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Situation Report of the VDP Prädikatsweingüter 2011

Small Vintage in 2010 • Great Challenges • Business was Good in 2011

Despite the small size of the 2010 vintage (ca. 30-50% less than the long-term average) and the marketing challenges this posed in the year that followed, the nearly 200 VDP member estates generally rate 2011 as quite a good year in terms of business.
Fortunately, VDP growers usually have sufficient cellar stocks of older vintages to cope when supply and demand are temporarily out of balance. Many estates do not release their wines immediately after bottling, but rather give them time to mature in the cellar. These reserves enable them to meet demand even when there is an exceptionally short crop as in 2010. “Our estates are financially sound, not least thanks to our commitment to sustainability and long-term planning,” says VDP president Steffen Christmann. “This helps account for our members’ ongoing positive business success in 2011.”
Nevertheless, VDP growers can attest that vintage 2010 was a challenging, labor-intensive year that separated the wheat from the chaff, and it didn’t make life easy in 2011. They can also confirm that the premium segment of their portfolios, the wines from ERSTE LAGEN* (top sites), continue to function as a driving force and post above-average profits. And this, not only in Germany, but above all, in foreign markets. Thanks to the successful performance of VDP ERSTE LAGE wines abroad, export figures in the German premium wine category as a whole have remained stable. “It required great efforts on the part of this small minority of growers, but with their creativity, they brilliantly succeeded in supplying the market with sufficient quantities of top-quality wines”, according to Christmann. Positive media mentions t home and abroad impressively testify to the high quality of VDP growers’ 2010 wines.

VDP Sales Overview
Although VDP members reported a slight decline in sales in 2011 (ca. 32 million bottles @ 0.75 liter), attributed primarily to the small size of the 2010 vintage, sales remained relatively stable and in line with the German wine branch as a whole. Nevertheless, VDP estates were able to maintain an average price per bottle of €9,50. The bottle price for a GROSSES GEWÄCHS as of vintage 2010 increased between four and ten percent to an average of ca. €27,50. Considering that members have been conservative with regard to pricing in recent years, fully realizing that great price hikes would meet with considerable opposition, the current increase is moderate and more or less on a par with the current rate of inflation. In 2011, total sales of VDP estates equaled ca. 270 million Euros. Taking into account that the crop was 30-50% short, earnings were down only some 7% compared with the year before. GROSSE GEWÄCHSE accounted for some 2.5% of total production in 2011, with a sales share of about 9%.
In order to maintain a healthy market presence and ensure customer satisfaction, diverse ways and means were used to deal with the issue of supply and demand: concluding agreements on quantities; filling orders with older vintages; implementing strict allocation by target group; delaying market launch; and putting active customer acquisition on hold. The trade also helped by stepping up depletions of existing stocks so that there was no shortage of top-quality wines available. For wines in the basic category, shortfalls from regular contract suppliers were alleviated by selective purchases of additional grapes from other sources.

Domestic Market
Compared with recent years, domestic sales of VDP wines remained stable in 2011. Some 80% of VDP wines are still sold in Germany. About 50% of all VDP wine is sold directly to consumers by producers – consumer buying trends clearly show that this distribution channel continues to be quite popular. Some 30% of VDP wines are sold via the specialty trade (wine shops), where competent, professional advice remains important, and in the eyes of wine enthusiasts, seems to go hand in hand with quality in wine. The hospitality industry, including restaurateurs and hoteliers, accounts for about 20% of VDP sales in Germany. In all, the popularity of VDP wines in the domestic market continues to grow.

Foreign Markets
Export volume in 2011 remained nearly the same compared with the year before and at this time, exports account for 20% of sales. The importance of specific markets varies considerably from estate to estate, but the general outlook in the USA is fairly positive – not only for VDP estates, but for the German wine industry as a whole, as corroborated by export figures published by the German Wine Institute/Mainz. On the other hand, German wine exports to the UK have been in decline since 2007. However, this has been offset by growth in high-caliber niche markets, such as Switzerland, Russia, Canada, Italy, Spain, and Japan, which offer VDP growers exciting possibilities. These are not high-volume markets. Their potential lies in their demand for high-priced “terroir” wines. Not only the VDP has benefited from this trend: its pioneering efforts to establish Germany as a unique wine-growing country with outstanding vineyard sites have improved sales opportunities for all high-quality, high-class wines of Germany. Emerging markets, such as Scandinavia, Hong Kong, and China, are particularly promising for high-priced ERSTE LAGE* wines from top sites. The specialty trade is the most important sales channel in export markets.

Outlook 2012
For VDP growers, the 2011 harvest fulfilled all expectations for a good vintage. Wines of a very special quality are maturing in their cellars. In addition to their excellent quality, initial assessments point to firm wines with moderate acidity and pronounced mineral tones. First samples of the young wines already confirm that they are developing harmoniously. VDP growers are extremely pleased not only with the quality, but also the volume of the new vintage. Yields averaged ca. 50 hl/ha. In regions and vineyards that were spared from storms and frost, the overall size of this year’s crop was about 80% of the long-term average – considerably more than in 2010. Steffen Christmann sums up his positive outlook for 2012 as follows: “In 2011, the prerequisites for a very good vintage were in place, and now we’re slowly realizing what treasures we have in our cellars. Based on current estimates, this vintage even has the potential to join the ranks of its legendary predecessors, 1811 and 1911. In addition, we’re very pleased that we won’t need allocations to meet customer demand in 2012. This will enable us to stabilize the operating efficiency of our estates.”

VDP – GENERAL SALES OVERVIEW in 2011 (Updated: February 2012)
(Figures are projected, not absolute.)

TOTAL SALES in 2011 (0.75-liter bottles): ca. 32,000,000
VDP membership: 196 estates (as of 01.01.2012)

Collective holdings: 4,900 ha (12,100 acres)
Average yield: 53.0 hl/ha (vintage 2011)
                       41.5 hl/ha (vintage 2010)  

SALES MARKETS (on average)

Domestic: 80% (2004: 86%)   
Export: 20% (2004: 14%) 
(Export share ranges from 0-80%;   
Mosel growers are particularly export-oriented.)

SALES VOLUME IN EUROS
Total: ca. 270 million Euros
Per estate: ca. 1.38 million Euros

EXPORT TRENDS  
Average bottle price of Grosses Gewächs: 27,50 €

PRICE LEVEL DOMESTIC MARKET   
Emerging markets, e.g., China, Canada, Russia,   
Japan, Switzerland, are increasing in importance.
Ongoing positive results in Scandinavian markets,
USA, Netherlands.

 

VDP PRESSESTELLE
Weinlagergebäude am Zollhafen - Taunusstraße 61
55120 Mainz
+49 (0)6131-94565-18
t.leschinsky@vdp.de
http://www.vdp.de