about us | newsletter | contact | archive | members area
Bogdan Nitulescu, Tremend
Cryptocurrencies volatility is a big problem»
  Features:      COUNTRY FOCUS   |   SECTOR ANALYSIS   |

Spiritual awakening

Romanian-based spirits producer the Alexandrion Grup is branching out from its core cognac brand to seize a market in the growth of wine, whisky and vodka, CEO George Christoforidis reveals to Michael Bird

February 2011 - From the Print Edition

Vodka is the planet’s number one spirit due to its ease of drinking, its flexible relationship with mixers and the fact that it leaves no trace on the breath, making it popular for cocktails and among women drinkers - enabling the grain-based spirit to become the top liquor worldwide, even in Scotland.
But Romania is different. Here, in a spirits market worth between 350 and 380 million Euro, drinkers prefer brandy.
Leading this preference is Alexandrion, a Greek-recipe cognac, which together with another brand in its eponymous company’s portfolio - Cava D’Oro - has seized 40 per cent of the brown liquor market.
Part of the reason for this bucking of the fashion is that Romanians do not like Russians. While other east European countries with a less than enthusiastic view on their big neighbour - such as Poland - forgive the spirit synonymous with the ex-Soviet giant, the older generation of Romanian drinkers seem to still take it personally.
But this is likely to change, as a new generation takes up the international trend in knocking back the vodka.
“In Romania, in five to seven years, vodka will be very close to the brandy market in size,” says George Christoforidis, CEO of the Alexandrion Grup.
Because imported vodka is expensive and has only a two per cent market share in Romania, this is an opportunity for local producers.
Romanians mostly drink spirits during celebrations or weekend house parties - accounting for almost 30 per cent of occasions. The second major category of 20 per cent is youngsters going to bars, restaurants and clubs. “In five years this will be [the number one drinking occasion],” says the CEO. “Here the majority of these people drink vodka and whisky.”
Preparing to ride on this trend, the Alexandrion Grup has launched authentic blended Scotch Red Bowler, plus vodkas Alexander and Kreskova. Both of these vodka brands see an increase in turnover, but still represent only six to seven per cent of the company’s sales.
Next month the Alexandrion Grup will become the exclusive distributor for William Grant & Sons’ brands in Romania, including blended Scotch Grant’s and single malt Glenfiddich.
Also popular in Romania are local tipples including plum brandy Tuica or its fruity Transylvanian counterpart Palinca, which tend to be produced by anyone with a shed, a chemistry kit, a plum tree to shake and a blanket to catch the fruit.
Alexandrion has done the math on whether to launch such a product in this aperitif category, but decided a mass-market Tuica or Palinca would not bring enough returns.
Instead the spirits producer is wise to the trend in the growing number of wine consumers. The group last year launched a range from Montrouge and, by 2013, aims to reach ten per cent of the import wine market - up from its two per cent share today.
“Wine is growing steadily over the world and we wanted to utilise our good distribution network,” says Christoforidis. “Our next target is to import new world wines from New Zealand, Australia and South Africa. Chile and Argentinean wines are already strong in Romania.”
The firm is looking to distribute a Romanian wine brand or buy a wine producer, but needs to find a partner. The company is in discussions with some local producers to manufacture its private label wines. “We need big quantities,” adds the CEO. “The wine market is steady and large. It is close to double the spirits market.”

Crossing borders

Now the group exports to Romanians in Spain and Italy, as well as to Greece and has a presence in duty free stores in Bulgaria. But these exports represent only four per cent of the company’s turnover.
This year the company plans to launch a range of premium products which will target the export market. It will also look for listings in duty free markets in neighbouring countries, such as Croatia, Serbia, Ukraine and the Republic of Moldova for its cognacs, with a view to branching out further to the ex-USSR space in the future. Ukraine is a challenge as the market is occupied by Armenian cognac - which has a strong international reputation.

Fighting spirit

The financial crisis has hit the spirits market in the last two years, with sales seeing a 20 per cent downturn in 2010 on 2009 - however Alexandrion witnessed only a three per cent drop during the same period across its total turnover.
The spirits market was impacted in the mid-year by the VAT increase from 19 to 24 per cent. Christoforidis says the overall impact of the rise made consumers more conservative. “The VAT rise was the main reason consumption of spirits dropped,” he adds.
But a larger threat to the market is the illegal manufacture of spirits. Alexandrion sells mostly to traditional markets via 38 distribution networks.
Rivalling the legal off-trade and on-trade markets in Romania are two shadow economies. Firstly there are cottage industries where Tuica and Palinca are prepared and sold openly. Around 30,000 of these producers have a quota of 1,000 litres they can produce annually, but few check to see whether they manufacture over this limit or test the quality of the product.
A larger problem are illegal producers in mini-factories who distill brandy and vodka and sell this on open markets. “The Government needs to organise all production,” says Christoforidis. “The markets are working without any regulations.”
Another major category are ‘alcoholic products’ with 16 to 17 per cent alcohol. Criminal gangs produce around 30 million litres annually of drinks with the ‘aroma of whisky’ or ‘aroma of brandy’. “This is just chemicals and alcohol,” says Christoforidis. “It is very dangerous for the health, but people drink it.”
Often the drink ‘with the aroma of vodka’ is placed in recycled bottles of branded vodka or Coca-Cola and known on the market as “one leu vodka”.
Alexandrion estimates the shadow market could be worth up to one billion Euro annually - three times the size of the legal market - which is a massive loss to the state budget. “The Romanian Government can follow the example of Greece,” says the CEO. “During the 1980s, the big multinationals pushed and in three years there were zero illegal producers on the market.” ■

Who is the Alexandrion Grup?

A unique business in Romania the Alexandrion Grup has manufactured spirits locally for 17 years, targeting mid-market consumers.
The group employs around 300 nationwide and has its own alcohol distillery in Suceava and a bottling facility in Ploiesti.
Globally, due to high taxes and the necessity to secure a strong distribution network, most producers of alcoholic beverages tend to consolidate in the grip of large multinational companies, such as Diageo or Pernod Ricard.
“As a local producer, if we do not expand and sell and create a global brand, one of the big players would knock on our door and make an offer,” says George Christoforidis. “For the moment we do not see one big group offering a premium to buy us - we are not against selling, but at a premium price.”
In 2010 the company saw a turnover of 265 million RON [around 62 million Euro], slightly up on 2009. For 2011 Alexandrion predicts a slight increase to about 280 million RON [around 66 million Euro] in turnover.

There are 0 comments:

Validation Code

0 Comments  |  10085 Views
Daily Info
The Romanian labour market needs a well-thought approach, says FIC

The Foreign Investors Council (FIC) has signaled in the past 2-3 years that its members are anticipating increasing strains on the Romanian labour market because starting with...

Romgaz posts a net profit of 1.02 billion RON in the first nine months of 2018

Romania's natural gas company Romgaz posted a net profit of 1.02 billion RON in the first nine months of 2018, a decrease of 14 per cent compared to the year-ago period. Total...

OTP Bank Romania posts 15 million Euro profit at the end of Q3 2018

OTP Bank Romania recorded a consolidated after-tax profit of 15.09 million Euro, in the first nine months of the year, almost twice as much as in the base period.

Black Sea Oil & Gas and Transgaz sign 15-year contract for the MGD Project gas production transmission into the NTS

Transgaz and Black Sea Oil & Gas signed the gas transmission contract for the transport of the Midia Gas Development Project (MGD Project) production into the National Transmi...

Almost 90 per cent of industrial and logistics stock is condensed in cities with highway access, says C&W Echinox

Romania's industrial and logistics market is currently benefitting from its best period in history, both in terms of supply and demand, with development being condensed in a n...







More on Features
Cryptocurrency exchanges. The new outsourcing El Dorado?

Customer experience has become the new competitive battleground for crypto exchanges. Cryptocurrency exchanges seeking to maintain or gain an advantage in this highly comp...

Blockchain how it's made and what can we do with it

In the context of the "fourth industrial revolution" that everyone is talking about these days, The Diplomat - Bucharest analyses how an emerging technology like blockchain...

US calls for coherent, long-term strategy

As USA celebrates 4th of July, its eyes are wide open on the latest developments in Romania's ongoing struggle for the rule of law. Still, the country is one of the fastest...

French investments at a glance: Interest still high

France, Romania's fourth largest foreign direct investor, has been around since the early 1990s, with flagship names the likes of Societe Generale or Groupe Renault taking ...

Romanian energy industry: Challenges to Overcome

With a national strategy draft still to be approved, Romania faces many challenges, as the energy market is striving to find a way to attract major investments that are cri...

Rising potential for green developments

With GDP growth outperforming neighbouring CEE countries by a significant extent, 2017 was very good for the real estate market in Romania, especially for the office, inves...

EnergyPal: The market must invest in innovation and develop worker qualifications

Romania's facility management sector in 2017 has seen changes in terms of increased market dynamic due to new office developments and also logistic sector growth, according...