by Markus Stolz

Feeling
the heat

byMarkus Stolz
September 20, 2010, 14 Comments

 

The ongoing financial crisis in Greece continues to take its toll. Disposable income for the consumer is dropping like a stone, and by now every sector in the country is badly affected. The wineries are having a particular hard time, cash flows have completely dried up and I estimate that sales are down by between 30 and 50% over the last few months. The export markets have remained steady, but given that roughly 90% of the produced wines are sold within Greece, this offers little consolation.

A lot of stock remains unsold in the shelves of the wine merchants and the supermarkets. AB, one of the largest supermarket chains in Greece, has aggressively started a rotation of offers that are valid through a limited period of time. As a consumer, I am happy about this, as bargains can be found.

However this morning, I was shocked by the latest promotion that covers two very different wines from the same varietal and the same area of production.  In my opinion, it sends out a dangerous message that might be very damaging in terms of reputation for years to come.

Assyrtiko is without any doubt one of the greatest Greek varietals. Assyrtiko from the island of Santorini, in the hands of a capable grower, can produce world-class wines that mirror their terroir.  These wines deserve to be counted amongst the best dry white wines in the world. 2009 in particular has been a stunningly successful vintage. Please take the time to learn more about the wines of Santorini here.

AB currently discounts two Assyrtiko wines from Santorini. The first one is simply labelled “Assyrtiko Santorini”. It comes from Greek Wine Cellars, one of the country’s most powerful producers. They are the largest producer and bottler of Greek wines with significant exports, and cater mainly for the mass market. This wine is currently discounted by 40% and is offered at 4,30 €, inclusive of VAT!

I am shaking my head in utter disbelieve – growing vines in Santorini is extremely labour-intense and the cost involved is prohibitive for any serious grower to be able to offer their product so cheap. None of the other wineries will be able to compete with these dumping prices. What worries me a great deal is that I have received reports from the US, where a similar strategy has been employed with the very same wine. At a time where Greek wines finally start receiving recognition, this business strategy seems very contra-productive. The Greek wine industry has not been able to expand exports in the last years by offering average quality at discount prices. To the contrary, this has damaged its reputation. As far as the wine itself is concerned, the bottle I just tasted was in all fairness quite descent, it is not one of top wines I have tasted from this vintage, but it typifies the varietal and the area.

The second discounted wine also caught my attention big time. Gaia Thalassitis 2009 is one of the best wines of the vintage. I am not alone with this assessment; it just received a score of 91 points from Mark Squires who writes for Robert Parker’s Wine Advocate. This wine is currently discounted by 15% at a price of 9,99 €, inclusive of VAT. I wonder if this is a direct result from the first campaign. If so, it shows the chilling effect that might already be in the making. I wonder how the price negotiations will go in the coming months. I know for a fact that Gaia is working hard to set recommended offer prices for the export markets. The fact that their wines are now offered at discounts in Greece will not support this effort.

I find this all ironic in a sad way. A lot of money is being invested for strategies to improve the image of Greek wines abroad. Consulting companies are being paid, wine writers are being flown into the country, wine road shows are organised etc. Yet somehow the industry continues to be plagued by major mishaps. Make no mistake, the move to offer one the real gems from the wines of Greece, Assyrtiko from Santorini, at discount prices is exactly that.

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  1. Benjamin DenekeSeptember 20, 2010, 8:13 pm

    Dear Markus…Good point here.
    It looks like prices are going down because of cash flow drained.
    I have to tell you though that as Santorini is concerned the prices are steady and solid for the time.
    AB supermarkets can offer wines on sale for a smaller price but make no mistake the Santorini wines are not getting any cheaper any time soon.
    The cost to produce a Santorini wine is high and that is because everything is expensive in Greece, from the man power to shipping costs and of course the grapes are not cheap either.
    The kilo of the Asyrtiko grape is around 0.80 – 1.10 so how can prices go as far as 4,30Euro…?
    Well Hellenic Cellars are buying wine from producers here in Santorini, they do not operate a winery on the island so the price is subject to quality…as you said it was not the best Santorini wine you had right…We all know there are qualities and qualities when it comes to wine…
    As for Gaia the only think I can tell you is that AB just wants to get rid of wines not selling that much…By offering the wine almost on wholesale price they look to change their portfolio that now is less expensive wine enthusiasts.
    It is true that the Greek wines are gaining more and more popularity in the US and other markets but the prices ….That is something we all need to work on.

    My best regards Markus you are doing a great job.
    Benjamin Deneke
    Iama Wine Store
    Santorini Greece

  2. elloinosSeptember 20, 2010, 9:52 pm

    Benjamin, I wish matters would be that easy, but in my view, they are not. Greek Wine Cellars have a powerful position in the market. If they decide to venture into Santorini, buy grapes from the local growers, and then cut aggressively the prices, it will have an impact. Most consumers are just starting to learn about the wines from your island. They will find wines labeled Assyrtiko Santorini at very low price points, and also the “original” wines that cost more than double. This will lead to confusion – after all, if you don’t know the producers, why opt for the more expensive option? The expectation will be that Santorini wines are a cheap play. Make no mistake, Greece has massive problems in the export markets because of this notion. Few quality wines are broadly available, what you do find in abundance is average, or less than average quality at the entry level. This pricing policy will cut the sales of other producers, this is how the market works. As to remarks to the quality of the wine, yes, it is not the best wine I have tasted, but in all fairness, it is a typical and well made Assyrtiko from Santorini. It is by no means an extraordinary wine, but a pleasing and modern styled wine nevertheless.

    I am very concerned that the outstanding terroir driven wines from Santorini will suffer as a result of this action. Santorini has all the hallmarks of true terroir driven wines, and the action taken by this producer (or AB) is a disservice to the Greek wine industry.

  3. Kostas P.September 20, 2010, 11:06 pm

    Markus be aware that most times supermarkets decide to make discounts on products based on _their_ stock and market strategy, without informing the producer, no matter if we’re talking about wine, cheese or coke. I have talked with many producers and most of the times they weren’t even aware that there was a discount on their wine at the supermarket.

  4. elloinosSeptember 20, 2010, 11:20 pm

    Kosta, I am aware of this – but in this particular (first) case, I’d be surprised if there was no communication at all. I’d be delighted to receive feedback from either AB or the producer. Trust me, I thought hard about publishing this post, but I did receive communication from US importers of Greek wines a few weeks back alerting me that me Assyrtiko from GWC was offered at seriously discounted prices, and I cannot imagine that the producer was not aware of this policy.

  5. Kostas KatsoulierisSeptember 20, 2010, 11:53 pm

    Markus, an interesting conundrum. On the one hand a perception that a drop in price will lead to a drop in people’s expectations of quality. On the other hand however, if the discounts lead to an increase in sales is this not a good thing, especially when Greece faces an uncertain economic future? Is there not a possibility that an “average Yiannaki” when visiting his local AB will pick that Thalassiti rather than that Aussie or Chilean white or even the “bog standard” retsina or other mass produced characterless white? As for the export markets, a more competetive pricing policy may also cause more people to take a chance on an unknown Greek wine when visiting their usual wine store… A lot of my British friends tell me the same thing whenever I go back to London – they find Greek wines too expensive compared to wines from other countries. As for GWC, they make good, simple, entry level wines and have even managed to get some good reviews in some foreign wine magazines. I would like to believe that someone would try the GWC and then move on to a Hatzidaki, an Argyrou, a Gaia, a Sigalas in much the same way people are introduced to Sauvignon Blanc via cheap NZ wine and then decide to move up a step to a Sancerre… I can dream can’t I? ;-)

  6. elloinosSeptember 21, 2010, 12:20 am

    Kosta, as a consumer, I am thankful that prices for Greek wines drop. This might result in an increase of sales. The average “Yiannaki” in Greece, or the average “John” in the US will however NOT pick the Thalissitis. He will pick the 4,30 Euro Assyrtiko Santorini and be offended by the “fantasy” prices demanded from other producers. After all, he has heard about Assyrtiko from Santorini, so why pay up if the same wine of origin can be purchased at less than half the price? Let’s face it, Santorini is a very special wine producing area, average yields are the lowest in all of Greece. The region has caught up with wine critics, and has received more coverage in the press than any other Greek wine region. Finally, merchants and consumers start to show well deserved interest. At exactly this time, a powerful player offers the wines at dumping prices, playing havoc with all the other growers. The scores received by Greek wines from foreign wine magazines is another story – I am well aware of the game being played there. The tought that someone who purchased GWC will move on to Hatzidaki, Argyrou, Gaia, Sigalas would be very commendable – but I seriously believe that the consumer should be exposed to exactly these wineries to begin with. Quality rules!

  7. Theo DiamantisSeptember 21, 2010, 1:40 am

    As in importer of Greek wines in Quebec, I have struggled for years to overcome the bad image of cheap Greek wines, and have chosen to work with smaller producers who are proud of their exceptional work. Greek Wine Cellars is perpetuating a horrible image of Greek wines by dumping wines, especially Assyrtico from Santorini, at ridiculous prices. But then again,,this is what they have been doing for decades, no surprise there

  8. David LambSeptember 21, 2010, 6:16 am

    People, when it comes to your countries flagship wine areas, please do not think a “competitive” pricing policy will help you in the long run. If Greece want’s to compete on price, it should do it in the broader viticultural areas on Greeces main land, areas which can provide excellent entry points for the consumer. Discounting or more importantly extensive discounting will only serve to ruin a high quality wine region, after which the road back is a very long one. Please note I am not advocating overpricing in the name of prestige, wines should try to over deliver and the best of Santorini I believe do that already.

  9. elloinosSeptember 21, 2010, 7:44 am

    David, you nailed the issue, thank you so much for your input. I hope many will read your thoughts!

  10. elloinosSeptember 21, 2010, 7:55 am

    Theo, working with small high quality producers is admirable. I just hope that the price dumping by others does not lead to serious confusion at the consumer level, although it is hard to imagine that it won’t. I think in this case it is very serious, as we are talking about a very small wine producing area that has received a lot of deserved attention lately. It is a shame that this good image is then misused by Greek producers for short term turnover. This behavior damages the industry as a whole.

  11. Yiannis PapadakisSeptember 23, 2010, 4:15 pm

    Just one information: Thalassitis 2009 is offered for less than 10 Euros at Sklavenitis S.M. chain as well, so it is not an offer from the AB chain only, based on excessive stock (for God’s sake, this is the current vintage for this label) but most probably an offer from the winery itself. As far as the Yiannaki issue, I am afraid that the average ignorant consumer will rather be schocked than delighted by the character of a wine like Thalassitis if his experience is limited to easy, ultra-perfumed and simple wines like the ones that are in fashion currently in Greece, or to simplistic, flat wines like the ones sold in bulk. Believe me I have heard several times people call wines of this kind “tart” and unpleasurable and would prefer to drink the content of that barrel in the family cellar refilled fot the 60th time with the liquid that their amateur brother in law has vinified from must he bought from his favorite mearchant.

  12. elloinosSeptember 23, 2010, 7:58 pm

    Yianni, thank you very much for the additional info, greatly appreciated.

  13. Paul DSeptember 27, 2010, 8:43 pm

    The only relatively inexpensive Greek wines available in the UK are offered (not frequently enough) by the ALDI chain, most recently a Roditis and Nemea. I advocate that people try them purely in the hope it will raise overall awareness. In the meantime I won’t hold my breath waiting for cut price Hatzidakis, Argyros, Sigalas, Roussos et al turning up in my local supermarket!