VINEX interviews Philip Cox; owner of Cramele Recas, Romania
by Richard Siddle
Accounting for half of Romania’s total wine exports, he is ideally placed to assess the impact of Covid-19 on the international wine market over the last 12 months...
Can you tell us about Cramele Recas in terms of your size and scale?
Here are some facts and figures for you:
- Cramele Recas is 1,250 hectares of estate fully owned vineyards, 750 hectares of long term contracted vineyards.
- We have three wineries: one of 32 million litres; the other two built in 2019 of 4 million litres each. * 25 million bottles sold in 2020 * €49 million turnover in 2020.
- We produce 270 different products.
- We account for 50% of all Romania’s wine exports.
How has the business grown in recent years and what has that meant for exports?
- The company doubled in size from 2016 until 2020, and is three times the size it was in 2013,by sales volume.
- The vineyard area has grown by about 200 hectares in the last five years.
- Exports have tripled between 2010 and 2020 up to about 12.5 million bottles last year which is about 55% of our overall company’s sales, and accounts for half of Romania’s total wine exports.
What are your targets for exports in the years ahead?
- We plan to keep growing around 10% per year for the next five years, and will invest around €7m this year in new capacities and equipment to be able to do that.
- We want to be come carbon neutral by 2023 and we have just signed a contract to install solar energy for most of our electricity in 2021.
- We are in the process of changing 50% of our car fleet to electric or hybrid by 2022. And all our vineyards are dry farmed.
How did Covid-19 impact the business and what did you do to respond?
- 2020 and Covid saw a steady growth in the retail sector particularly large supermarket chains in countries such as Netherlands and Germany, and particularly in online sales, but obviously a collapse of the on-trade sectors in all our main export countries.
- But it still meant total exports were up about 12% on the year, but the local market was down about 7% where we are more involved in the on-trade.
- So overall I think a good result with some exciting new developments already planned for 2021.
What are your new target export markets?
- We have been developing potential Asian markets - as they are much less affected by the pandemic than countries like the UK. South Korea, for example, is becoming very important and even more so Japan where we have strong growth in orange and natural wines.
- We got the winery certified organic in 2020 as well as vegan in 2018, so we see strong growth in the natural/organic and vegan wine sectors in the years ahead and will be focusing on that.
What other wines are you looking to develop?
- We are keen to develop our exports of wines from local varietals.
- We have some new listings in the UK, for example at both Marks & Spencer and Aldi UK with Feteasca Regala, and with rosé blends from local varietals Feteasca Neagra, Babeasca Neagra with international varietals.
- We are also focusing on our mid and premium ranges, with, for example, strong growth in the UK with Majestic with our Solomonar red blend (£8.99) which is a blend of Merlot, Cabernet Franc, Feteasca Neagra, and in Germany with our Richtig Fett red and white premium wines.
How was the 2020 vintage?
2020 was a great year for quality, very bad for quantity. Both due to the same reason it was very dry and as Romania has practically no irrigated vineyards volumes were low, but quality high.
What impact is that going to have on pricing?
- Grape pricing was up in 2020, but the collapse in demand from the on-trade sector rather tempered the rises to reasonable levels.
- Carton prices are going up a lot due to the world increase in carton consumption due to online sales.
- Price of glass and bottles are also going up due to a rise in energy costs. Our pricing is probably the most competitive on the overall Romanian market.
- We try very hard to have the most aggressive pricing to quality ratio on all products from entry level up to super premium.
What are your main export markets and what wines are they looking for?
- Netherlands and Germany are our largest markets and they are very keen on Sauvignon Blanc, Pinot Grigio rosé, Cabernet Sauvignon.
- The UK is focused on Pinot Noir, Pinot Grigio and rosés, but also now good quantities of local varietal Feteasca Regala for the first time.
What has been the impact on Brexit for you as one of your key markets is the UK?
- We have serious trading difficulties in the UK. The increase in red tape has been significantly worse than we expected, with several new documents and certificates needed as well as lengthy extra procedures, and modified invoice requirements and preferential origin certification.
- This is even more difficult when it comes to organic wines, and, of course, will get much worse in July following the introduction of the much discussed UK wine import certificates which will put another significant and completely pointless layer of cost and difficulty.
- These are all things the UK government could have avoided in what is already a difficult situation due to the new barriers posed by the UK going back to paper import documentation after the rest of the world is going digital.
- Then you have the added issue of the antiquated and not fit for purpose CHIEF customs software.
- We feel both the UK and the EU have badly neglected our industry and have introduced many pointless time consuming and expensive requirements in a situation that was already very difficult (not even to mention the pandemic as well).
- All of the above have generated extra documentation admin costs, customs costs, plus generated significant delays in all shipments to the UK which, in turn, have resulted in serious increases in transport costs. For example a load that previously cost €2,300 for full truck or container now costs around €3,000. To put it mildly that has entailed a great degree of discussion and some confusion with our customers in the UK which we are working through slowly.
- There have also been massive problems with shipping samples too.
Has it made you re-think your export strategy and level of business you do with the UK?
- We always took the view that Brexit would increase costs and complexity and make the UK a much more difficult market, but its turned out much worse than we thought and it is now literally the most complicated market in the world to trade in with many UK specific documents and procedures that are hard to deal with or understand.
- We already started looking for new markets in 2016 and we have succeeded in transferring 90% of our exports to other markets (compared to only 30% in 2015), whilst still keeping up good sales in the UK, so we are pretty much covered either way.
- Despite the above we think we will still sell more wine in the UK in 2021 as the effects of the pandemic are hopefully reduced and via new business we are developing there with our new UK based sales team.
How about the rest of the world?
- We expect Germany to grow strongly on the back of new business with Lidl, Aldi, Rewe and particularly Penny market.
- We are also confident about the Netherlands, Japan, Korea, Canada, and we have our first listing in Norway starting this summer.
- We are also slightly worried about our surprisingly good market in Myanmar.
If you would like to contact Philip Cox about how to work with Cramele Recas you can reach him via VINEX.
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