The laws of the market are ruthless. The final price of a product is not defined by the state of our wallets or the average Croatian salary. Unfortunately, besides the classic law of supply and demand, prices are also dictated by production costs. To simplify – if production costs were primarily simpler and thus more favorable for the wallet, wines would reflect that calculation and display lower prices on the shelves. We will try to explain what exactly it means to reduce production costs in the wine industry.
More grapes, smaller bill.
Let’s go back to the very beginning – if the yields in the vineyards were richer, it would be easier to breathe. And we’re talking about drastic increases in yields, not just a few kilograms. If you don’t control yields, especially if you don’t conduct green harvests, you end up with much more cheap grapes that can be processed and harvested mechanically in most vineyards. This is a way to obtain cheap raw material, and everything starts from there. However, if you care even a bit about your winemaking reputation, you’ll avoid cheap raw materials. No top-quality wine has ever come from them, no matter what promises are made.
But we already hear the question you’re asking – then why are some European wines on the shelves of stores cheap and still tasty and “good”? Roughly speaking, it’s because of the famous Davis list, which in the 1980s contained more than 300 additives for wine. In simpler terms – it’s about bad wine that successfully camouflaged everything wrong with it with chemistry.
UC Davis is the most famous American wine school. It is here, of course, just a symbol; its list of wine additives, developed in the 1980s, is now much richer and more modern. Davis symbolizes the fact that any well-educated winemaker can make relatively drinkable wine from the worst raw material, using millions of different additives and techniques that most wine consumers have never even heard of in the context of the wine industry, and some of which are also applied to quite expensive wines. For example, in the 1990s, many Barolo and Barbaresco producers regularly centrifuged and pasteurized their wines.
So, anyone can make hectoliters of drinkable and affordable wine. You need to fulfill two prerequisites for this: you have to have acquired cheap raw material and manipulated it with additives and special mechanical procedures to deceive all the senses of the final taster. You rub your hands in satisfaction because you have succeeded in satisfying every buyer’s dream – to drink cheap good wine. When we say good, it’s best to say that it only means drinkable. But let’s not deceive ourselves – drinkable rarely means quality. The choice is, of course, up to the buyer, and the saying “every bottle has its buyer” will always be valid. However, you should know all this so that you don’t live under the illusion that Croatian wines are overpriced and that Europeans have made excellent cheap wine.
Croatian story
Let’s immediately commend Croatian winemakers. Not just because they leave blood, sweat, and tears in the vineyards, but because they are wary of excessive chemical use in the wine production process. There are always exceptions, of course, but here we are talking about the majority – Croatian winemakers still adhere to tradition, and their mainstays are the sun, soil, and hands. Sometimes they believe that prayer also saves the day. That’s why Croatian winemakers, without much hesitation, limit yields and don’t use too many chemicals in their cellars. They will use chemicals in the vineyards, and they do this again because “that’s how it’s done in Europe.” Now let’s come to a logical conclusion – Croatian wines are inherently more expensive than mass-produced Spanish, French, Argentinean, or Macedonian wines.
You will pay around forty kuna for an average quality Graševina or Plavac. These are wines that receive medals even though they are not defined as premium. What you get in a bottle of Slavonian Graševina for 50 kuna, you certainly won’t get in a bottle of French Sauvignon Blanc from the same shelf.
Prices of wines like Malvazija and Pošip often bother us because they are significantly more expensive, but demand has dictated the figures. In the hospitality industry, for example, these are highly sought-after varieties – Malvazija is the best-selling restaurant wine in Croatia, and demand for Pošip is constantly increasing. Solely for that reason, Pošip has become the most expensive wine on average in the country. We’ll add – and rightfully so. It justifies its price with its taste.
However, the prices of Croatian wines 15 years ago were not as favorable as they are today. Let’s remember the period when Dingač and premium Malvazija were sold for 200 kuna, and sparkling wines for 150 €. The big crisis cut down those prices, and as they say, “brought many winemakers back down to earth.” To the delight of tasters and buyers, prices have fallen across the board. Few remained in the range above 100 kuna per bottle, and if they did, we like to believe they deserve it. Again, it’s obvious they have their customers.
In Croatia, over 70 million liters of wine are consumed annually – some domestic, some foreign. This amounts to about one billion kuna. Let’s not forget to add 50 million liters of homemade wine. These figures in black and white prove that Croatia is very aware of the potential of winemaking. The wine business today is a promising sector and appears to be sustainable. And it all started with joining the EU.
The moment when European wines became cheap and ours expensive.
With the entry into the EU, foreign wines became cheaper due to the reduction in tariffs and levies. As a result, we got wine for €3, which we buy without any hesitation when going to someone’s birthday. Even without this competition on the shelves, Croatian wines were expensive for the domestic wallet. The arrival of cheaper wines further endangered the Croatian offer.
Small producers, family farms, struggled the least. Despite the tourist boom, they failed to break into the forefront. Suddenly, there was stress in the middle price range. This prompted wine giants like Agrokor, Kutjevo, and Badel 1862 to adjust their prices.
“After joining the EU, there is no more control over imports, and that’s bad for us. All sorts of things end up on the shelves. One thing is written on the label, another is in the bottle. Foreign wines attack our market using our old classification ‘table – quality – premium’ because it is ingrained in the minds of our consumers. They label the wine as premium, but expert tastings by our enologists reveal that it’s not premium in the bottle but rather quality, which is a lower category. What are these foreign wines? This deception will be short-lived”, says the renowned Croatian winemaker Slavionac – Vlado Krauthaker.
Each winemaker has their own pricing policy, so they position themselves independently in the market. In doing so, they either hit the mark or miss it. If they strike the right balance between price and quality, they won’t have any liquidity or sales issues. If they fail to do so, they will encounter various problems. My estimate is that, on average, due to larger quantities, there will be certain price adjustments towards lower prices. – Mato Matuško
In the last 5 years, nearly 50 foreign wine labels have become cheaper. Among our people, wines from Chile and South Africa are particularly popular. On the other hand, domestic producers of red wines have not responded with lower prices. Despite this, the sales ratio of domestic and foreign wines is 70 to 30 percent in favor of domestic wines, but those are mainly white wines. A bottle of Croatian red wine, such as Plenković or Zlatan Plavac, costs around a hundred kuna. On the other hand, a bottle of Italian wine like Monte Zovo, Valpolicella Ripasso, costs 70 kuna, or a Spanish wine like Rene Barbier, Tinto Reserva, costs 55 kuna. Alternatively, a Chilean wine like Caliterra Reserva Cabernet Sauvignon costs 70 kuna.
Domestic white wines have a fairly normal price-to-quality ratio. However, domestic red wines are still mostly overpriced. The quality and price are not well aligned. Therefore, consumers will often choose a foreign red wine for 50 kuna because Croatian red wine of similar quality costs 80-90 kuna.
Lidl Croatia, which has rolled out the whole story with affordable wines, offers 60% Croatian wines and 40% foreign wines on its shelves. Two years ago, they launched their own brand “Winemakers of Croatia”. This was intended to help small winemakers compete in the market. These are products from small Croatian winemakers with a retail price of up to 39.99 kuna.
Where do statistics lead us, and where does import/export lead us?
According to estimates provided by the European Union member states to the European Commission, wine and must production for the 2021/2022 season is expected to amount to 147 million hectoliters. This is 23 million hectoliters less than the previous season, representing a decrease of 13 percent. This predicts a more expensive raw material and ultimately slightly more expensive wine.
Croatia currently imports around 15 million liters of wine and exports only 2.5 million liters. The goal is to achieve exports of up to 15 million liters. Some of our producers are bothered by the perception in the eyes of buyers that “foreign – better – cheaper” is the case. However, the main culprits are ourselves. It’s 2022, and we are still contemplating branding some varieties. We are unknown to foreigners, so it’s futile to offer top-quality wines that leave them speechless when tasted. Branding helps to lower prices, and the sooner we realize this, the sooner we will compete with wine prices.
With an estimated production of 44.5 million hectoliters, Italy remains the largest producer in the EU. It is followed by Spain (39 million hectoliters) and France (33.3 million hectoliters). All productions are declining by between 5-10%.