Sectoral Survey of the German Wine Market

Under contract to the Cyprus Chamber of Commerce and Industry, Navigator Consulting completed a sectoral survey of the German wine market. The project included a comprehensive market assessment identifying opportunities and challenges for Cypriot wine producers to increase their exports to Germany.

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Under contract to the Cyprus Chamber of Commerce and Industry, Navigator completed a sectoral survey of the German wine market. The project included a comprehensive market assessment identifying opportunities and challenges for Cypriot wine producers to increase their exports to Germany.

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Germany is the European Union’s largest importer of wines. Over the last 20 years, wine consumption has become firmly established as an integral part of personal and business consumption in the country. In particular, German consumers have been important early adapters of New World wines, while premium French, Italian and Spanish wines have maintained and expanded their respective market shares.

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Some main factors influencing the challenges affecting Cypriot wine producers in exporting to Germany include:

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• Practical logistical difficulties due to high transport prices and the need to either share a container, or fill an entire container. Together with the small size of production runs as well as the high costs of imported inputs (bottles, barrels, etc), this creates higher costs per unit and difficulty in supplying large wholesalers or supermarkets. This puts Cypriot producers at a competitive disadvantage against larger scale French, Italian, Spanish or Greek producers, who have road access links, or larger volume Australian or Chilean producers.

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• The Cypriot brand is not well established in the German market. Unlike Greek, French or Italian producers, there is no equivalent brand multiplier (such as Greek or Italian restaurants). Moreover, incoming German tourists are a small part of Cyprus’ total tourism mix, and the brand impact of Cypriot wine is usually diluted by hotels and restaurants which use own label wine, usually of an inferior quality. Most Cypriot producers are too small to systematically develop their brands in Germany; the Cypriot authorities have not made a systematic or meaningful effort to do so either.

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• As with Greece, the general Cyprus “brand” or identity is being tarnished by accusations of money laundering and tax evasion, which are being actively distributed by a segment of Germany’s press and political system. It is imperative that Cypriot wineries—as well as the government—act systematically to counteract this image.

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• Although it is a large market, a large share of the German wine market is dominated by lower-cost products sold through discount supermarket chains which have excessive customer power over wine suppliers. Although Cypriot producers have the potential to enter such customer segments, their order profitability will be low or negative, and such orders would absorb a high share of the production run of any one brand. This price sensitivity of German wine consumers affects on trade and off trade sales: unless the product / supplier and national brand can be developed, it will be difficult if not impossible to grow out of the “value” price segment.

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• German consumers are incredibly price sensitive (although they are willing to pay for premium and luxury products). This tendency is exacerbated by the control of large retail networks and discounters on household wine consumption.

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Some main points about the German wine market:

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• In 2011, Germany produced approximately 9.131 million hl, representing 3.5% of global production, and placing it 8th place for wine production world-wide.

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• In 2011, Germany imported a total of EUR 2.24 billion of wines, amounting to 15.2 mln hl. Of this, red wine accounted for EUR 1.16 billion, or 8.5 mln hl, while white wine accounted for EUR 496 mln, or 4.85 mln hl. Sparkling wines were also an important import category.

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• The big three “old world” wine producers Italy, France and Spain accounted for the top three sources of wine supply to Germany in 2011.

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• According to Weinwirtschaft magazine, the average price of wine in the retail sector (including discounters) for a 0.75 litre bottle wine was EUR 2.08 in 2009. German average bottle prices were EUR 2.11/bottle, while average imports were EUR 2.06/bottle.

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Navigator Consulting developed a detailed wine exporter’s guide to Germany. The main chapters included:

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• Summary of general marketing strategy for the German wine market

• Online marketing requirements for the German wine market

• Macroeconomic profile of Germany

• German wine production

• German wine exports

• German wine imports

• National wine consumption

• Major wine importers and distributors in Germany

 

For more information please contact Philip Ammerman on pga@navigatorconsulting.com.