„Regulations grow at the same rate as weeds”*

„Regulations grow at the same rate as weeds”*

2023. 04. 25.

Cry for stricter rules and regulatory efforts are enjoying a peak season nowadays. In other words the domestic wine sector needs to be better supported by the local legislation.More precisely: more protective actions should be taken against the perceived or real non-historical or non-traditional endeavors that have no conventional value. Also, creating a kind of online 'killer applications' for the given regions, that may help to solve the sales problems. What does it mean in the real world?We see there is a season for the different product pyramids, for listings of permitted and prohibited varieties based on certain principles, for the different product descriptions, etc. A common element of these regulatory efforts is that, as if the market's demand and expectations were less important, the consumption habits and trends would moderately reach the stimulus threshold of decision and strategy makers. At this stage I think, it is worth to remember a few examples to illustrate the results of ‘out-of-the-box thinking’ and rewriting of existing rules in case of different countries in the recent decades.Examples that somewhat mirror the market and quality expectations and help us to decide whether the changes in the regulatory environment can actually create competitiveness or is able to put a variety or even a region into the international map?

In 1985, as a result of the well-known 'glycol scandal', the country's wine exports practically disappeared and the sector suffered a significant loss of prestige in the domestic market as well.The market participants, the so-called stake holders in the sector (all of them!) decided an immediate and radical change of the strategy and started to work on the consistent implementation of it.The result?Within 6-7 years, i.e. by the beginning of the 90s!!!!not only did they regain the lost market positions in absolute terms, but its composition also became healthier: instead of the previously dominant bulk sales, bottled exports became dominant.Today, the bottles sealed with the red-white-red national caps are present in the most prestigious restaurants, wine bars and wine shops all over the world.

The small but instructive and interesting part of the story is that the first DAC region (Traisental) was only created in 2007, 22 years after!! the ominous event, well after achieving the international recognition.

In 1976, quality winemaking was already in full swing in California, and at best, quite a few people in the old continent knew about it.At that time, however, a certain Steven Spurrier organized a blind tasting 'summit', where French and American reds participated and where French wines were ‘weighed, measured and found wanting’, as they say.The event was later named Paris Judgment, recalling some historical parallels.

Another part of the story here is that Napa Valley only received AVA, i.e. the protected origin status in 1981, 6 years after!! this breakthrough event.

Perhaps the world's biggest success story in the wine sector. I would not go here into the details of the success factors - although there would be something to learn - it is enough to mention that both the production areas and the output have increased more than 6 times! in 25 years, and exports have increased by about 25 times!, without negatively influencing the export price level, the country does not sell at dumping prices.New Zealand is almost synonymous with quality and immaculate cleanliness.

From the regulatory point of view, the regional control (both at country and regional level) prevails, also gives ample room for experimentation.The primary arena of 'quality control' is the individual (i.e. the individual behavior, mentality and thinking) and the place of production.And one more thing (just to shade the picture): in terms of the size of New Zealand and Austria's vineyard area and the volume of production, it is roughly equivalent to Hungary.

In Italy, namely in Tuscany, the regulations were fairly rigid.The good old Italian authorities did not take kindly to the appearance of the so-called Super Tuscans in the late 60s, early 70s.The wines could only be launched to the market as table wine (Vino Tavola) without any DOC/IGT name on the label.All this did not bother only two market participants: the producers and the consumers.Despite the regulatory declassification, the Super Tuscans were among the most sought-after and most expensive wines.

In the end, the authorities, having egg on their face, modified the rules: in 1994 and 2013, they granted the status of protected origin.

From a marketing point of view, a differentiation strategy (partly or strongly) based on the PDO/PGI scheme can be useful, but at the same time, according to the 'normal course of things', the establishment of the market presence, reputation and gaining market recognition are the first priority. I'm not saying that the market isn't wrong sometimes and there are not ’interesting’, fashion-driven and even questionable quality oriented trends in the world, but focused quality creation usually makes its way.Borrowing and adapting the quote of an American senator: regulation needs to catch up with product development and creative freedom.**

Then at some point I will also write a few lines about the relationship between pálinka and protection of origin.

*quote: Norman Ralph Augustine

**original: Henry Paulson