the EU in regards to its areas under wine production and grape productions (APEV 2019a). Hence, the country competes with states such as Italy, Spain, France, Italy, and Germany in these domains. Concerning the wine production itself, this state holds the 6th place in the EU (APEV 2019b; APEV 2019c).
In 2018, the area under vine in Romania was estimated at 182.6 thousand hectares (APEV 2019a). Moreover, due to continuous funding from the EU, which is estimated at 47.5 million euros per year, the facilities undergo reconstructions, increasing their production capacity (APEV 2019a). In regards to the regional distribution of areas under vine, the majority of production occurs in Moldova, accounting for 45% of the production area, and Muntenia and Oltenia, that total at 29% of Romania’s wine production area (APEV 219c).
Manufacturing Approaches
A vineyard is an essential element of wine production since it is a plantation where the grape crops are harvested. Aspects such as elevation, history of previous plants, slope, and are essential for understanding the potential of a specific site.
The viticulture approach in Romania is connected to the state’s long history of harvesting grapes and producing wine. The report, written by the Agrosynergie EEIG (2018), reveals the structure of the sector. The report suggests that 25 significant producers control the market; their average turnover exceeds 1 million euros. Agrosynergie EEIG (2018, p. 2) states that producers sell-through “own wine shops, small supermarkets, and deliver their wine products through distributors,” including HORECA and online platforms. The majority of wine producers are small or medium-sized, do not have a certification or capacity to output large volumes of product.
Grape Varieties
Notably, the grape varieties described above are of high quality, yet the cost of them is lower when compared to grapes from other countries. In Romania, over the last fifteen years, the vineyards were modernized, and a large number of new ones were established, allowing to improve the quality and variety of the grapes (A1.14 What makes a Romanian wine special?, n.d.; Winemaking in Romania, n.d.; Romania, 2019). More specifically, the government and the EU funding programs provided financial support for vineries interested in improving their manufacturing facilities.
The grape varieties can be divided into the following categories – local or indigenous grapes and international grapes. The former group includes Fetească, Tămȃioasă Romȃnească, and Fetească Neagra (Everything you need to know about Romanian wine, n.d.). The former is the oldest variety of Romanian grape, which is used for dry red wines. The first two grape varieties are characterized by notable aromatic characteristics.
The latter refers to “Chardonnay, Pinot, Grigio, Sauvignon Blanc” (Everything you need to know about Romanian wine, n.d.). The following are the most common grape varieties in Romania – “Busuoaică de Bohotin, Crâmpoșie, Fetească albă, Fetească Regală, Frâncușă, Galbenă de Odobești, Grasă de Cotnari, Tămâioasă Românească, Zghihară de Huși,” while these “Băbească Neagră, Cadarcă, Creață de Banat, Fetească Neagră, Negru de Drăgășani, Novac, Plăvaie” are used for red wine (A1.14 What makes a Romanian wine special, n.d., para. 7).
Vinification
Vinification is the winemaking process that incorporates fruit selection and fermentation (Civit, Piastrellini, Curadelli, and Arena, 2018). Romania has an extensive history of wine consumption, which is a part of the state’s tradition, suggesting that wine producers possess unique outlooks on the vinification process. Ladau and Besiu (2015, p. 189) argue that the following aspects affect the wine production processes in Romania – “increasing efficiency and effectiveness of supply chain, development of a new segment of this market, based on market research, implementing mechanization processes and innovation at farm level.”
Production volume
In 2018, the winemakers produced 5,088.2 thousand hl, while in 2016, the output was estimated at 3,266 thousand hI (APEV 2019a). The following statistics allows one to understand the production volumes of the Romanian wine:
- In 2018, Romania exported over 17,927,352 liters of wine (APEV 2019a).
- The total revenue from wine export in 2018 was estimated at 30,440,632 euro (APEV 2019a).
- The top four countries that export the most significant quantities of Romania wine are the United Kingdom, Germany, Netherlands, and Spain (APEV 2019a).
- Out of the four major export destinations, the United Kingdom is the most important country for wine exports, with 4,380,985 liters resulting in sales of 7,634,907 euro in 2018 (APEV 2019a).
The production volume statistics suggest that for Romanian wine producers, export is an essential factor (APEV 2019a). Moreover, the primary destinations of wine export are states of the EU, with the exception of China, since Romania exports approximately 744,297 liters of wine totaling at 2,528,794 euros in sales (APEV 2019a).
Market Overview
The export of the Romanian wine can be divided into the intra-EU, meaning the export to other states in the Union, and outside the EU markets. Intra-EU exports account for 88.9% of all exports in liters and 82.1% of exports in euros (APEV 2019a). Despite this, the analysis conducted by Ladaru and Beciu (2015) suggests that Romania’s exports are much lower when compared to other countries producing wine. In the future, the amount of export for the wine will increase (Romanian wine exports for 2015 reach 14 million liters worth €24m, 2019; Lădaru and Beciu, 2015). This factor suggests that the country’s producer can continue expanding its sales channels by partnering with global trading companies.
The internal consumption of wine is estimated at 5,262.9 thousand liters for 2018 (APEV 2019c; Clissitt, 2018). Ladaru and Beciu (2015) state that the estimation for domestic consumption is 25 liters per capita. According to Veseth (2018), due to the fact that wine has been produced in this country for over six thousand years, this state is both a significant exporter and consumer of this product. Approximately 20% of the export accounts for the Romanian wine sold in the United Kingdom (Barbulescu, 2019). The other 68% is exported to “Germany, China, the Netherlands, Italy, Spain, the USA, Slovakia, Estonia, and Canada” with smaller countries accounting for the remaining percentages (Barbulescu, 2019, p. 137).
An essential factor that distinguishes Romanian wine from its competition is the price since this product is much cheaper than wines produced in other European states (Veseth, 2018). However, although the domestic consumption accounts for a large percentage of Romanian wine sales, the emergence of new vineries decreases the price of the products. Barbulescu (2019) argues that because of margins in the domestic market continuously decrease, export is important for Romania wine producers.
From a global perspective, Romania can increase its sales by exporting to non-EU countries, which is a worldwide trend for wine production. Ladaru and Beciu (2015) examined the globalization of the wine market and specifically the prospects of development for Romanian producers. The overall global production volume has been steadily increasing, including the price and volume indicators (Anderson, Nelgen, and Pinilla, 2017; Anderson, and Strutt, 2016 Navarro et al. 2017).
Ladaru and Beciu (2015, p. 189) state that the Romanian government supports the development of local producers and their export efforts, by allocating financial support for “promotion on third-country markets; restructuring and conversion of vineyards; harvest insurance, investment in enterprise and use of concentrated grape must allow for enrichment.” This means that the wine producers can rely on the government in their endeavors relating to increasing production capacity, exploring new niches, improving manufacturing practices, and exporting efforts.
SWOT
The previous paragraph highlights the potential of the Romanian market for export. Table 1 presents the SWOT analysis with the main elements that affect wine production in Romania. Many factors impact wine production and the output of vineyards. Notably, the OIV (2018) report on global viticulture, highlights the crisis of 2017 with extremely low harvests, which impacted the industry. However, as seen from the statistics explored above, Romania managed to increase its production volume since 2016 continuously.
In regards to weaknesses, it can be concluded that the Romanian wine producers suffer from a lack of knowledge in the areas of international trade and cooperation that would allow them to share the know-how and adopt best practices. One aspect of this is the certified production of wine, such as DOC and IG, which are the European classifications, referring to Controlled Designation of Origin and regional Wine (Official wine classifications, n.d.). Moreover, because the Romanian wine tradition has a long history, wine producers often overlook international standards, as “ vine is part of Romanians life, all traditions are related to wine” (“Why not Romanian wine?,” n.d.).
Next, as with any other wine producer, Romanian farmers are affected by weather conditions and can have a negative impact on the production capacity of the country. Additionally, the analysis of the export trends within the global wine market conducted by Ladaru and Beciu (2015) suggests that local producers have a competitive disadvantage when compared to other wine manufacturers. In terms of production output and business specifics, Romania currently is not a major global producer of wine, with five states accounting for 51% of the production and other countries for the remaining 49%, including Romania (OIV 2019 a; OIV 2019b). This suggests that the country’s producers may have difficulties competing on the global level, especially when considering political and economic instabilities, such as Brexit.
Among the strengths of the Romanian wine, perhaps the most notable is the high quality of grapes, discussed in the previous paragraph, and the low price. The Tămȃioasă Romȃnească grape was created to mimic the Muscat Blanc à Petit Grains and has comparable characteristics, used to produce white wines (Everything you need to know about Romanian wine, n.d.). The variety of the products sold by the Romanian wine producers is notable, as well.
Brexit is perhaps the most significant threat that the Romania wine industry faces. According to Barbulescu (2019) and Anderson and Wittwer (2017), approximately 20% of the wine export from the state is delivered to the United Kingdom. This export allows wine companies to ensure stability and support their growth over the periods of domestic market decline. Several economic effects that will impact the British economy are essential for wine export.
Firstly, the currency depreciation will lead to an increase in the price of wine for the consumers (Barbulescu, 2019; Office of National Statistics, 2017). In general, one can expect a 22% price increase per unit, suggesting that the demand for the product will decrease, affecting the Romanian exports. Anderson and Wittwer (2017) suggest a 28% drop in consumption rates as a result. Therefore, one can suggest that Romania manufacturers should expand their exports to other European and non-European countries, to account for the decrease.
Table 1. SWOT analysis for wine production in Romania (created by the author).
Advice for a Boutique Wine Producer
Production of boutique wine is more complicated when compared to mass production. Boutique wine can be defined as small vinification facilities, which usually output small quantities of product. Notably, the wine produced by such entities is often premium quality, sold for a price above average. Due to Brexit, Romanian wine producers will have to explore new niches for their products (Campos, 2016; Cantino, Giacosa, and Cortese, 2019; Peth, Drastig, and Prochnow, 2017).
One issue that will be examined in this paragraph is the marketing of the boutique Romanian wine, which has a reputation of being cheap, and the establishment of new trading agreements that will be used for distribution (Lewis, Byrom, and Grimmer, 2015; Oliveira M. and Duarte, 2016; Oliveira and Duarte, 2015; Veseth, 2018). This should be considered when developing a marketing strategy for the brand, as overcoming the stereotype of an inexpensive product can be challenging (Haros, 2015).
Firstly, the threats from the SWOT analysis suggest that the Romanian wine producers should dedicate more attention to exporting their products to European countries and other regions. To overcome the issue of tradition as opposed to production quality, the boutique wine producer must establish quality and safety processes. Based on the SWOT, this can be achieved by obtaining financial support from the government or the EU.
Additionally, this indicates that boutique wine producers should undergo DOC/IC classification to have better prospects of competing in this market since the majority of wine producers in Romania do not experience these procedures (Mărăcineanu, Nicolae, Carmen, and Căpruciu, 2018). The vineyards should avoid using hybrid products, instead of focusing on high-quality domestic grapes such as Fetească, Tămȃioasă Romȃnească, and Fetească Neagra.
Next, according to research by Beery and Trela (2015), which studies the example of Turkish boutique wine producers, marketing a boutique wine is more complex and requires significant investment. In the case of Romanian boutique wine, similar to the Turkish products, the main issue is the low price associated with the segment of the product (Wines of Turkey, 2017). Hence, the producer should be able to communicate the premium quality of the product through appropriate marketing strategies. Finally, the issue of the knowledge gap that will allow for successful production enhancement, export, and marketing can be resolved through education and participation in knowledge-exchange activities with wine producers from other countries. Alternatively, wine producers can hire specialists who have experience working in the wine industry outside Romania to help with marketing and export.
The target consumer and consumer segmentation are people in the United Kingdom, Germany, Spain, Italy, and other countries across the world. They have a sufficient knowledge of vinification, which helps them choose the best quality product. I would argue that within the contemporary globalized market, boutique wine producers should dedicate special attention to marketing their products, especially using social media and other capabilities of the Internet. Hence, the following summarizes the advice for boutique wine producers in Romania:
- Focus on export rather than the domestic market.
- Explore states that allow for large margins, as opposed to CIS countries (Veseth, 2018).
- Undergo DOC/IG certification.
- Use high-quality local grapes instead of hybrids.
- Exchange knowledge with other wine producers or hire experienced professionals.
- Use marketing to highlight the grape quality.
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