Assessing Competitiveness In Moldova's Economy - Economic Growth

Development Alternatives, Inc. Moldova Competitiveness Assessment: The Wine Cluster
Figure 9: Cost structure for a low/medium quality bottle of red wine
Source: Wine sub-sector case study, Trade Diagnostic Study (World Bank), 2003
Demand and Market Architectures
Losing Ground in the Key Market
Over the past five years, over 80 percent of Moldova’s still bottled wine exports and over 75
percent of bulk wine exports went to Russia. Ukraine, the second largest market, is far
behind, and subject to the imposition of nontariff barriers, such as the recent retaliation for
Moldova’s decision to remove Ukrainian ethylic alcohol from the Moldova-Ukraine freetrade
agreement. The EU does not represent a significant market, with 2003 exports
equivalent to little over 1 percent of the total, reflecting the poor quality of wines from
Moldova, and the limited exposure of Moldova’s wine producers and exporters to the
European market architecture. Moreover, Moldovan wine exports to the EU are subject to
excise taxes that translate into significant ad valorem taxes for lower-priced wines, adding as
much as 10 percent to the average cost.
In the Russian market, Moldovan wines, mostly of the semidry varieties, have historically
competed in the low- and medium-price segments. Moldova exporters have in fact dominated
the Russian market, but they have been losing market share since 1998, as illustrated in
Figure 10. The trends in market share over the period 1998-2003 are a result of the sharp
July 2004 • DRAFT Page 6