Assessing Competitiveness In Moldova's Economy - Economic Growth

Development Alternatives, Inc. Moldova Competitiveness Assessment: The Wine Cluster
beginning to play an increasingly influential role in the transformation of the wine industry.
Especially wineries with foreign partners have placed immediate emphasis on upgrading
winery processing equipment, which can have an immediate effect on quality. Several of the
wineries are working with the agriferme in vineyard planting programs.
The wines from most of the newer wine companies are generally of a higher quality, well
made and clean, although most, particularly the whites, exhibit rather subdued bouquets.
Both reds and whites usually have lighter palates than wines preferred in premium markets.
The newer wine companies tend to have newer equipment and storage facilities, designed
with the exigencies of modern winemaking techniques in mind, whereas the state-owned and
former state-owned wineries work with equipment often more than 30 years old, and
equipment upgrades have usually been piecemeal.
However, it is clear that part of the difference stems from mentality: the new entrants are
usually receptive to new ideas and to the need to change styles. On the other hand, the older
wineries, even though they may now be privatized, usually retain the same personnel at the
middle management level. Accordingly, the same bad habits persist, and there is a preference
for the classical Eastern European wine styles over the wine styles preferred in premium
markets.
As equipment in the privatized wineries is upgraded, attention will shift increasingly to
improvements in grape production. What transformation in the industry has occurred so far
has already resulted in an excess demand for quality grapes. The focus on grape production
reflects in part the cost structure of winemaking in Moldova, using a low- to medium-quality
bottled red wine as a representative product. As part of the recent World Bank-sponsored
Trade Diagnostic Study, the wine sector case study produced estimated costs for the different
stages in the production and distribution of wine, shown in Figure 9. These estimates do not
include taxes and depreciation of buildings and equipment. The cost of grapes to the factory
gate accounts for 70 percent of the total cost, which is comparable to that in competitor
countries, while it is reportedly in the range of 50-55 percent for Germany, with significantly
higher labor cost.
Improving the competitiveness of Moldova’s wine cluster calls for cooperation and
leadership. While individual entrepreneurial action can address some of the issues, others go
beyond the domain of individual participants. The recognition that Moldova is in trouble in
its major market has stimulated debate and may provide the incentives for exploring joint
action.
July 2004 • DRAFT Page 5