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Russian revolution

Russia has been flexing its political muscle over its neighbours and has unilaterally banned all wine from both Georgia and Moldova since 27 March 2006.

The Russian health minister has claimed that these countries' wines are contaminated with heavy metals and pesticides, and 'endanger the Russian consumer'.

There seems to be little hard evidence to support Russia's action, not least because many grape growers in these countries are far too poor to afford agrochemicals anyway.

Several commentators believe that wine is being used as a political football to punish both countries for daring to look west towards the EU and NATO.

For Moldova, this situation is desperate. It's already the poorest country in Europe, with a minimum monthly salary of US$32 (17), and yet it must be the country that is most heavily dependent on wine in the world.

It has few natural resources beyond its agriculture, and wine has been, until now, its biggest export product (after ex-pat workers). About 93% of Moldova's wine is exported, accounting for some 25% of export earnings, worth $312 million (165 million; to the end of 2005).

The Commonwealth of Independent States take wine worth $300 million (158 million) and more than 85% of this has been going to Russia.

Until the embargo, Moldova was still number one supplier to Russia, although market share had dropped to 45% in the face of the growing Russian market and competition from Western Europe and the New World.

Russia has been an easy market, buying low-quality semi-sweet wines as cheap as possible from Moldova (many wineries have dedicated railway connections as shipments have been so huge), so there's been little incentive to change.

The US Agency for International Development (USAID) is working in Moldova to increase the industry's competitiveness and develop other market opportunities, but it may be too little too late.

Most wineries have sent staff home on unpaid leave, unable to pay their meagre salaries, so finding cash flow to invest in the necessary equipment and expertise to approach Western markets seems unlikely.

A small number of wineries are already demonstrating the kind of fresh, precise and attractive varietal wines the country can produce from its rolling hills. These include Acorex (selling as Albastrele to Direct Wines in the UK); DK Intertrade, with its Firebird brand (going well in Waitrose, according to buyer Nick Room); and Dionysos-Mereni, with its premium reds and even the country's first icewine.

Georgia, too, has also been exporting up to 80% of its wine to Russia and the ban is causing widespread panic and economic difficulties. It's a bigger issue than just wine, as a ban on mineral water was announced on 5 May.

As Lado Uzunashvili, winemaker at Pernod Ricard-owned GWS, says: 'It's ironic that this is happening when the quality of Georgian wine has reached a high level, and the country was ready to present "Brand Georgia" to the world.'

In the UK, Neil Philips of Pernod Ricard is encouraged by reactions to GWS's wines. He said the repackaged Old Tbilisi wines 'have done well in Ocado, where they've been positioned as a separate category, not just lumped in with Eastern Europe'.

Room at Waitrose confirms this, although admits he lacks the shelf space for a store listing.

One of Georgia's strengths is its indigenous grapes, including the white Mtsvane, which will be listed by Direct Wines from August.

Inky-dark Saperavi is the backbone of the reds and has responded very well to Uzunashvili's Australian-influenced winemaking to tame its often fierce acid and tannins. The result is a more balanced and appealing wine, which Philips reports is attracting repeat purchases.

Bulgaria - regaining the Balkan crown?

The Russian situation may well be a huge opportunity for Bulgaria, and there are already reports of Russians hunting for wine supplies across the country.

At present, exports to Russia are held up by the country's bureaucratic failure to issue new excise strips.

The old ones were permitted until 1 April, but replacements are not expected until mid-May. Ivan Zahariev of London-based importer Winez points out that this may not be good for the industry.

He says there is a danger of being carried away with the Russian market, as it will be easy and initially give better returns than the West.

Radoslav Radev of Bulgarian wine export company Vinimpex highlights another problem: Russia will treat wine like other foodstuffs and require ingredient listing and nutritional analysis, although no lab in Bulgaria has this capability at present.

With EU membership just a few months away, Bulgaria has been showing signs of a real return to its heartland of good-value, drinkable varietal reds.

Domain Menada is supplying the Bronze Hill wines to Morrisons at 2.99, which are 'flying out' according to Zahariev. Waitrose has just agreed to take on two new Bulgarian wines - Todor Estate from Liubimetz made by Angela Muir MW at 4.49, and a Cabernet Reserve from Boyar at 4.99.

The country is also developing a new generation of high-quality boutique and estate wines, which will help put it back on the wine map. These will be showcased at London's Bulgarian Tasting on 3 October.

These are wines with a real sense of identity, such as Sensum from Valley Vintners, Maxxima's Private Reserve, Santa Sarah and Chateau de Val. Bessa Valley's Enira has been listed by Waitrose at 8.99, which is very high for Bulgaria but, as Room says, 'it's a very good wine and well packaged'.

Undoubtedly the Von Niepperg connection and good press helps. Michel Rolland has just signed up to be consultant to Telish - which also adds weight to Bulgaria's claim to have quality potential.

Romania

Romania is just a few months away from EU membership too and, like Bulgaria, it has benefited from vast sums of EU money through the Special Assistance Programme for Agricultural and Research Development (SAPARD).

The main difference compared to her neighbours is a strong domestic market which takes well over 90% of Romania's wine production. The market is still protected by customs duties and is very loyal to the local product, but things are changing and the industry needs to invest in its home market before it's too late.

The arrival of Western supermarket chains will bring globally sourced wines and aggressive tactics, such as listing fees and funded promotions. There is already a swing towards imports, reaching 60,000 hectolitres (hl) in the first six weeks of 2006.

Romania is just 0.2% of the UK's imports (13,761hl in 2005, although the Carl Reh winery ships via Germany so does not affect the data). Germany is the main importer (112,197hl), then Moldova (85,597hl), with the UK third.

With the buoyant local market, there's little incentive to cut prices for export. For Philip Cox at the Recas winery, local sales have doubled and his top Reserva wines are selling for 8 per bottle - considerably more profitable than an 8 Romanian wine sold in the UK.

For the last harvest, Recas employed Australian Hartley Smithers, senior winemaker at Casella, and is optimistic about the wines in spite of the challenging vintage - 'they are more balanced and juicier' says Cox.

Carl Reh is focusing on its Val Duna brand, which sells more than 100,000 cases in Germany and was recently launched into the UK, priced from 1.49 for 250ml to 4.79 for 750ml.

This year sees a new Sauvignon/Feteasca blend. In the vineyards, producers are rushing to plant varieties such as Shiraz ahead of EU membership. Romania still has to grub up its low-quality hybrids, and has negotiated replanting rights of 30,000 hectares (ha), although as Cox notes, it will be almost impossible to plant varietals you don't already have.

New Europe two years on: Hungary

Hungary hasn't had an easy time since joining the EU in 2004, and sales in the UK off-trade are down by -15.7% (AC Nielsen), although the average price has crept up to 3.38 from 3.29 last year. As Neil Gooch of the RGS Group explains, 'the country has not had much trade exposure this year' and RGS has kept an unsupported generic presence in the UK for five years now.

There was some optimism in Hungary that this would change with the establishment of a new wine office, which would be able to focus on wine. Hungary's parliament finally agreed to funding in December - the 8FT (2p) excise duty is to be diverted to the new office to pay for promotion and quality control.

However, so far the new office 'remains a sleeping beauty with official structure but no money yet', according to Zoltan Balo of Torley winery.

For Arabella Woodrow of Myliko, the problem for 'New Europe', as she prefers to term it, is that there are so few stock-keeping units in the category. 'Retailers reduce space and sales fall, which becomes self-fulfilling,' she says.

'It's frustrating for buyers, too, who can see value in the wines, but the category is too fragmented for effective promotions.' UK-based importer Bottle Green comments that its Riverview brand is outperforming the market with 1% growth and is the only Eastern European brand in the top 50.

The one real success story for Hungary is its Italian look-alikes, especially Pinot Grigio, in the shape of own-brands such as Sainsbury's Via Floriana, Morrisons' Monte Capella, Direct Wines' Campanula and Bottle Green's imminent launch of Via Cappella, sourced from Hilltop.

Michelle Smith of Sainsbury's points out that the strength of Pinot Grigio means it sells three times as much as Sauvignon. 'Consumers do not have a strong frame of reference for Hungary.

Fortunately, however, it doesn't seem to offer the same negative images as other Eastern European countries.' Perceptions may change, though, with a 40% increase to more than 400,000 British visitors to Hungary last year; and Balaton has just become a new Ryanair destination.

'Good value in the middle ground is where Hungary needs to focus,' says Alan Ponting of Yorkshire's Wines of Westhorpe, who reports selling out of 2005 Budai Chardonnay as early as November.

Laszlo Lanci of Hertfordshire merchant Malux agrees: 'Hungary must concentrate on quality products.' He reports success with listing wines such as Gal's Pinot Noir and Pannonhalma Riesling in Gordon Ramsay's London restaurant Maze.

'The challenge is to spread the word and it is rewarding when restaurants comment that their turnover is up - people are appreciating that Hungarian wines are different and very enjoyable.'

At the top end, Hungary's leading producers are making wines that are of international quality, not just good for Eastern Europe. Uxbridge-based Pannon Wines lists a number, including Weninger, Malatinzsky, Gere, Figula and Bock.

Tokaji, too, is increasingly appearing on restaurant lists, recognised as one of the world's finest sweet wines. High-priced Asz wines will always be a challenging sell, so most Tokaj producers are adding late-harvest and cuve wines to their portfolio, such as Ats Cuve from Royal Tokaj and Andante from Degenfeld.

Even Istvn Szepsy is adding a szamorodni at 140g/l residual sugar, which will be 60% of the price of his sweet cuve - easier to sell in restaurants and for everyday consumption.

Slovenia

This small and stunningly beautiful country is gradually making inroads into the UK. Ivan Zahariev at Winez has just taken on wines from Goriska Brda and Jeruzalem-Ormoz, as he sees an opportunity with whites priced at 4.49 to 4.99 - 'not entry point but excellent quality and competitive at this level'.

He adds: 'Slovenians have done their homework; they've learned from their neighbours Italy and Austria, and have revived the tradition of excellent winemaking.' At the premium end of Slovenia, where there is a small group of international stars, a new company has been set up to make these available in the UK.

Run by Vlado Sodin, latevintage.com has agreements with seven Slovenian wineries including Edi Simcic, Marjan Simcic, Curin, Sutor and Jakoncic. 'The concept is to start with the best wines possible and hope that quality will prevail over price,' says Sodin, although he admits that this won't be easy in the UK.

Rutland-based importers Richards Walford is listing wines from Dueri-Pax 'not from long and diligent research, but because we tasted the wines and liked them', says Roy Richards.

EU membership has brought mixed fortunes. Dusan Brejc of the Slovenian wine office PSVVS admits that the bureaucracy has been much worse than he expected. The country has recently agreed a reduction in number of regions from 14 to eight, which should help with competitiveness.

Promoting Slovenian wine is still difficult as budgets are very small and 'the superstars tend to go their own way', says Brejc, who would like to get all the producers working together. Only 350 growers have more than 5ha, with 20,000 owning less than 0.75ha. This doesn't make strategic planning easy.

Cyprus

The after-effects of joining the EU have been dramatic for Cyprus and the industry is at a turning point. Until recently, the island produced more than 150,000 tonnes of grapes, most shipped in bulk for sangria, vermouth and glhwein.

Grape growing here is small-scale and fragmented, with 20,000 growers farming just 17,000ha, mostly part time. It's expensive mountain viticulture, requiring refrigerated trucks at harvest for decent quality. Without subsidies, ends don't meet.

Growers' protests forced a new strategy which focuses on abandoning vineyards and replanting better varieties at higher altitude, so far costing around 40 million. Nearly 2,000ha were removed in 2004 and 2005, bringing the 2005 harvest down to 60,000 tonnes.

The Sodap wine co-op has switched entirely from bulk to bottled wines; its new Kamanterena winery crushed just 8,200 tonnes this year, compared with 24,000 last harvest. The other big three - Loel, Etko and Keo - have made similar moves away from bulk wines.

In the UK, the biggest presence is the Co-op's Island Vines made by Bottle Green's Paul Nelson. Sales this year have started slowly, but two promotions are scheduled, which should drive sales.

The island has about 1.5 million British visitors every year, which should help create a positive image for the wines, especially as there is a new generation of small wineries. These estates are producing some really exciting wines from local grapes such as white Xynisteri (which can be excellent when grown at altitude) and red Maratheftiko, as well as international varieties including Shiraz.

The Vlassides, Kyperounda, Nicolaides, Vasa, Tsiakkas and Fikardos wineries are well worth a look.

Best of the rest

Of the other wine nations that joined the EU last time round, both the Czech Republic and Slovakia are net wine importers, producing considerably less than they consume.

Neither country has much presence in the UK, although JM Cullen Wines has a small range of Czech wines and Slovak Tokaj (sold mainly direct to the public), and Top Selection brings in Egon Muller's elegant, mineral Kastel Bela Riesling from Slovakia.

Future members: Croatia and Macedonia

These two former Yugoslavian nations are both in negotiations for EU membership, and hope to join in 2010. Croatia has become a major tourist hotspot, helping to drive the switch from bulk plonk to high-quality wine.

In 1989, there were about seven producers and now there are more than 450. Registered vineyards cover only 14,000ha, so considerable volumes are imported and there is little drive to export.

Government strategy is to plant vineyards ahead of membership, and 7,000ha of cleared forest has just been allocated to vineyards. Phil Bilodeau of Vina Grgich says: 'There has been a sea change in attitude from selling to co-ops to making high-quality, artisanal wine.'

Macedonia now has 31 wineries and is working hard to ensure that EU standards are met, as well as developing vineyards to satisfy international demand, recognising that the country's indigenous Vranec and Smederevka grape varieties (currently 80% of production) have limited global appeal. USAID projects are providing technical expertise and the UK is a major target for 2006.

Sailing the sea

It's hard to sum up the challenges ahead for such a diverse group of countries, as each one faces its own distinct circumstances.

In these days of global wine surpluses it won't be easy, but there are many positive signs of better winemaking, better vineyard management and a welcome emphasis on local grapes that can create a sense of place and unique identity amidst a sea of Chardonnay and Cabernet.

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