In war, whichever side may call itself the victor, there are no winners, but all are losers. Not my words but those of Neville Chamberlain, the former British Prime Minister, best known for his appeasement policy to avoid conflict with Hitler. The JollyCellarMaster is not the right place to talk foreign policy, there are many better outlets for that, but we cannot look the other way and pretend this war does not affect the world of wine, too. In fact, it does, and while I don’t want to get into the discussion about the conflict in general, Chamberlain was right that there are only losers. In that sense, an analysis on the cost of war for the wine industry serves to prove this statement as we will see.
No Winners, Only Losers
Counting the Cost of Madness
There is so much sadness coming out of this war, it is difficult both practically and emotionally to follow all the stories you hear or read about the Russian invasion of Ukraine. Yet, I feel that beyond the sheer madness and tragedy of this war, personal stories sometimes explain even better what this means for the Ukraine and the world. For instance, last week I’ve heard about the struggles of officials working in the agricultural sector in Ukraine who simply do not know what to do with their crop as people cannot work the fields or bring in any harvest since they are in many cases covered with bodies. And if that isn’t the case there are landmines that make any work impossible. The horror that this image paints is increased by the realisation of what this means for the people of Ukraine. Not only do they lose their plantings, this obviously threatens in extension their livestock and then anything they have built in the past and will rely on for the future.
Meininger published a short piece about the worries of Georgian wine producers since they were to have particular reasons to be viewing the Russia-Ukraine war with concern. With memories of the conflict with Russia in 2008 still fresh in many memories, they fear that they may be next if Putin achieves his aims in Ukraine. One of the oldest, wine producing in the world, its exports heavily rely on the two countries currently at war as they represent 70% of the total amount. The 28 million bottles sold to Russia in the first half of 2021 are the equivalent of almost sixty percent, so Georgia is particularly dependent on exports to Moscow and beyond, though the military threat will be a bigger concern.
Moldova finds itself in equally troubled waters: though home to only 2.5 million people, it exported $137 million in wine in 2019, ranking it the 20th largest wine exporter in the world. Its biggest export markets? Belarus and Russia. Together with Ukraine, the three account for 36% of total exports and the economic consequences for the country will be enormous if not dwarfed by the threat to its security if Russia’s attention should turn to the territories the Soviets annexed in 1940.
Yesterday, I read an article that the Ukraine war costs Russian military €20 billion per day. Thisgigantic number is of course just part of the damage Russia will incur due to its actions with its economy close to collapse because of international sanctions. It also eclipses all the numbers we have shown above and will discuss below, yet to determine the cost of war for the wine industry, we must put it in perspective and must not be misled since the economic consequences for the sector are vast in itself.
If we talk about export market, we naturally have to consider the fate of French and Italian winemakers. Together with Spain, they build the top three importers to a country that in 2020consumed about 11 million hectoliters of wine products, accounting for 61 percent of the value of imports in 2019. And by the way, the big winner in terms of export numbers was the Republic ofMoldova whose wines registered 81 percent import growth, the highest compared to other origins.
Ukraine wine sector in numbers
The true looser obviously is Ukraine. While wine may not be the biggest export of the country – in 2019 it exported a mere $5.75m in wine and ranking as only the 59th largest exporter of wine in the world; at the same time and in terms of share of total exports, wine in the same year was only the 394th most exported product, showing the limited importance to the country’s overall export budget. Yet, Ukraine has a long history of producing wine going back as far as the 4th century BC. Over time, Ukraine’s vineyard plantings have fluctuated with the Oxford Companion of Wine noting 133,000 acres in 1913, before phylloxera and World War I reduced plantings to a mere 3,212 acres only six years later. By 1940, total vineyard area was 254,519 acres and decreased post war to 168,031. When Crimea ceded to Ukraine in 1954, an estimated 988,421 acres were under vine. It hasn’t been the same since former Russian President Mikhail Gorbechev’s anti-drinking drive pulled 533,000 acres of vines—or 16% of Soviet vines from 1985-87. A true roller-coaster ride and in 2019, the vineyard surface was down to 41.800 hectares, down from more than 150.000 hectares in 1995 and even 75.100 hectares in 75.100 in 2013. While the period between 1995 and 2013 showed a steady decline year-on-year, Russia’s 2014 invasion of Crimea, the major wine growing and producing region inUkraine, has been a heavy blow to the industry as the country lost more than half its bottled wines, as well as many historic wineries.
Now, more than 50 wineries in the western part of Ukraine in the regions of Bessarabia, Transcarpathia, and the Black Sea region produce about 130.000 hectoliters per year from 180 grape varieties (main black grapes: Bastardo Magarachsky, Cevat Kara, Kefesyia and Odessa Black / main white grapes: Telti Kuruk, Kokur Bely, Sary Pandas, and Sukholimansky; plus the usual international varietals).
What is more, the Ukraine should not be underestimated as an import market. Over the past years, numbers had been on the rise and OIV data shows that in 2019, the country imported $133m worth of wine and becoming the 34th largest importer worldwide, with Italy ($36.4m) leading Georgia ($23.1m), Poland ($14.5m), Spain ($11.3m), and France ($9.34m) in annual value.
That, of course, lies all in the past and only time will tell if the country can ever rebuild and return to pre-war levels. For now, we can only pray that this terrible war comes to a swift end before even more damage is done.
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Apologies, but given the sensitive topic I really didn’t think it would be right to cover other news this week in this format as well, but before I leave you I’d like to say that as always if you have an interesting story to tell or simply want to chat about wine as a guest on the Podcast, connect on Twitter or drop me a line. And if you want to stay in the loop about things happening at the JollyCellarMaster and the world of wine, make sure you sign up to our newsletter.
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