Until Malta joined the EU, there was a substantial levy on foreign wines which made them considerably more expensive than local ones. But accession 10 years ago brought about the removal of this levy, new rules on labelling and standards, and paved the way for everyone and their aunt to become a wine importer. Vanessa Macdonald finds that winemakers were forced to invest heavily to improve their product and marketing and importers were forced to compete – sometimes on unfair terms –­ but one couple found that the EU opened doors for them...

Wine fit for a Chancellor

A woman walked into a shop in Berlin and asked for help: She wanted to buy a few bottles of very good wine for her good friend, Angela. After tasting a few, she opted for two bottles which were duly given as a gift for Angela’s birthday.

This would not be of any interest to the Times of Malta Business reader except for two important details: Angela is the German Chancellor. And the wines were Gozitan.

Anthony Hili and his wife Marisa Cauchi Hili are grinning from ear to ear now – but it was not always so. When he first decided to follow in his family’s footsteps and open a winery, he was met with derision.

The winery, started in 1930, had been very successful in its heyday but his father shut it down in the 1970s, keeping only enough for his own consumption.

Anthony, who had spent much of his childhood in the vineyards, and hours tied into a harness pressing the grapes in an underground vat with his bare feet, always dreamed of re-opening the winery. When EU accession loomed, he knew it would shake up the industry, which at the time was based primarily on lacklustre Maltese wines and foreign wines subjected to an onerous levy.

He read and reread a 1960s article on agriculture in which Malta was found to have the best elements to produce red wine. The German government, which had subsidised the report, actually paid for a Maltese to go and study winemaking – and the beneficiary, Roger Aquilina, went on to make some of the best wines in Malta.

On Mr Aquilina’s return, he organised courses – with EU funds – for those interested in vines and Anthony was hooked. (Mr Aquilina is now Anthony’s oenologist.)

The winery was set up underground in Xagħra, adjacent to the original family one. But when it came to the vineyards, they had to choose between the rich soil in Xagħra or poorer soil in his in-laws’ 1.5 hectares in Għarb – which had the advantage of being spread across one terrace rather than small parcels of land. The latter, he knew, would give him a smaller yield but far sweeter grapes.

In 2006, they planted San Giovese, Nero d’Avola, Vermentino and Chardonnay, using EU funds for the vines as well as for the construction of the rubble walls – although they were not successful when they applied for money to help with the machinery.

“Our fathers would call each other in the evening to shake their heads over what we were doing because they were convinced that we were crazy,” Marisa laughed.

But in 2009, they got their first harvest and in two years they had 10,000 bottles ready to sell.

They thought that selling them in a country which consumes several million bottles a year would be a doddle. But they were shocked to find only closed doors.

“We took bottles to hotels, restaurants and distributors but they all felt that taking our wine might upset the major wineries and that it would infringe the terms of their contracts with them. And we got nowhere, even though we had already won a bronze medal in a French competition!” Anthony lamented.

Our first clients were Swedes who came to Gozo just to taste our wine!

Instead of giving up, the couple was determined to try again – or emigrate, Marisa joked.

The EU stepped in yet again: She was attending an EU-funded course on tourism and was listening to lectures about Trip Advisor and Facebook. That, she thought, was the solution.

It worked. They organised wine-tasting tours – sometimes for just two people at a time – but the reviews were fabulous and their fame grew.

“Our first clients were Swedes who came to Gozo just to taste our wine!” Anthony laughed. The tours last some 90 minutes, and visitors get to taste five wines and local delicacies. “Now we have a long list of fans and eventually came to an agreement with the shop in Berlin as it is easier for us to freight it there and then let them post to clients all around Europe.”

They are clearly saddened that they have so far been largely overlooked by the Maltese, convinced that there are many people who would be willing to pay premium prices for a product grown without herbicides, meaning hours of back-breaking work by hand to weed and to expose the grapes to prevent fungus.But at least they know that bottles of wine from Gozo were honoured to be chosen as a gift for the German Chancellor.

www.massarwinery.com

Too many green bottles...

In the beginning there were a few wine importers but after EU accession and the ensuing removal of levies on imported wine, it seemed that everyone became an importer overnight.

“Whether they imported shoes or furniture, suddenly everyone started adding a few crates of wine on to the back of their trucks,” the general manager of Farsons Beverage Imports Pierre Stafrace said.

That was the first phase. This was rapidly followed by the second, during which the initial success was deflated as consumers started to realise that cheap wine did not always mean lower prices but often lower quality too. The result? Many of the amateur wine importers were left with unsold stocks, which they then dumped on the market. That second phase was followed by a period of painful adjustment and it has only been a few years since the market stabilised.

FBI, formely Wands, has been importing wines for decades, and were the pioneers when it came to wines from the New World. If anyone had bothered to ask them, they would have been quite happy to warn wannabe importers that this is not an easy market.

For a start, the sheer number of varieties of wine is daunting.

“The number of beers we supply does not change dramatically while there are only a limited number of spirits brands. But with wines, it is endless,” Mr Stafrace explained.

Some wines simply come into fashion and then disappear, and the same applies to grape varieties, with the film Sideways sparking demand for Pinot Noir and Frank Prial’s catchphrase “anything but chardonnay” becoming a worldwide movement. And whereas it might have taken years for Malta to catch up on these trends in the past, things now change much faster, making it more complex to anticipate trends and ensure appropriate stocks.

FBI’s long history has allowed it to build up good relations with its suppliers, some of them family firms that appreciate the commitment. Its cash’n’carry outlet in Mrieħel (the Wands premises were taken over by Quintano Foods) has a number of synergies with the adjacent brewery, and its sales teams and brand managers look after the distribution to retailers, hotels and restaurants, as well as sales to customers.

Because there are so many wines, FBI cannot rely on brands alone and must organise wine-tasting for the trade as well as for customers.

“Getting a wine on to a restaurant’s wine list or shelf is no mean feat,” he explained. “But once we manage that, then customers get to know it. Then it is just a matter of maintaining interest.”

Now the hundreds of importers of a decade ago have whittled down to a few dozen, with only a handful of major players, all of whom are professionals who understand this complex market.

“Importers would bring wine in and leave it in a garage because they did not realise that it would take so long to sell,” he said, pointing to the temperature controls in the Mrieħel outlet. “And it deteriorated. A lot of consumers are still wary of good value wine as they associate it with some of the cheap stuff they had bought...”

Getting a wine on to a restaurant’s wine list or shelf is no mean feat

The market is not quite stable, though. As with many other importation sectors, there are illegal imports with trucks bringing in supplies on which no eco-tax has been paid, for example. As with furniture and foods and so many other sectors, the legal operators are frustrated by the lack of enforcement. But most of the time, they cannot spare too much energy on the fight.

“We are concentrating on the customer, who nowadays is much more knowledgeable about wine and who is willing to spend more to get a decent bottle which does not give you heartburn,” he said.

“A decade ago, wine was classified as either Maltese or foreign. Now they talk about monovarietals and even particular wineries! Even young people are going on wine-appreciation courses.”

Mr Stafrace was philosophical about EU accession. The removal of levies gave consumers more choice and reduced the price of foreign wine. This is turn put more pressure on Maltese winemakers to improve their product.

“Apart from illegal imports, it is now a level playing field and wines compete on value and quality. That is not a bad thing,” he said.

Divided we fall

There is probably no more symbolic a picture to tell the story about Malta’s winemaking after EU accession than the sight of Jeremy Cassar and Louis Camilleri sitting in the same office.

And it is even more poignant when Mr Cassar points out that before accession, his father Tony asked him what to do and he had to answer frankly: “I don’t know.”

“Looking back, I have to admit that I knew we would be badly affected by the removal of levies on wine imports. But I didn’t think that it would be so bad. My father, who was very active in the constituted bodies at the time, was actively pro-accession. I think it was very unselfish of him as he knew it would hurt his company,” Mr Cassar said.

The Cassar’s Marsovin and Mr Camilleri’s Camilleri Wines merged last year, in a pragmatic realisation that together they stood a much better chance of survival than if they were pitted against each other.

The removal of the levies as a result of EU accession unleashed pent-up demand for foreign wines that for too long had been put out of the reach of so many people, giving them a mystique that was hard to dispel.

There was a 20 per cent in Marsovin and Camilleri sales within the first year alone. And the situation just got worse. Marsovin alone sold 3.5 million bottles in 2004 and now, Cassar Camilleri sell just 1.5 million between them.

Camilleri Wines had started in 1999 and had four great years as it launched wine after wine. But once decline set in, it was dramatic. Between 2008 and 2009, its sales were halved.

The drop in sales had a huge impact on employment. Marsovin employed 350 people (including those at the Lowenbrau factory) 10 years ago. Now, they employ just 145 between them.

The Lowenbrau factory was another victim of accession. Closed after just eight years, it did not have enough time to recoup the huge capital investment before cheaper imports affected sales.

“It simply does not make sense to produce beer or wine in Malta. The economies of scale are simply not in our favour. But the EU has not done a thing for manufacturing. The small was pitted against the big. We cannot sell our products outside of Malta as easily as other countries can sell into Malta. It took us three years to sell our wines in the US, and we had to get the government to help us to sort out the documentation needed to sell it in China. And our brands are not as well known as international ones. It is not a level playing field; it’s an uphill struggle.

“If we could find a supermarket chain to sell our products, believe me, we would be able to supply them with the amounts they needed,” he said.

“Farmers are giving up. They are not being supported and the public does not appreciate the dedication of those who work here. If we are not careful, Malta will end up with just gaming and financial services... It is dangerous to lose manufacturing as this sector has a certain stability, especially if it is Maltese-owned as then the patriotic roots are deeper.”

If Mr Cassar sometimes sounds bitter, it is also because he feels that the Maltese consumer judged local wine unfairly.

“We invested a lot to improve our product. We were the first local winemaker to have its own vineyards. Six years ago, we became self-sufficient and stopped importing grapes,” Mr Cassar said. Camilleri, too, had invested to keep a step ahead. It actually used €400,000 of EU funds (with Malta Enterprise) to buy new equipment, and a further €350,000 out of its €2 million investment for its San Ġwann operations.

Marsovin, on the other hand, did not get funds from the EU although the farmers that grew their grapes did.

“They did not get a great amount but they are being told that they will get more,” he said.

“And perhaps there will be money for upgrades in the future.”

It is hard to pinpoint what happened to stop the decline but Mr Cassar is convinced that the worst is over. They are once again seeing sales improve, albeit it by a tepid five to 10 per cent per year – part of which is due to inflation.

Camilleri’s Master Cellars wine and spirits outlet in Naxxar is also faring well. They had started importing in 1991 and the business flourished, making up for the drop in sales of their locally-produced wines.

“I think that there is light at the end of the tunnel as the new generation is more appreciative of the local product and have no prejudice against it because of the past,” Mr Cassar said.

“A third on the wines on restaurant wine lists are now Maltese, on average. Things are changing, although they will not change overnight.

“Now what we need is a marketing campaign to promote the DOC certification. We pay over €100,000 for this but few people even know about it. I have to say that this government is very responsive and willing to listen.

“But the reality is that picking grapes by hand in small parcels of land is never going to be the most cost-effective way to make 1.5 million bottles of wine.”