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Hungary like the wolf

There is little doubt that lack of a concerted generic effort in promoting Hungary's wine has been a major failure of the cash-strapped government. As Neil Gooch (who ran the Hungarian Food and Wine Bureau) of RGS Group points out, Budget cuts by the government mean AMC [Agricultural Marketing Centrum] has not funded the bureau for two years, and we only work on a project-by-project basis.'

New wine office

With the foundation of a new national wine office, Hungary might be about to get the united front its wine producers so desperately need. Though the office was actually founded' this spring, it remains a dormant company, with just an address, a nominal director and an elected supervisory board, and funding details remain unconfirmed. There are several organisations behind it, including Hungarian Wine Academy, Vine and Wine Growers Association, Pannon Wine Guild and Council of Wine Communities. The last is the biggest single organisation of any type in Hungary, with around 118,000 members (anyone who has a vineyard must be a member to gain the certificate required to sell grapes) and, importantly, with an election looming, is a big slice of the voting community.

In principle, it is expected that funding will come from the current excise duty on wine of 8 forints per litre, of which 3 to 4 forints should go to the new office. A decision on releasing funds is due to be made in November, when Hungary's parliament will vote on this measure. In addition, the current AMC budget may go to the new office, which should be able to plan on a longer-term basis, with firm focus on the wine sector only - unlike the AMC, which has had to work on strict annual budgets, and for which wine has tended to become lost within the agricultural sector.

Zoltn Balo, export director for Trley Winecellars (previously Hungarovin) and supervisory board member of the new

wine office, expects that once funding is agreed, probably 50% will be spent abroad, especially on Scandinavia, the

UK, Germany and possibly Russia'. Wine producers must be hoping that this is not too little too late, since a glance at Hungary's export statistics for the five years ending 2004 (Tables 1 and 2) shows decreases in just about every major

market. As Vencel Garamvri, owner of top sparkling-wine producer Chateau Vincent and ngociant Vinarium, points out, the government needs to provide leadership to increase the image of Hungary'.

Italian look-alikes

There's little doubt that Pinot Grigio is the current success story from Hungary in the UK, though with Italian-sounding labels like Sainsbury's Villa Floriana, Direct Wines' Campanula and Morrisons' Monte Capella reported to be selling well, there is a question as to whether consumers really know the origin of the wines they are buying. Hemant Kotecha, MD of Myliko, admits the Italian look-alike Pinot Grigios are selling very well in both on-trade and off-trade and are important in maintaining interest in Hungarian wine. The slots otherwise would have been lost to New World wines.' He firmly believes that there is more to this success than customers being fooled, mentioning one major supermarket that promoted Italian Pinot Grigio at 2.99 with very little effect on ongoing sales of Myliko's Hungarian Pinot Grigio. This indicates that consumers like the style Hungary has to offer,' he says. The way forward for Hungary is to call these wines "wines from New Europe", and we are actively promoting this in our PR and marketing activity, such as on our new Spice Trail labels.' Kotecha also points out that sales of ros are very strong, due to an excellent quality/price ratio, and he also has high hopes for the new Chapel Hill Sparkling Pinot Grigio.

One company that is particularly committed to Eastern European wines is Direct Wines, whose Campanula Pinot Grigio (supplied by Trley) was one of the most successful recent launches. Buyer Samantha Caporn says, We do highlight the origins of this wine, though the fact that it is made from such a popular grape and overdelivers in terms of taste and value no doubt contributes too.' New range additions also include Domain Szent Orban Sauvignon Blanc, Baron Lazare Pinot Grigio and Dnes Gbor Pinot Noir. We are certainly looking to grow this segment, since it shows real potential, and we will

be considering indigenous varieties if quality/value stacks up,' says Caporn.

Hungary's native grapes, especially whites, are also an area where Hungary can offer a real point of difference. Fiona Barlow MW of Bottle Green, agent for Hilltop, says, There's broader interest in indigenous varieties, and we have a couple of interesting projects underway, with two major retailers to bring these wines to the shelves in the next couple of months.' Kotecha, for example, is about to start shipping Irsai Olivr again in response to renewed interest.

For the more specialist operators, Hungary's real potential lies in the mid-market. Eastern Europe has lost its position as lowest-cost supplier, and overproduction in the New World has driven prices down to a point where Hungary can't compete on this platform and has to find another marketing weapon', according to Alan Ponting of Wines of Westhorpe. For him, Hungary has great potential to build sales in the 4-6 range, where quality can be formidable'. It is the superb crisp whites from Budai and juicy reds of Vinarium Szekszrd that bring repeat customers, more than the cheaper, price-driven offerings. Lucien Llanci of Malux concurs, seeing opportunities at the 6 level. Hungary must concentrate on quality products,' he says, citing a new wave of Bull's Blood (notably Egri Bikavr, with its newly protected quality status), silky

Pinot Noirs and exciting whites made by a new generation of talented winemakers'. Other specialist Hungarian suppliers, such as Click4abottle and Pannon Wine Limited, have recently sprung up too.

For all this, Hungary's sales performance in the UK makes fairly grim reading. In the off-trade, sales have fallen this year by 16.2% by volume and 13.7% by value, putting Hungary in 12th place (AC Nielsen, MAT to 12 June 2005). An exception is Riverview from Hilltop, which remains the leading Hungarian brand and appears to be bucking the trend', according to Bottle Green PR officer Suzanne Kaberry, with a fall in the grocery sector of just 1%. We believe this is due to Riverview focusing on lifestyle rather than country of origin,' says Kaberry. It should lead to consumers discovering the great quality and exceptional value of Hungarian wines.'

On the price front, Hungary has clawed back from an average of 3.22 per bottle to 3.31 this year (AC Nielsen, 12 June 2005). However, lack of promotional activity may be a factor. Kaberry points out that retailers are not interested in promoting Hungarian wines at present - they get better deals from other countries'.

A new focus on quality

The past few years have seen enormous efforts going into improving grape and wine quality, which has undoubtedly been reflected in the bottle. Hungarian soils tend to be very fertile, resulting in excess vigour and green, underripe fruit (especially with red varieties). Scrupulous attention to canopy management and yield reduction is thus necessary, and the economics of viticulture in Hungary is the current major challenge for the majority of producers. Everyone agrees that there is overproduction, especially from the low-quality Great Plains region, and this has forced grape prices down to e0.20/kg, with producers just grateful to find a buyer. As Gbor Keresztury, vineyard manager at Hilltop, points out, the dilemma is that they have to produce 14-15 tonnes per hectare to make it cheaper than buying in, though yields for quality wines would ideally be lower. Nonetheless, Hilltop now owns 400ha around Nezmly and another 140ha for reds in Szekszrd to enable long-term planning and control over fruit quality. Keresztury sees Hungary's future mainly with whites, since red varieties are particularly tricky in Hungary's climate. He reckons on a maximum of 10 tonnes/ha to get enough colour into the wines to make them saleable against international competition. In years like 2004, even top producers had to cut yields heavily to get anything decent. Csaba Malatinszky, who makes one of Hungary's best Cabernet Francs, says, 2004 was so bad, it was the biggest challenge of my life - I ended up picking just 500g per vine.'

Labour is increasingly an issue in Hungary, because costs are going up post-EU accession while selling prices are not. Balo admits to bringing in labour from as far as Turkey at harvest time, while Hilltop uses workers from Slovakia. Mechanisation is still rare, with just 10 harvesters across the country, and, as Keresztury points out, the best labourers are much quicker than machines for techniques like shoot positioning.

Near Budapest in Etyek, Trley has taken another approach. It owns some 800ha but farms very little directly. Instead, either the vines are rented out for cultivation, or the land is rented out to growers who plant their own vines, with Trley supplying equipment and viticultural advice. These arrangements benefit from tax advantages, since growers are allowed a certain income before any tax is due, so ownership can

be cheaper than direct labour. Also, as Balo says, growers have a better incentive over workers because there is a closer connection, and it helps with labour, since there is a shortage near the city'.

The other notable change is one of attitude. As Lzl Romsics, chief winemaker for Trley, says, A decade ago growers had different goals to winemakers. Now I decide when to pick.'

The case of Tokaji

It is impossible to look at Hungary without considering Tokaji to be the only wine of any real global standing, yet it is quite distinct from the rest of the country both in terms of the wine itself and the challenges it faces. As Istvn Turoczi of Royal Tokaji says, We are the only region directly influenced by politics - a pain in the neck.' His frustration at the government's failure to privatise the last remaining state winery, the Tokaji Keredozhaz, is widely shared. It has an obligation to buy grapes, whatever the quality, from the region's nearly 3,000 small growers. This huge social role is politically important in a region with little alternative employment. The recent privatisation failed because the only offer on the table was an MBO, rejected because the price was deemed too low. The other problem for Tokaji is that, as Tokaji evangelist Istvn Szepsy emphasises, the market for great sweet wine will always be limited, and dry wine can appeal to a much bigger market sector'. In Wine Report 2006, Tom Stevenson says of Szepsy's wine:

This is the greatest dry Furmint I have tasted. Tokaj needs to develop a wine of this calibre if it is to survive.' Gyrgy Rask, of Royal Tokaji, concurs, pointing out that 95% of Hungarians drink dry wine, and also admits that these wines (along with late-harvest wines) are good for cash flow too.

Looking in the crystal ball

It seems certain that some tough times lie ahead for Hungary. Vineyard area will fall to around 60,000-70,000ha, though those who survive should know better what they are doing. However, quality is definitely improving across the board, with better winemaking and viticulture. A new generation of top-quality winemakers is showing what potential Hungary has, even if steep prices mean that sales outside Hungary will always be limited.

In the home market, consumption is already more than 30 litres a head, but a growing professional class is interested in eating and drinking better - there are even five wine magazines published in Hungary. Flocks of tourists are also arriving, brought in by several low-cost airlines, and are discovering that Hungary is a wine country. Balo comments that in 14 years of coming to LIWSF, this year was the first time people mentioned visiting Hungary. The new office may make all the difference in communication and education for both buyers and consumers, so it is to be hoped that the government sees sense and agrees to some decent funding quickly.

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