Fitz-Ritter wine estate 220 years of tradition and entrepreneurship

Fitz-Ritter wine estate
220 years of tradition and entrepreneurship
Lambert T. Koch, Marco Biele & Sean Patrick Sassmannshausen
Institute for Entrepreneurship and Innovation Research
University of Wuppertal, Germany
***ABSTRACT***
The Fitz-Ritter Wine Estate was founded in 1785. In 1837, the estate was
supplemented by a champagne production. Today, the young owner Johann Fitz
leads / is managing director of both companies in the 9 th generation of traditional
family business. German wine producers have been facing global challenges for
several years. This case shows how an entrepreneurial spirit in generations of
successors contributes to the survival of a firm. It also shows how a medium sized
business can cope with global challenges if it commits itself to international
entrepreneurship. In this complex situation, Johann Fitz has to take decisions
concerning strategic positioning, customer relations, distribution channels, new
business segments, investments, and the international business.
Introduction
Johann Fitz opens the door to his office on a Monday morning, holding the
first bottle of a brand new product in his hands. The combination of premium
sparkling wine and passion fruit will be the new FitzSecco Passion fruit, a variant
for the young generation in particular. Johann is excited and rushes to the phone
to call Alice, his mother, who has been responsible for the estate’s marketing and
exports for the last two decades. Impatiently he dials her number. While he is
waiting he looks at his watch. It is quarter past eleven and the monument
protection people seem to be late. He is wondering why his mother does not
answer the phone. It’s only her voice mail answering. Johann opens his email
account, searching for a mail from his mother: “August, 25 th - New York wine
exhibition; August 27 th – Chicago, August 29 th – Detroit.” New York City is seven
hours behind, no wonder she is not answering the phone. He peruses the attached
excel sheet with the latest figures of Fitz-Ritter’s export. Johann is calculating
some key figures, unsure how to continue with the export business. Should he, as
the new head of the company, expand foreign businesses or should he
concentrate on domestic projects? Things are changing more rapidly on the
domestic market, and the export requires great attention and expenses, but
achieves a relatively small turnover. The door bell rings. Johann switches off his
laptop. With a number of construction plans stacked under his arm, he is meeting
two men from the local monument protection office, guiding them into the historical
cross vault cow barn. “I will call her later”, he is thinking, “now it is time for my next
project.”
- 1 -

Johann Fitz is the 9 th generation, succeeding his father Konrad Fitz, who
ran the family business in the last 37 years. The young vintner has inherited the
passion for wine from his parents.
At first, this passion remained
undiscovered by himself; his
interests lay in other areas.
However, only weeks ago, he took
over the lead of the Fitz-Ritter
wine estate, right after completion
of his studies in economics at the
renowned University of California
at Berkeley. The wine estate,
founded in 1785, is located on the
fringes of Bad Durkheim, a winegrowing
spa town at the edge of
Picture taken from: www.fitz-ritter.de
the Rhine Plain in south western Germany. Famous for its high quality white wine,
it is one of the largest wine estates in the area. With 22 ha (= 52 acres) it is
situated in the largest German wine-growing region, the “Pfalz” (Palatinate).
Johann is the new type of vintner, who combines respect for the traditional
family business and entrepreneurial spirit. In the last twenty years, the German
wine market was subject to an immense change. Globalisation had a tremendous
impact on the European wine industry. Conservative strategies and antiquated
structures restrained German wine estates from achieving global competitive
positions. A few years ago, however, a young generation of vintners entered
leading positions at an increasing number of wine estates, determined not to be
smothered with so called protective state intervention, but to face competition and
to react successfully to the market forces. “Being a young German vintner is not
just an occupation, it is a movement. These days, it is not just about age, it needs
a certain entrepreneurial mind set to be a young German vintner” claims Johann
Fitz.
In summer 2007, the successor accepted an inheritance of a renowned
family business, well-known for their incentives to produce more than just wine.
Growing the first Chardonnay (1992) ever in Germany and launching a small
museum as well as a boutique stile wine store, Alice and Konrad Fitz were always
ahead of their local competitors in terms of innovative thinking and entrepreneurial
spirit. “The production of premium wine and champagne needs passion”, says
Konrad Fitz. “Unfortunately, some German vintners lost track some decades ago,
trying to compete with New World wine estates in mass production. Thereby, the
decreasing quality of some German wines, combined with high production costs,
almost ruined the international standing of German wine and many wine estates.”
To understand, it will be necessary to take a look on the market and its
developments in a chapter later on. First, the Fitz-Ritter family business is to be
introduced in more detail.
- 2 -

The Fitz–Ritter company - family business since 1785
In 1785, the Fitz-Ritter company was founded in Bad Durkheim, Germany. The
founder, old Mr. Fitz, was a merchant, who decided to start something new. There
are sayings the family would be of Scottish origin, explaining the – to German
standards – uncommon family name. The vineyard is located at the famous
“Deutsche Weinstraße” (German Wine Street) which for a distance of 53 miles
crosses a German county known as Palatinate (i.e. “Pfalz”), an area well-known
for its warm and sunny climate and excellent wines. In addition, a champagne
production was started in 1837. The Champagne Company was started up for
some special reasons: Some members of the Fitz family took part in the first
German democratic national parliament in 1848 in Frankfurt. In 1832, Johann Fitz
(so called “The Red Fitz”) spearheaded the German vintners protesting for the
elimination of customs duties and a mutual trade area. Because of his
engagement at the Hambacher Fest (a peaceful demonstration calling for more
liberty) he was persecuted by the police of the Bavarian King, who owned Palatine
County in those days. The Red Fitz had to take refuge in France. History has it
that he hid in the Champagne where he studied the production of champagne.
Later he returned home accompanied by a cellar master and together with some
members of his family co-founded one of the very first German champagne
productions, the “Durkheimer Champagne Factory”; it is now the oldest sparkling
wine production in the area and the third oldest in Germany.
Despite the fact the Red Fitz was still wanted by
political police, ironically, in 1842 The “Durkheimer
Champagne Factory” became the purveyor to the royal
Bavarian court. Obviously, as time changed, the king
preferred Mr Fitz’s sparkling wine more than taking him
in – quite a sign of product quality, may one assume.
Thus, traditional wine and champagne production roots
back more than 220 years. Now Johann Fitz, a relative
of “The Red Fitz”, has taken over from his father Konrad
Fitz and will probably lead the company into a new and
different age. Exhibits from the starting days of the Picture: The “Red” Fitz
champagne production are shown at the small estate museum on the first floor
where one can also see ancient devices which once were used by the Romans
some 2000 years ago, when they occupied Germany and introduced viniculture.
Reaping hooks, knives and other tools were found on “Michelsberg”, a hillside
where the Fitz-Ritter company still plants some of the best premium wine.
The museum is not the only place to visit inside the manorial estate
building. On the ground floor, the family business embraces the “Bacchus
Boutique”, a gift shop founded by Alice Fitz, who has been responsible for
marketing and export for many years now. After Alice had married Konrad Fitz,
she started to become familiar with the wine business. “First I fell in love with
Konrad, but soon, I fell in love with the wine business too”, she said. Her attempts
- 3 -

at contributing something to the business were supported by the fact that she had
studied business and economics. One of the very first actions she took was to
launch the Bacchus Boutique, which at the time was a completely new idea among
traditional wine makers, and disregarded as foolish by many of them. But later,
when it proved to be a success, it was imitated by almost all of them. In line with
the boutique style gift shop, Alice organises charity events and classical concerts
on the estate site. Furthermore, the company sponsors art galleries and wine
festivals. Alice is full of memory: “Even Johann cannot imagine the shape this
estate was in when we took it over. In 1970 no one here had ever heard the word
marketing. To German vintners, it was absolutely unknown to build a brand by
cultural or social endorsement and event marketing. Now, this concept is broadly
accepted, but most wine estates are too small to follow our strategy. Nevertheless,
most of the bigger estates and co-operatives created their own brand strategy
nowadays, but we still have some first mover advantages because our events
have been well established at the time competitors entered.”
Photo: Family Fitz
As in the case of the boutique and the Fitz-Ritter branding, Alice showed
entrepreneurial spirit in starting international business. Her export focus is mainly
on the United States, due to her American origin. According to the Association of
German Praedikat Wine Estates, today’s export average is about 20-25 per cent of
the total wine production with an increasing trend. 1 Fitz-Ritter started the export
business in the late 1970s. It all happened more or less coincidentally. While
Alice’s mother was on vacation in Germany, they were thinking about how to
deliver wine into the U.S. – not for business first, but just for their own needs. Soon
came the idea of expanding and the export business into the United States was
born. A few years later, when Konrad and Alice went to wine exhibitions, importers
from Japan, Great Britain and the Netherlands became interested in Fitz-Ritter
wines and started to order. “But everything started more or less with the export
into the U.S.”, Alice emphasizes.
1 www.vdp.de
- 4 -

The wine is shipped to the United States and unloaded and cleared by an
importer, who has to have an alcohol licence. Moreover, the importer is also
responsible for the distribution of the wine. Although Alice travelled across the
United States to promote the wine and “Sekt” on trade fairs, which often meant
dealing directly with customers, she was not allowed to sell directly to her
customers but could sell only to the distributors through the importer due to
restrictive import laws of the United States. She often experienced that customers
placed orders with the salesman, who handed the order on to the distributor, but
some distributors never handed the orders on to the importer, for instance when
the distributors felt that the margin from accumulation of orders was not worth the
effort of the necessary paper work. If this happened to many distributors at the
same time, the losses in potential orders would be immense, and so were the
fruitless investments in sales promotion by Fitz-Ritter.
The importers´ and distributors´ intermediate positions are very important
for the export business as a whole. “You rely on the effort and contacts of your
importer and your distributors”, Konrad Fitz says. “It has a lot to do with trust, and
loyalty is hard to find”, compliments Alice. “It took us years to identify trustworthy
importers and distributors in the US and other markets. It is a time and money
consuming trial-and-error process. Trust is an emotion in the beginning, and proof
only occurs when time passes by. Even if you have found a trustworthy, talented
and ambitious distributor, you still need to do a lot of sales promotion all by
yourself. And if you are not present to offer the new vintage, the importer and
distributors will forget you very soon. While Fitz-Ritter was obliged to give
exclusive rights to one importer, this importer has many German wines in his
portfolio. Exclusiveness is part of an adhesion contract: None of the licensed
importers will negotiate exclusive contracts, so a family business like Fitz-Ritter
only makes up a small portion of the importer’s portfolio and thus, only relatively
small efforts will be spent on sales promotion. Moreover, in a family business
selling products made by good craftsmanship, customers want to know the
entrepreneurial family behind the product, so they can judge the product and the
reliability of delivery by the people representing the company. Furthermore, the
financial stability of the importer you choose is of course vital. In the UK, we
trusted one import agent and were absolutely gutted. For this reason, we are not
present in the UK market anymore, and we are still looking for a trustworthy
importer to take on this market.”
Alice has been travelling all across the U.S. to promote her German wines
and she is also present at national and international exhibitions. Especially the
Fitz-Ritter Gewurztraminer was embraced by the Americans because of its
semiarid or smooth taste full of herbs and flavour, with a low amount of alcohol.
“While most German exporters focused on the Riesling, soon the Gewurztraminer
became our hot seller within the United States, where we positioned ourselves
within a niche market.” “But our Riesling is demanded, too”, Konrad adds. Today’s
business in the U.S. is getting harder and harder, due to the decreasing exchange
rates, the presence of ever more competitive wineries on the export scene, and
the need for intermediates who want to own their share, so it is difficult to sell the
- 5 -

premium wine. Fitz-Ritter is present in many states, but turnovers concentrate on
some New England Sates, New York City, other Eastern Seaboard States,
Michigan, and California. Massachusetts has proven itself to be one of the
toughest US markets. It is cost intensive to penetrate all states with personal sales
promotion; one promotion tour causes estimated costs of an average of 5,000
Euro, and up to five tours are necessary each year. Thus, Alice tries to build up
personal relationship and loyalty with distributors, who consequently care for the
volume of sales to a greater extend. This approach is partly depended on mutual
sympathy and by chance was successful especially with the two distributors in
Michigan and California.
The business has changed a lot, says Konrad Fitz. Today the winery has to
sell its wine at exhibitions and through more innovative distribution channels.
Some decades ago the winery sold its wine exclusively to commission agents
without any direct sales. Commission agents actually travelled from door to door,
offering their product portfolio. To their potential customers, basically
housekeeping women, they
offered the opportunity to taste the
wine and learn more about each
single product before buying any
bottles. Thus, the wine distribution
business was slow, but it was
reliable, and good traders knew
their business very well, knowing
all the high purchasing customers
in their area, their customers’
taste and price range and so forth,
and they achieved reasonable
turnovers.
Meanwhile, the door to door business is down. The door to door wine
trader is even more an endangered species than the housekeeping wife. On the
one hand, as the population became more urban, more mobile, easily moving from
one area to another, and suffered from higher crime rates, door to door traders
were increasingly treated with mistrust. On the other hand, less young people
entered this business. Today it seems that travelling salesmen in the wine retail
business have reached an average age above 65 years. “When I entered the
business I instinctively knew we desperately need new distribution channels. This
is why I started an online shop. There was the risk that retailer would ban us, due
to the fact that we decided to introduce direct customer services via internet, but
until now it all went fine. We notice that online trade is an additional business with a
certain set of customers and thus does not harm other distribution channels”, says
Johann Fitz. 2
Photo: Fitz - Ritter
2 www.fitz-ritter.de
- 6 -

“It took some time and energy to convince our stakeholders, but we have to
face market forces – and therefore we have to deal with changing consumer
behaviour and with demographics. Our wine has its quality, travelling salesmen
where able to convince consumers that Fitz-Ritter is something special. Today we
need to renew our communication.” “The production of high quality wine is much
more cost intensive than mass production. We will only be able to continue with our
business if we communicate our quality advantages. The local climate, the
geography of our landscape and the nature of our soils provide the opportunity to
produce high quality wines in our vineyards. However, we need some ideas to sell
those more expensive products in a highly competitive surrounding. In wine
production, I basically focus on two areas: product quality and product portfolio. In
the wine business, decisions on product portfolio, i.e. the variety of grapes you
plant, are not to be changed easily. Therefore they are regarded strategic
decisions. If we decided to produce different types of grapes on some acres, this
would mean that on these acres over a period of at least three years no grapes will
be harvested at all. That’s just due to the nature of vine, and there is nothing one
can do about it. Planting vine is a long range strategic decision, change needs
three years at least and bears some risks, and the amortization of the plants takes
many years. If your decision is led by trend and fashion, you better make sure that
the kind of grape won´t be out of fashion again soon.”
Vines have a productive life of 60 to 70 years, but after planting, it takes
them three to four years until they produce a first harvest, five to seven years to
achieve full productive capacity, and up to 35 years to produce the best quality
grapes for wine. There is a nexus between age of vines and quality. In addition, the
vintner can take a lot of actions to increase quality. Most activities are labor
intensive and therefore costly. For Fitz-Ritter premium wines for instance, workers
cut off 50 percent of each single bunch of grapes in spring. Therefore, the energy
and sugar of the vine
can concentrate in the
remaining grapes, which
will result in a much
more intense flavour.
Wine acreage in Bad Durkheim (Picture: Fitz – Ritter)
- 7 -
Regarding the vineyards,
two-third of Fitz-Ritter’s
acreage is planted with
Riesling. The best spots
are the rolling hillsides
Herrenberg, Spielberg,
Abtsfronhof and
Michelsberg. By their
geographic situation and
special soil these hills
offer the foundation for

premium wine, especially the number one premium class, so called “Grosse
Gewaechse” (Great Growth), the label for the highest premium wines of The
Association of German Prädikat Estates (VDP entitled estates). Each vine, each
single plant is officially documented by the VDP with the aim to guarantee the
highest quality. Quantities are limited and growing and harvesting of grapes as
well as wine production have to be carried out traditionally by hand, combined with
the most modern innovations in sustainable oenology, for a gentle treatment of
grapes and wine during the production process. Thus, production remains a craft,
not an industrial process, and this kind of production is expensive. A wine with its
own personal character representing richness and complexity in taste is the
reward for vintners, cellar masters and consumers. Exhibit 1 shows an excerpt of
the comprehensive product portfolio of wines which the Fitz-Ritter wine estate is
producing today.
For Fitz-Ritter like for many other members, the Association of German
Praedikat Estates (VDP) is one of the most important marketing instruments.
Traditionally, German vintners organized co-operative wine production. This was
to decrease costs of capital by a more intense use of plant and equipment. VDP is
different. It is not a co-operative in production, but in high quality wine philosophy,
and its’ label is a signal in the market. Before the VDP will be introduced in more
detail, it is necessary to have a look at the German wine market as well as
international developments.
German wine industry and the development of a global wine
market
“The Riesling Renaissance” 3 or “Following hard times, German Rieslings
rise again” 4 are headlines German winemakers are pleased to read. Such
headlines restore their pride. Years of trouble lie behind the German wine industry,
and it is not clear if the development has really taken a different direction yet. The
German vintners find themselves in a changing situation. Domestic competition is
getting tougher, the purchasing power of the Germans has increased again, and
foreign wines are well-known for a good cost to quality ratio, so Germany is still
the no.1 importer of wine in the world. The demand for good wine is still unbowed
and the reputation for excellence increasing. The German producers even have
the problem of satisfying the domestic demand for premium wine. On the surface
everything seems to evolve as desired. But in Europe, the problems rooted in the
history of winemaking are much more serious than it looks at first sight: In
Germany, growth rates of wine consumption are very promising, but a closer look
at the statistics shows that only the importers benefited from this. A look at past
developments will help to understand the current market situation.
3
Lynam, R. (2001), The Riesling renaissance, Hong Kong Business, p.98.
4
Wolkoff, I. (2006), Following hard times, German Rieslings rise again, Medical Post,
Vol.42, Iss.20, p.39.
- 8 -

German wines, Riesling for example, still have reputation of excellence, but
the last fifty years put a “variety of demons” 5 on them. In the first two decades after
World War II, Germans were drinking German wines, except for a small market
segment at the higher end of the price scale which was occupied by famous
French red wines. The giant overseas wine estates were yet not founded or at
least not yet recognized. Transportation costs were high, creating a natural barrier
to market entry at least for Non-European producers. But over the years, the
situation changed. Wine consumption increased, and foreign wine got more and
more fashionable, at first Italian wines, then wines from Spain and other European
origins. During this time, the so-called New World wine producers (e.g. Australia,
Chile, New Zealand, South Africa, and the United States) achieved sustainable
progress on the learning curve. Decreasing transportation and production cost
combined with an increase in quality made it possible to enter and finally to flood
the European market. The market entry coincided with fierce price competition
among German discounters and super market chains, such as ALDI, LIDL, Metro
Group, Tengelmann Group, and alike.
Competition has become so fierce over the past years that even WAL-
MART, the world’s largest retailer, was just swept away from the German market.
To succeed, discounters search for cheap supply in a good and stable quality.
Therefore the ideal typical wine offers a stable, medium quality and at the same
time, needs to be produced in a high quantity making it possible to offer exactly
the same product to millions of customers at several hundred discounter outlets.
New World wine producers match these criteria. Moreover, they fit the needs of
marketing because origins like Australia, California, Chile, New Zealand, and
South Africa sound exotic, cosmopolitan, and became as fashionable as Italy,
France or Spain.
For a long time, the European producers and particularly the French,
Spanish and German vintners referred to their tradition and proscribed the
overseas producers and their products. Consequently, the Old World winemakers
were shocked when they finally realised the changing demand of retailers and
wine consumers as well as the increasing quality of their competitors´ products
and the rapid decrease in market shares. 6 New methods of winegrowing, new
production systems and technical innovations resulted in competitive advantages
of the New World vintners. They were able to produce more comparable wine on
decreasing costs and to flood Europe with it. The new competitors penetrated
Europe and the wine world with mass production, innovative methods and wine of
all kinds. The response of European vintners was twofold: there was a call for
state intervention and protection on the one hand, and the attempt to compete in
mass production on the other hand. Soon numerous regulations prescribed for
instance grape varieties, controlled cultivated land, and sugar content. Price
5 Wolfkoff, I. ibidem.
6 See for more detail e.g. Bartlett, Christopher A. (2003): Global Wine Wars: New World
Challenges Old (A), Harvard Business School Publishing, Boston, MA.
- 9 -

guarantees were given by the EU and national agricultural subsidies in France and
Spain were meant support vintners by converting the overproduction of low quality
wines into cash. Prices were stabilized by state intervention; wine that could not be
sold on the market was simply purchased by the EU or national state authorities.
The attempts to respond to the entrance of the New World wine producers
resulted in a disaster for the German winemakers. Ignoring differences in outer
conditions, especially the Germans tried to copy the successful strategy from
overseas producers and to respond with mass production, especially of white
wine. The production was increased at the expense of quality. One major obstacle
was the fact that the New World producers were able to increase cultivable land by
buying additional unimproved land very cheap, whereas in Europe that strategy
was just impossible. The German wine producers faced geographical and
regulatory limits which prevented them from increasing their cultivable land. All
viniculture areas were allocated and moreover atomised (see Exhibit 2).
Therefore, increasing the production meant increasing the output of a given
vineyard by emptying more liquid from each single grapevine and grape. This in
turn lowered the quality significantly. Decreasing quality resulted in decreasing
reputation. Consequently, the more quantity was achieved, the more reputation for
quality was squeezed out. In addition, productivity increased slowly in comparison
with overseas wine industry because the landscape of many German vineyards
does not allow the use of heavy machinery and robots. Vineyards are typically
located on very steep hillsides alongside river valleys like Rhine, Moselle, and
Main. Another setback for German vintners was suffered by changes in
international consumer demand in the 1990s, when there was a dramatic shift in
consumption from light white wines towards red wine. Unfortunately, in the 1990 s ,
the climate in Germany did not conduce to red wine production very well. The
more unstable climate was another obstacle which – combined with strict
regulations in wine making – caused inconstant qualities and quantities, including
the risk of crop failure. The conclusion after one generation of investment in mass
production is that due to the small size of many estates, limited acreage and steep
hillsides of many vineyards, domestic production cannot ever be expected to cover
domestic demand. For importers, this gap makes it much easier to enter the
German market.
German import and export in a changing world wine market
Germany is the largest import market for wine in the world. The German
wine market has a heavy import surplus. The demand for white and red wine is still
unbowed with an even increasing trend. Unfortunately – from a point of view of
German producers – this increasing demand is mostly satisfied by imports from all
around the world. There are various reasons for this development. The wine
drinking habits have changed in the last decades. In many parts of the society,
drinking wine is subject to fashion and lifestyle. This is not only true for the upper
- 10 -

classes, but also for students, skilled labour, middle classes and pensioners.
These changing habits in the consumption and perception of wine were first
surveyed in the world’s largest non-producing wine market: England. Marketing
departments (an organizational element that for a long time was frowned upon or
at least unknown to the traditional German and European “wine artisans”) very
early identified Great Britain as an ideal target market. This market did not know
any domestic supply, and at the same time offered a continuously growing
demand. New World producers in particular managed to satisfy this demand,
winning the so called “Battle of Britain” 7 in wine industry. Considering the changing
habits in wine consumption, Britain is regarded the leading market in consumer
behaviour. Success on the English market therefore is regarded as an indicator for
international competitiveness: “If you make it there, you’ll make it everywhere”, as
wine marketing managers say.
Today, buying and drinking wine is associated with a specific lifestyle and
customers are willing to pay higher prices for higher value, a matter of fact that
German vintners apparently have recognized. Since advertisement presents
drinking wine as the common upper class life style, copying this style makes
members of the middle classes feel part of the upper class. This opens new and
growing market segments around the World. The largest market for German wine
is located in the United States. It can be seen in Exhibit 4 that the German wine
export is still increasing. Since the late 1990s the demand for German wine is
raising consistently. It coincident with the time when the first of the new generation
of young German vintners successfully started to rediscover their abilities to
produce first class white wines, especially famous Riesling. Accordingly, the
German export quotes document an increase of wine sales, particularly outside
the European market (Exhibit 3). The most important export markets for German
wine, especially white wine, are the United States, Japan, Canada and Russia,
whereas in Europe the largest markets for German wines are Great Britain, the
Netherlands, Sweden, Norway, France and Belgium. Exhibit 4 underlines the
changing export trend among German wine estates which seem to withdraw from
highly competitive markets like Great Britain and France. They focus more on
newly growing markets like the United States, the Scandinavian countries and
especially Russia (+172.6). The activities in Asia (e.g. India and China) seem to be
careful at the moment but should not be underestimated.
As mentioned before, the governments of the Old World producers tried to
protect their markets with entry barriers and subsidies. For many years, market
response of Old World wine producers, especially in France, did not focus on
market forces, but on the call for state protection and intervention. Bilateral treaties
aimed to control import activities of New World producers by increasing the export.
By the year 2002, European Union (EU) Agriculture Commissioner Franz Fischler
and EU officials found that protection guaranteed policy support from the wine
producers’ interest groups only in the short run. But in the long run, protectionism
7 Bartlett, Christopher A. (2003), ibid, p. 8.
- 11 -

esulted in an ongoing increase of the rent seeking phenomena. Additionally,
intervention harmed consumer interests, since it resulted in less variety of choice
and higher prices. For officials, explaining benefits of EU intervention was getting
harder each year. Furthermore, EU intervention once was meant to protect
producers in order to give them time for change and improvement to regain
competitiveness. Instead, uncompetitive structures were preserved whereas New
World producers continued improvements in productiveness and size.
Consequently,
the 2006 bilateral trade
agreement between the
(EU) and the United
States marks a turning
point on the
liberalization of the
global wine market. The
important aim of the
latest conglomerates of
treaties is the mutual
acceptation of wine
growing methods and
the protection of so
called semi-generic
names, e.g. Burgunder,
Port or Champagne
which follow liberal
thoughts. The
agreements’ goal to Development of rules in international wine trade
open the market into a
global free one is in contrast to the Old World’s attempts to shield themselves from
the pressure of the New World winemakers. However, globalisation, lower
transportation costs and a growing desire for overseas products as well as
changing demand and fashion trends resulted in an increasing pressure to
liberalise the world market for wine.
But the market is far from being a really liberal market. The EU is still
paying huge amounts of state subsidies to intervene and support domestic
producers. Old fashion thinking relies on the faith that state subsidies and import
quotas can control increasing demand in foreign wine. Protection resulted in
inflexibility. In contrast, a new generation of German wine makers are willing to
face the challenge by focusing on high quality combined with tradition. They have
accepted that perpetual execration of new developments and techniques does not
help to survive in global competition. The process of innovation and competition
cannot be stopped. Solutions to competitive challenges are to be found by a more
entrepreneurial behaviour. After decades of drastic governmental intervention and
the instructive past, young German vintners decided that the only chance to
survive under constraints of limited resources would be to change their focus from
- 12 -

mass markets towards the satisfaction of high quality wine demand. On the other
hand, the German wine was by far not the only one to improve. All around the
globe, due to different methods, the overall quality of wine significantly improved
over the last fifty years. “There is no doubt about the fact that the overall quality of
wine today is better than ever before”, attested Konrad Fitz. The competitiveness
of high quality wine coming from the New World producers is tough.
Johann Fitz and the new entrepreneurial spirit in German Wine
Industry
In this situation, while many other vineyards – trapped by inflexibility
convention, attempts at preservation, and investments in mass production – face
bankruptcy (accordingly a concentration process within the German market
(Exhibit 2) can be seen in the last years), a young generation of vintners is trying
to combine traditional
winemaking and
innovative methods to
strengthen and regain
their position in the
global wine industry.
They developed a new
image of German wine
based on its traditional
heritage. Today’s
vintners regain strengths
and the trends show that
German premium white Wine testing (Picture: Fitz – Ritter)
wine is celebrating a
comeback and new German red wine a start-up – the latter due to increased
knowledge, less regulations in planting varieties of grapes, and climatically
changes. Increasing export ratios show a growing demand for German high quality
wine, especially but not exclusively in countries outside of Europe. The U.S.
market is only one example that the demand for German white wine, e.g. high
quality Riesling, has gone up in the last couple of years. But overseas wine
producers already jump on the bandwagon starting or increasing their own
Riesling production. Due to the industry’s time to market ratio (vine growing),
outcomes of this process will be noticed with a lag of time lasting three or four
years, but sure will come.
Johann Fitz is one of these young German vintners. Even so Fitz-Ritter
never was involved in mass production but always dedicated to producing top
quality wines, there are a lot of things to do. Konrad was always open for
improving the methods of production in the vineyards and cellars and Johann
continues on this path by oenological innovations most rigorously and
conscientiously and without compromise. But his entrepreneurial spirit does not
- 13 -

wear itself out in innovations in oenology and production methods. In addition to
the online shop and the new product FitzSecco passion fruit, one of his first
projects as successor of Konrad Fitz is the refurbishment of the “historical cross
vault cow barn” (which has not seen cows for decades, but still was there somehow).
It will be converted into a ball and dining room with winter garden, where
dignified events can take place. Johann’s idea of a modern wine estate is as
simple as his mission statement: Deliver high quality wine in combination with
features to retain customers. Like the new room, where wedding parties can take
place. “If you celebrate your wedding here, you will receive a lifetime discount and
a tailored label for your special day. This is the perfect way to win over customers
for our vineyard.” The tricky question for vintners in such a highly competitive
market is how to retain customers. Johann sees the answer to that question in the
combination of events at the winery, but this is not new for Fitz-Ritter. As
mentioned above it was decades ago that the winemaking family started to host
charity events and classical concerts at the traditional residence in the centre of
Bad Durkheim. “But not for making money, for charity”, says Alice and, “because
we feel responsible for the region and it is part of our commitment and honour to
support people”. Nevertheless, this strategy resulted in some increase of customer
loyalty, but now the effect diminishes and needs an innovative replacement.
To Johann, the transformation of the historical cross vault cow barn into a
ball room with winter garden is a symbol of the new spirit he brought into the
company. Even though he was unsure about taking over the company, he now is
searching for opportunities and change. “It required a little convincing, but soon I
knew that I wanted to run the company and implement new ideas” emphasizes
Johann. “My parents were leading the vineyard with an entrepreneurial mindset,
and I want to continue this track. And continuation means change. As for every
human being, my attention and power is limited. I need to concentrate on very few
projects each time. Consequently, I have to develop the estate step by step. I
need a priority list, showing which projects or opportunities are crucial for success
and then concentrate investments on first things first.” This is why he is still unsure
about the expensive export, which pays off exiguously.
“The new project has potential to compensate for the declining export
quotas” says Johann. “Export is an affair of my mother’s heart. She put so much
effort in it, but the weak dollar is wearing the profits down.” A small company like
Fitz-Ritter has to pass through 100 % of all currency changes. “Our Incoterms
usually refer to CIF (when carried on ships) and CIP (in case of airfreight). In the
international wine business, it is commercial custom that prices are negotiated in
foreign currencies on the day of order. Payment is due after delivery. Hence we
carry the risk of exchange rates, and I can tell you, we have not been lucky with
the Euro to US-Dollar ratios during the last years. Just to increase the price in US-
Dollar is not the answer, because we soon would bust market prices and our wine
would become unsellable.”
But Johann is optimistic “I will find a solution and make a decision, one way
or the other.” He is someone who likes to tackle a problem. “I am a person, who
likes to put my hand on it” he says during the interview. Then he tells a story from
his years of study at the University of California at Berkeley: “During the summer, I
- 14 -

took part in a management program and there was a competition where students
had to run a real small company. I was the manager of a painting company. It was
exciting. I did all the planning and administrative processes by myself and I even
employed some people for operational work. I did very well and finally won the
competition. It was a great experience. But then after winning I was supposed to
explain and teach my strategies and ideas to other students, but there I failed
badly”, he says with a smile on his face. “I am a person who just does things, and
not one to talk about it. I am not a coach or a teacher.”
The refurbishment of the “historical cross vault cow barn,
picture taken from www.fitz-ritter.de
- 15 -
First the idea crossed
his mind that it could
be a promising
opportunity to bind
customers by opening
the estate building and
the gardens for the
most special events in
his customers’ lives.
Then Johann had to
care for the
investments and
search for capital. “We
have returns on
investment from wine
production, but the
surplus reserve cannot
cover the entire
project. It can only contribute a little equity to the amount of cash needed. So I
faced the task to finance the project. In a first step I limited the need for capital by
a clear focus on our core competence. The project is intended to foster our sales
of wine, during the event and for future delivery. It is not designed to run a
restaurant. This would mean the need to employ a chef, cooks, waiters, and so on.
Therefore I decided to outsource the catering. Guests are free to choose any
caterer they like, and thus all the diverse demands for cuisine which may occur
can be easily fulfilled. The only product I put restrictions on is wine and
champagne. It has to be purchased from the Fitz-Ritter Wine Estate or the
“Sektkellerei Fitz KG” respectively (i.e. the official name of the sparkling wine
incorporation). Apart from that, the outsourcing of catering redounds to our
advantage by the fact that for the most part calculation is detached from variable
costs. Consequently, the need for capital is equated with the costs of
transformation of the site. The break even point will be reached almost with the
first bottle sold after the interests on the invested capital are paid.”

Table 1 shows the investment costs and the source of funds. 8 In the
financial plan, the “KfW-Mittelstandsbank” plays a decisive role. This public
financial institution once was created to help to recover from Second World War
and to distribute aid from George C. Marshall’s “European Recovery Program
(ERP)”. Most European countries burnt the money from the program in
subventions while the German government chose a different model: They founded
the KfW Bank as a fund holder. The KfW did not spend the money on subventions,
but invested it by offering loans to small and medium sized innovative enterprises.
Hence, the aid, once given by the US, still accumulates by amortizations,
moderate interest rates and the wisdom of the creators of the so called “German
Wirtschaftswunder” (the economic miracle of the 1950s); it is still beneficial to
German economy. The market for informal equity is not well developed. For this
reason, the KfW-Mittelstandsbank offers not only investment loans but also
mezzanine capital. On condition that the entrepreneur will get involved with 15
percent equity, up to additional 25 percent of total investment can be financed by
the mezzanine capital program. The remaining 60 percent of investment can be
covered by an investment loan.
Total Investment: 500,000 €
Sources of capital:
Equity from surplus reserve: 75,000 €
Mezzanine Capital from “KfW-Mittelstandsbank”
(so called Capital for Entrepreneurship Program): 125,000 €
Investment loan from “KfW-Mittelstandsbank”
(so called Entrepreneurship Loan): 300,000 €
Interest rates and amortizations (year 1 starts on January 1 st 2008)
Mezzanine Capital
Year 1 2 3 4 year 5 & 6 from year 7-
15
Interest %** 0.0 3.0 4.0 5.0 6.50 6.50
Amortization*
Investment Loan
0.0 0.0 0.0 0.0 0.0 13.888.89 €
p.a.
Year 1 2 3 from year 3-20
Interest %** max. 4.45 – 7.30 (depending on rating), Fitz-Ritter is rated A (4,45)
Amortization* 0.0 0.0 0.0 17,674.06 € p.a.
*) if required by the entrepreneurial enterprise amortization can be expedite
**) interest rates are object to change, for actual rates see www.kfwmittelstandsbank.de.
Table 1: Entrepreneurial Finance for SME in Germany – an example
8 To protect the company’s interests, all financial data and sources of funds have been object to
modification. Nevertheless, the data given is realistic and the source of finance is the most
important for entrepreneurial start-ups and business successors in Germany. It was chosen to
give the case a universal validity for entrepreneurial finance in Germany.
- 16 -

The new project looks promising. Although the project has just been
started, so far 15 couples have already booked the room and the garden for their
wedding parties at a rent of 2,100 Euro a day. In addition to the rent, Johann plans
to sell around 100 bottles per event at consumer prices (see EXIBIT 1). At least 40
to 45 events per year could be scheduled at the beginning, most of them during
the main season. Although Johann will accept a 600 Euro abatement of rent
during low season (15 th of October – 15 th of April), he is confident that the project
will result in huge returns on investment. “Apart from the cash which we put into
the project, we use our Estate’s Garden and the Cross Vault next to it, both
representing assets that have lain idle for many years but soon will contribute to
our business.” Market analysts state that the average German couple spends
14,000 Euro on the wedding. And not only couples but also companies, clubs,
associations and private persons are looking for special locations to make their
function a very special event. Due to word of mouth, internet advertisements, and
a “google-strategy” 9 , the business plan expects the number to increase to 60 or
even 70 events yearly until the fourth year. Operation will start April 15, 2008.
Confident in his future plans, Johann is talking about his strategy and his
mission to become the best wine company in the region, maybe not in terms of
size but in quality. “We work very hard on increasing the quality of our wines.”
From the first seeding to the harvest the vintner family and their employees are
doing everything within the company. Even filling the wine into bottles, labelling,
marketing and selling will be done by the small group of people at the Fitz-Ritter
winery. The whole
value chain is still
within a single
company. “Today, this
is special”, says father
Konrad, “we do
everything on our own,
it is demanding but we
believe that you can
taste it. High quality
wine is our passion
and we control the
total process.”
The award winning Fitz–Ritter Garden (Picture: Fitz–Ritter)
Johann’s next plan is to increase the quality of wine by investments into
human resources and know-how. “You can always increase the quality of wine.
We have achieved a lot but still have some space left to climb up the ladder to the
9 Searching for a wedding room at www.google.de from a place located within in a circle
of 100 miles around Bad Durkheim, one would find the “historical cross vault cow stall”
among the first hits. The city of Frankfurt, financial capital of German economy, is
located within this circle.
- 17 -

top German vineyards”, says Johann. The shift in methods of achieving quality has
been drastic during the last 15 years. Meanwhile, the recognition of quality has
increased too. The quality of wine evolved and so did the market: The internet and
other types of easily accessible mass media created more transparency.
Consumers can quickly share their experiences on wine with others.
Recommendations and ratings are popular. Some of the so-called experts have a
lot of power; they influence consumer behaviour and thus give incentives for
higher quality. Today, markets reward quality more than years or decades ago.
For this and many other reasons, Johann is monitoring the market for new high
quality acreages. But it is almost impossible to buy more land because of the high
prices for cultivated land in Germany. Renting land is expensive too, but if it is
feasible, it is the only realistic way to increase acreage.
“Purchasing good wine is another possibility, especially in the cuvee and
sparkling wine production”, the young vintner adds. This strategy is feasible and
can help to bypass bottlenecks in delivery, e.g. with his latest innovation FitzSecco
passion fruit. “It is a product for young people who like to enjoy good quality wine
with the flavor of passion fruit. It is a stylish product, which is brand new and
already the “in-drink” here in our region. Demand is higher than we thought, so
that for production quality wine has to be bought in addition to our volume. With
this new flavored sparkling wine, Fitz-Ritter is targeting young people, especially
young women. It has a great potential to become the next hot-seller of our
vineyard.” Furthermore, the passion fruit secco will soon be available in smaller
“Piccolo bottles” (0.2 litres) together with the latest trend in bottle caps, the so
called “twist and plop” cap. Due to its low alcohol and fruity, refreshing taste, it is a
good alternative to the so called “alcopops” sold at pubs and clubs, which face
increasing criticism in public debate. “Changing our product portfolio, I can imagine
to dedicate our entire own acreage to production of premium wine of highest
quality and to round off the portfolio with quality wine bought from other vintners.
The additional wine is to be placed in the medium price range and in the
production of Cuvees for Champagnes, sparkling wines and FitzSecco.”
This development is the logical continuation of Johann’s impact on the
reinvention of the traditional Fitz-Ritter vineyard. Soon after he took over the lead
of the company he reorganized the Fitz-Ritter’s price list conceptually and he also
gave it a new style, emphasizing the black knight company logo and the
membership of the Association of German Prädikat Wine Estates. Johann´s
influence can also be seen at the company website, which now has a virtual tour
and many other features around the vineyard, highlighting the new project in the
“historical cross vault cow barn” and the beautiful garden which won the
competition “Most beautiful garden along the German Wine Street” some years
ago. The garden contains an oak tree which is more than 350 years old, a lot of
roses, and the largest Gingko tree in Germany, a plant described in the famous
poetry of Johann Wolfgang Goethe.
- 18 -

The Association of German Prädikat Wine Estates
The Association of German Prädikat Wine Estates
(VDP) is “dedicated to making wines of the highest
quality…Wines which reflect the distinctive character of
their German origin and grape variety. 10 ” With its 200
members, the association embraces only 3% of the
entire German viticulture area. Due to the common VDP
logo, all VDP wines can be identified very easily among
their competitors. Strong labelling regulations by
government tend to confuse customers who do not
know too much about wine. Especially in Germany and
Picture: www.vdp.de
Italy regulations are misleading and differ from county to
county. The VDP attempts to liberalize regulations and to establish more common
labelling rules. It emphasizes the grape, the quality, and – very important for
German wine – the region and exact name of the vineyard where the wine comes
from.
VDP membership is selective and it is a privilege to become a member,
because a wine yard can not apply for membership. The Association selects its
members, and not vice versa. To be elected, a company has to stick with a strict
catalogue with numerous characteristics. One important requirement for
membership in the VDP is that at least 70% of the estate’s acreage must be
planted with traditional varieties. This is one reason why among VDP members the
percentage of Riesling is significantly higher than the regional average. The
association and its members commit themselves to traditional methods of
winemaking to produce consistently superior wines. The main objective of the
association is to combine the best German wine estates and the best German
wines. To strengthen its position in today’s global wine world, wine production is
based on three principles:
1) Vine treatment in the vine yard is without technical intervention in natural
processes.
2) The use of oenological innovations is fostered whenever they increase
quality, are in line with natural process, and are carried out carefully in
good craftsmanship.
3) An artisan treatment of grapes and product is obligate from harvest to
gentle press, to aging in a traditional wine cellar, to the final product in an
attractive bottle.
Following these directives causes immense labour costs. On the other
hand, to be rewarded with membership and to show off the VDP logo on bottles is
an opportunity. There are signalling effects along with the VDP logo since the
organization is known for its attempts to distinguish even higher quality premium
wine from other quality wines available. It offers transparency to consumers who
are lost in a market with confusing rules and regulations. “The association will
10 Association of German Prädikat Wine Estates (VDP), webpage: http://www.vdp.de
- 19 -

establish a system of estate monitoring in addition to the national German wine
quality control system, to ensure and guarantee adherence to the VDP’s high
standards for high-quality, naturally-produced wines.” This common goal has not
changed since the first formation of regional quality circles in the end of the 19 th
century. In 1910, the regional groups united into one association, to protect the
attribute “natural” which became synonymous with high quality. Due to the
prohibition of the term “natural” with the promulgation of the German wine law of
1971 the association adopted its present name, replacing the designation “natural”
with “prädikat” (i.e. selected or entitled). Fitz-Ritter was not invited for membership
but belonged to the founding members back in 1909/10 which documents the
company’s tradition in the pursuit of quality.
Today’s aim is to adopt new production
and marketing policies. Its initiatives include
“stringent yield restrictions, institution of
ecological winegrowing techniques, and the
usage of the new VDP capsule as a
distinguishing mark for wines from the estates
of the association.” The mission is to extend the
international reputation of German wine
combined with the duty to protect the regional
identity because many wine estates have been
in the same family for centuries. For many
estates, small in size but large in quality, it is
the only chance of getting international
recognition. Due to the lack of monetary
capacities a large number of German wine
estates cannot afford large marketing budgets
and therefore are stuck in regional identification
without a chance to extend their reputation.
High bargain power of large national
discounters put pressure on prices and
production volumes. Hence, some traditional
wine estates capitulated in the past. For many
wine estates only two scenarios were thinkable:
Either increasing the production volume to
produce more wine on the same acreage,
which in turn lowers the quality, or decreasing
the production volume to improve the quality of
the wine which again means an increase in
Picture: Fitz – Ritter
costs and makes products unattractive for discounters. Members of the
association of German Prädikat Wine Estates follow the latter strategy. Equipped
with the best areas of vine cultivated land and committed to the use of old hand
picking techniques during the harvest and other special crafts and skills in vine
growing and wine production, the VDP estates feel constrained to the highest
standards possible. Although the limitation of quantitative production outcome
- 20 -

ears high risks to the vintner, it also offers legitimacy for higher prices and
marketing power to an extent that an average vintner could never achieve.
The VDP estates have earned worldwide recognition for their excellent
wine and with setting up its own vineyard classification, the VDP is “performing
pioneering work in Germany”. The demand in premium segments noticed by all
VDP members led to an increase in latest years with today’s volume of sales by
300 million Euros for the total number of members. The average export quota rose
by an additional share of 5% up to a total of 21% in 2006 (16% in 2005).
Especially novices in export activities could achieve an immense increase rate in
2006. Now up to 65% of all VDP members are selling their products
internationally. The average outcome of a VDP wine estate was around 65hl/ha in
2006. Due to hand picking 400 hours of work in harvesting for one hectare is
average, which leads to a cost comparison by 500 €/ha (harvest by machine)
versus 2,500 €/ha (handpicking). Cost in wine production is also higher, for
instance in the process of pressing the grapes.
The VDP presents opportunities for knowledge transfer about new
techniques and the latest innovations. This networking system could be used to
fasten the latest know-how exchange among vintners about e.g. brand new
cultivation techniques. In terms of marketing activities, the VDP takes part at the
largest exhibitions in the world like the ProWine in Dusseldorf, Germany, or at the
Lincoln Center, New York. In combination with other VDP estates Fitz-Ritter
advertises its best wines at moderate costs. With limited financial resources it is
fairly the only chance to get recognition in the world. Due to mass competition, the
Association also strives for legitimacy of the small premium class German wine
estates. Johann Fitz, who represented the Fitz-Ritter vineyard at the latest
exhibition in New York, emphasizes the importance of being present
internationally. It is existential for him to promote his wine at exhibitions all around
the world. Ironically, this could be more important for Fitz-Ritter’s domestic sales
than for their export activities. “Achieving acceptance within the German market is
very hard. International reputation can boost your sales. It is a signal. It gives
recognition and contributes to Fitz-Ritter’s brand building”, says the young vintner.
Highlighting the importance of the VDP in terms of marketing support, the
latest attempts and reform developments within the EU increase the significance
of the Association, especially for Fitz-Ritter and other small vintners. With less
state protection and a more liberal and global wine market, the pressure for – in
terms of global comparison – “small” vintners will raise exponentially.
Perspectives and Discussions
The Fitz-Ritter company is facing an important and crucial period of time. A
couple of decisions have to be made which will depend massively on strategy. The
wine industry has changed and it keeps changing. First effects have reached the
wine estate already. In Germany and elsewhere in Europe, smaller wine estates
already had to capitulate in the face of the challenges of global wine industry. In
- 21 -

Germany the concentration process has just started but has not reached its
inflection point yet. Latest rumours say some of the largest German vineyards had
takeovers bids from overseas. The succession process within the Fitz-Ritter
company might not weaken the company although the new young head Johann
Fitz starts within a though industry, but he has steeled himself against it: He
enjoyed an excellent education in oenology, economics, and entrepreneurship. His
father, Konrad Fitz, has retired but is still on the estate to help with his rich
experience. Alice is willing to promote exports for some more years. The company
is in family ownership by 100 percent. Nevertheless, future plans have to be made,
it is just not enough to rest on what has been achieved so far.
The new projects Johann Fitz executed so far are all in line with the overall
strategy of the company: the making of a premium quality wine estate that
combines tradition and innovation. Projects have been:
− The introduction of new products, i.e. the FitzSecco passion fruit sparkling
wine.
− A first reorganisation of product portfolio, stressing out those products with the
highest quality and prices.
− The reorganization of distribution channels on the domestic market including
the establishment of an internet online shop.
− The “historical cross vault cow barn” project to increase direct sales right on
the estate site. This project also has the potential to increase customer loyalty.
− New labels and elegant designs for bottles containing the most expensive
wines.
− Investments in human resources, i.e. hiring of a famous first-class oenologist
and employing a cellar master of excellent craftsmanship.
But still more decisions lie ahead of Johann. Since every project
mentioned above bears the natural risk of failure it is necessary to have a pair of
thought-out alternative plans. Additionally, the reorganization and redesign of Fitz-
Ritter’s distribution channels depend on customers’ willingness to buy online –
without testing. Increasing investment into exhibitions and a more active
advertisement is necessary to attract customers to the vineyard. The event project
can only be seen as a starting point to attract new buyers while turnovers by
traditional salesmen rapidly decrease. The fact of the dying breed of salesmen is
an opportunity for innovative ways but it is also a threat, and it inescapably means
additional marketing costs. The “historical cross vault cow barn” refurbishment
project has the potential to compensate decreasing export profits. Why not
concentrate on the domestic market and leave the cost intensive and often difficult
export to competitors? Even though she has decades of experience, Alice admits:
“Export business is a perplexing and troublesome job, with markets not easy to
understand.” Domestic demand is sufficient, especially if the “historical cross vault
cow barn project” turns out fine. So why should Johann Fitz continue with the
export business? What are the possible rewards of international entrepreneurship
in the case of Fitz-Ritter wine estate? Should the 25 percent of given production
- 22 -

capacity that is used for international business be dedicated to the domestic
market in the nearer future? How about distribution and product portfolio? Do
changes in climate offer any new opportunities for differentiation of the product
portfolio? Are there growth strategies any Fitz-Ritter should take advantage of? In
which areas of the Fitz-Ritter business can one recognize such opportunities for
growth? Are exhibitions and internet appearance enough to survive? How can the
company use its latest innovation, the FitzSecco passion fruit? What could the
marketing plan for FitzSecco passion fruit look like? And how can Johann gain and
retain more young customers? And where should he to go with the international
business? How to stay abreast of change?
These difficult questions are on Johann’s mind when he returns from the
historical cross vault cow barn refurbishment site. The monument protection
officials felt comfortable with the way how the ancient renaissance character of the
building is carefully sustained. After taking leave from the officials, he enters his
office. The phone is ringing. It is Alice calling, with excitement in her voice:
“Johann, our premium wine is positively reviewed by today’s New York Times and
to boot, the “Wine Spectator” ranked the “Michelsberg” and the “Kanzel Ungestein”
Riesling above 90 points. So to speak, we have just entered the international
champions league at a top rank.”
“What news, and the day has just started” Johann says. “Our strategy
seems to turn out fine, and tonight, we shall definitively open one of the best
bottles of champagne from our cellar.” But before this, Johann makes good use of
the day, considering the rewards of the challenging export business from a new
perspective, rethinking his opportunities and re-weighting his options.
- 23 -

Exhibit 1
Nr.
Nr.
619
621
624
335
536
533
511
612
218
416
A
B
C
D
Wine
Wine
2005 Durkheimer Rittergarten Riesling
2006 Durkheimer Abtsfronhof Riesling
2006 Riesling CLASSIC
2003 Ungsteiner Herrenberg Riesling
2005 Michelsberg Durkheim Ries. GG**
2005 Kanzel Ungstein Ries. GG**
2005 Durkheimer Dornfelder red wine
2006 Pinot Noir
2004 Durkheimer Cabernet Dorsa
2004 Durkheimer Spielberg Chardonay
FitzSecco Blanc
FitzSecco Rosé
FitzSecco Passion Fruit (0.75 litres)
FitzSecco Passion Fruit (0.2 litres)
Product Portfolio 2007*
Price Price €
B B to to B
B
2.80
3.20
3.20
7.70
11.45
12.05
3.30
4.30
9.00
9.95
2.60
2.60
2.85
0.90
Price Price €
E E to to C
C
5.60
6.40
6.40
13.50
19.00
20.00
6.60
7.90
14.90
16.50
5.20
5.20
5.70
1.80
Nr.
Nr.
613
616
425
627
339
938
645
415
314
001
002
003
E4
F3
- 24 -
Wine
Wine
2006 Durkheimer Blanc de Noir
2006 Durkheimer Spielberg Chardonnay
2004 Durkheimer Abtsfronhof Gewurztram.
2006 Durkheimer Abtsfronhof Gewurztram.
2003 Durkheimer Hochbenn Ries.“Ice wine“
1999 Durkheimer Abtsfronhof Ries. Selection
2006 Cuvée “Red Fitz“
2004 Cuvée “Revoluzzer“
2003 Durkheimer Pinot Noir
Rittergold “dry“ (0.75 litres) sparkling wine
Rittergold “dry“ (0.2 litres) sparkling wine
Riesling Extra Brut (0.75 litres) spar. Wine
2006 Fitz-Ritter Riesling (1l.)
2006 Fitz-Ritter Red Wine (1l.)
Price Price €
B B to to B
B
*Figures taken from Fitz-Ritter price list (modified), business to business prices (B to B) modified for class room calculations only.
** GG = “Grosse Gewaechse“ (Great Growth)
E to C: Prices for direct sale from the Estate to private customers.
3.95
5.15
6.20
4.60
62.00
46.00
4.10
8.10
9.90
2.85
0.90
4.50
2.45
1.85
Price Price €
E E to to C
C
7.10
9.30
10.90
8.40
93.00
70.00
7.40
14.20
16.50
5.70
1.85
8.10
4.90
4.70

Exhibit 2
Viniculture companies in Germany 11
company size
from… to…
EGE
Number of companies
1999 2003 + / -

Exhibit 3
The global wine market
2006
Value Volume
- 26 -
Annual
percentage
change (05/05)
% Share
2006
Rang Countries 1.000 Eur hl Eur/hl Value Vol. Val. Vol.
1 EEC 25 354,661 2,185,513 162 9.7 2.5 63.2 75.2
2 Others 206,573 720,822 287 36.6 40.6 36.8 24.8
3 Great Britain 128,342 825,122 156 1.2 -8.1 22.9 28.4
4 USA 100,350 301,649 333 29 21.2 17.9 10.4
5 Netherlands 69,104 476,526 145 17.7 17 12.3 16.4
6 Norway 25,602 85,529 299 53.1 17.2 4.6 2.9
7 Sweden 23,687 176,100 135 5.8 -2.1 4.2 6.1
8 Russia 22,765 169,132 135 113.9 172.6 4.1 5.8
9 Japan 22,759 62,394 365 1.6 0.9 4.1 2.1
10 France 18,542 104,334 178 -3.9 -4.4 3.3 3.6
11 Canada 15,308 57,211 268 49.4 40.7 2.7 2
12 Swiss 13,804 24,569 640 68,6 22.9 2.5 0.7
13 SUMMARY 561,234 2,906,335 193 18.2 9.9 100 100
Source: VDW (Verband Deutscher Weinexporteure e.V.) www.vdwweinexport.de

Exhibit 4
Value in 1000 € / Volume
in hl
350.000
300.000
250.000
200.000
150.000
100.000
50.000
German exports into the United States
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Source: Verband Deutscher Weinexporteure e.V. (www.vdweinexport.de)
(after publishing of Statistisches Bundesamt der Bundesrepublik Deutschland)
- 27 -
Value in 1000 €
Volume in hl

Exhibit 5
Durkheimer Abtsfronhof
Durkheimer Fronhof
Durkheimer Fuchsmantel
Ungsteiner Herrenberg / Kanzel
Durkheimer Hochbenn
Wachenheimer Mandelgarten
Michelsberg
Rittergarten
Durkheimer Spielberg
Others
Growing Growing area
area
Fitz – Ritter Company - Growing Areas
Acreage
Acreage
3.2 ha (7.9 acre )
0.8 ha (1.98 acre)
0.56 ha (1.38 acre
1.44 ha (3.46 acre)
4 ha (9.88 acre)
2 ha (4.94 acre)
0.7 ha (1.73 acre)
1.86 ha (4.6 acre)
0.7 ha (1.73 acre)
5.74 ha (14.1 acre)
%*
%*
35
30
20
15
100
100
100
100
50
50
100
40
25
20
15
100
100
Riesling
Gewurztraminer
Chardonnay
Sauvignon Blanc
Riesling
Riesling
Riesling
Riesling
Pinot Gris
Pinot Blanc
Riesling
Riesling
Dornfelder
Cabernet Sauvignon
Cabernet Dorsa
Chardonnay
Diverse
- 28 -
Wine
Wine
Use Use in in Production
Production
A++, A+++ & A+S
A++, A+++
SWP
SWP
B, A, SWP
B, A, SWP
A+++
B, A, SWP, A+S
B, A, SWP
B, A, SWP
A+++
A
A, A+, A++
A++, A+++
A++
A++
A+, A++, A+++
Potential Potential Quality* Quality
C – A+++ & A+S
C – A+++ & A+S
C – A+++
C – A+++
C – A++
C – A++
C – A+++ & A+S
C – A+++ & A+S
C – A+
C – A+
C – A+++ & A+S
C – A+++
C – A+++
C – A+++
C – A+++
C – A+++
C – A+++
* Figures adapted and modified from the authors for calculations only, SWP = usage for sparkling wine production

Exhibit 6
Purchasing Prices for Wine (cuvee production)*
Wine
Wine
Average white
Average red
C
0,75
0.80
B
0.80
0.85
In % of wholesale price
Figures for class room calculations only.
- 29 -
A
0.90
0.95
* Figures adapted and modified from the authors for calculations only
A+ A+ - A+++ A+++ & & A+S
A+S
No purchasing possible
No purchasing possible

Exhibit 7
Per Per Bottle:
Bottle:
Price Rang
Whole Sale
Average
margins for
retailers
Price Rang
Estate to
Consumer
Average
profit (€) in
whole sale
Code
Average
liters per ha
Wine Segments based on Quality Assessment
Table Table Wine
Wine
< 1.25
100%
< 2.50
0.05
C
140,000
Average
Average
1.00 –
2.00
>100%
2.50 –
4.99
0.10
B
100,000
Quality
Quality
2.50 –
3.50
100%
5.00 –
7.00
0.20
A
65,000
* Figures adapted and modified by the authors for class room calculations only, VDP wines will be classified “A” at least
- 30 -
Premium
Premium
3.50 –
5.50
>80%
7.01 –
9.99
0.30
A+
50,000
Top
Top
6.00 –
10.00
>75%
10.00 –
14.99
0.50
A++
30,000
Top Top Special
Special
10.00 –
18.00
>66%
15.00 –
30.00
1.00
A+++
20,000
Speciality
Speciality
>20.00
>50%
> 30.00
2.00
A+S
5,000

Exhibit 8
Currency
Currency
Euro / US-Dollar
Euro / Brit. Pound
Euro / Yen
19.10.2007
19.10.2007
1.425 USD
0.698 GBP
165.51 JPY
Development of exchange rates
29.12.2006
29.12.2006
1.317 USD
0.672 GBP
156.93 JPY
30.12.2005
30.12.2005
1.180 USD
0.685 GBP
138.90 JPY
- 31 -
31.12.2004
31.12.2004
1.362 USD
0.705 GBP
139.65 JPY
31.12.2003
31.12.2003
1.263 USD
0.705 GBP
135.05 JPY
Source of unmodified data: www.bankenverband.de
31.12.2002
31.12.2002
1.049 USD
0.651 GBP
124.39 JPY
28.12.2001
28.12.2001
0.881 USD
0.609 GBP
115.33 JPY

Exhibit 9
Pictures: Fitz-Fitz-Ritter
New products and new designs for bottles and labels
- 32 -