Bottoms Up for the
Greek Liquor

THE GREEK alcoholic beverages industry is worth a whopping 8 billion euros a year.

This figure has shot up in the past five years by about a third, because of the price hikes implemented by retailers following the introduction of the euro. However, the volume of consumption is growing only modestly at around 2 percent a year as most sectors are relatively mature.

Changes in market shares depend largely on preference or new product launches both of which are supported by massive advertising and promotion expenditure.

Greek per capita consumption of alcoholic beverages is below the EU average, approximately 5.3 litres/capita for spirits (placing Greece 19th) and 40 litres for beer which is well below the EU average of 80 litres. But there are particularities.

Vintage hall: A chamber of the Nemea city hall has been
transformed into a cellar for a wine fest and
exhibition of the northern Peloponnese vineyard
farmers and beverage manufacturers

Greece shares the honours with South Korea for the world's highest per capita consumption of whisky - the import sells twice as much as domestically-produced ouzo - and the Greek market is something of a bellwether for international trends.

Drink's ideal customers

Greece, for instance, has been a key focus for the development and promotion of flavoured alcoholic beverages (FABs) and it now looks like leading a trend towards mid-range, ready-to-drink products - pre-mixed drinks with a hard liquor base but a reduced alcohol content.

Greeks are the drinks trade's ideal customers. They drink often but not too much. Many, particularly in the 18-30 age range, go out three or more times a week to meet with friends for one or two drinks. Thereafter, many will go on to bouzoukia or clubs to listen to music or dance till the small hours. But the pace of liquor consumption is usually measured and there is little binge drinking. Boisterous public behaviour, which in northern Europe is often alcohol-fuelled and leads to belligerence, in Greece is usually a combination of natural ebullience lubricated with a modicum of alcohol.

Drunkenness is frowned upon, and alcoholism, though it exists, is not a major problem. Until the end of the last century about 75 percent (possibly more) of all alcoholic drinks were consumed in restaurants, bars and nightclubs - the so-called on-trade. Latterly, however, as greedy bar and club owners have rounded up their prices in the course of the transition from drachmas to euros while employers have translated salaries at a strict official exchange rate ratio, the on-trade has been diminishing. Many people simply can no longer afford as many - in some cases any - evenings out.

Off-trade booming

The proportion of drink bought in shops for consumption at home - the off-trade - is steadily growing, with the overall split having drifted to 65 on and 35 off, or 55-45, depending upon the sector and who you talk to. As more people eat and entertain at home, the off-trade in wine and beer has grown. Spirits still tend to be consumed in bars and clubs, though there has been a drift in the off-trade towards premium brands, as people buy more expensive whiskies and liqueurs to share with friends at home - particularly on occasions involving a celebration, such as a birthday or anniversary.

The drinks market is highly seasonal, particularly for beer where up to 60 percent of the sales are made during 40 percent of the year (May-September). Local producers tend not to mix their drinks, with most winemakers producing only wine and brewers producing only beer. The beer market is dominated by Heineken NV of the Netherlands, which is reputed to have a market share of 83 percent.

The wine trade is dominated by four large industrial scale producers - Malamatina, Kourtakis, Boutari and Tsantali, which focus on the middle to mass market and exports to Greeks of the diaspora. This sector, however, is more diffuse and there are some 300 wineries each with production of less than a million bottles a year making wines of ever-increasing quality - and cost. Boutari is the only company that does both wine and beer. The formal spirits trade is predominantly imports and is dominated by six companies, only one of which is Greek owned - all the others being subsidiaries or divisions of multinationals. In addition, though there is extensive bulk trade in domestically-produced ouzo, brandy and tsipouro, which is largely unorganised and difficult to monitor in terms of both production and consumption.

Wine's spirit raised

The wine industry, based as it is on local raw materials, remains in domestic hands. Output is small with total production comprising just 2.3 percent of total EU production and just 0.2 percent of its quality output.

Categories that don't innovate lose consumer attention and brands that don't innovate lose market share. Brands that innovate intelligently can gain consumers, add market share and grow their category while they are at it. The Greek wine sector is going through a slow process of transformation from bulk to bottled product.

The problem is that, to date, exports have been dominated by bulk wines - particularly retsina and imiglykos, resinated and semi-sweet white wine, resinated - that found their way initially into foreign markets through sales to Greeks of the diaspora. Most foreigners' sole knowledge of Greek wine is these peculiar products. International wine trade is dominated by products based on two French grape types - chardonnay and cabernet - that provided the basis respectively for the great French whites of Burgundy and reds of Bordeaux.

Greek vine cultivation, however, is virtually all by hand, which means that a Greek regional vin de pays costs some two to three times more than a NWW wine of comparable quality putting them in the same price bracket as appellation wines. This puts off many potential buyers. Greek wine producers thus face an uphill struggle in their expansion abroad. The top producers are optimistic. Subsidies under the Common Agricultural Policy have meant the introduction of new techniques in wineries that have produced improvements in quality and consistency. "A lot of people now are training as oenologists," says Anne Kokotos, marketing director of Domaine G Kokotos. "There are many consumers within Athens who have a lot more money to spend on good wines. Greek consumers, who could afford quality wines, 30 years ago didn't have a lot of confidence in Greek wines. Now they believe that Greek wines are good quality."

Restructuring and innovation

Across Europe, the economic stagnation of recent years has led to a reduction in disposable income and with it a change in the structure of the beverages market. Spirits have been losing market share to cheaper beer and beer to yet cheaper non-alcoholic products. The restructuring has been hastened in Greece as greedy retailers have jacked up prices on the back of the transition to the euro, ignoring the basic market principle that, if earnings flag, you sustain them by cutting prices and increasing volume not by boosting prices to a level that leads to a vicious circle of volume collapse.

This phenomenon has been coupled in recent years with a shift in Greek lifestyle. People are eating in more with a concomitant shift to off-trade sales of all alcoholic beverages. For example, the market research company Plato Data estimates home sales to have increased by an average of six percent across Europe during the past decade. In Greece, the shift has been more than double that at 13 percent.

How this plays out over the longer term remains to be seen but as a temporary trend it seems to be gathering pace. For the moment, the Greek concern with image and style means that if one buys drinks to offer to guests at home, instead of at a bar or a nightclub, they will compensate by purchasing premium brands. But the fluidity of the situation taken as a whole is a marketer's nightmare and constitutes another major factor fuelling the sector's constant pursuit of innovation.

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