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2008. Dezember 29. Montag
The view from Hungary by Caroline Gilby MW
Hungary, December 29th 2008
Hungary has become another nation to receive a bail-out from the IMF to shore up its troubled banking systems and the Forint which had plunged in value. Hungary’s economy has been under pressure for a couple of years, but until recently the wine industry had seemed relatively immune to the economic crisis. A number of shiny new wineries complete with all the latest computer-controlled winemaking toys, and tourist facilities have appeared across the country These come with premium wine prices, aimed at the aspirational middle and upper class and booming restaurant culture.
But since late October, the industry has experienced a brutal reality check. As Angela Gere of Gere Winery points out: “The economy is really in a bad situation and innovation and development in the industry will be very difficult. It is more and more difficult to get loans from the bank and they raised the prime rate from 8% to 11%.” Several producers admit that planned investments may not go ahead.
“We are all trying to survive (and postponing investments if possible)”said Monika Debreczeni of Vylyan Winery. Many wineries took out large loans in the last 10 years, especially ahead of EU accession, to pay for equipment and new vineyards, and repayments are now falling due. Frequently these investments were part-sponsored by EU and funded with long-term loans calculated in euros. These have become more expensive to pay back in capital terms, though the interest rate is more favourable compared to loans in forints.
For wineries with significant exports, the weakened Forint could be an opportunity – although some are reporting falling order volumes, gaining revenue in euros makes up for some shortfall. Indeed, some larger wineries had been suffering significant debt problems due to the over-valued Forint, and their reliance on exports, and this devaluation may give them breathing space.
Opinions vary about the effect in the domestic market, where over 80% of Hungary’s production is sold. For Zoltan Heimann of Heimann Winery, the recession will mean immediate cutbacks in consumer spend, “mostly in the low and mid-price range. I see cutting back of low quality production and many of these producers facing the dark shadow of death.” Reports indicate that small grape-growers in Eger for example are likely to go out of business because Egervin, the volume producer in the area, did not buy its usual grapes. Izabella Zwack of Zwack-Unicum notes that “the only thing I can foresee is that sales will move more to the off-trade, to home consumption as people go less to restaurants. Also, sales might move towards lower price ranges.” Several wineries have already noticed cancelled orders for festive gifts, but remain optimistic that people can still afford to drink (to cheer themselves up in hard times). Debreczeni says “I hope that the domestic market will be resilient enough to keep us going “
This is one of a series of articles about how the downturn is affecting the global wine industry. For the full series, which looks at 17 countries, see the latest edition of Meininger’s Wine Business International. Further articles in this series will be posted over the Christmas and New Year break.
http://www.wine-business-international.com/News_The_view_from_Hungary.html
