Interview | Wednesday, 27 August 2008

How not to get drunk on wine

John Farrugia is not a new face in the scene. Among Malta’s hoteliers and restaurateurs, he is regarded as one of the budding big-time wine importers. Living up to his reputation, Farrugia explains why the wine business must be approached with a sober mind. By DAVID DARMANIN.

Up until four years ago, common households never dreamt of opening a bottle of foreign wine at table unless it’s Christmas. Back then, when the choice was scarce, the market minute and the prices obscene, discerning between a bottle of wine and another was not particularly important. Foreign wine was foreign wine and whatever the variety, vintage or producer, it was too expensive for one to afford drinking casually.
As a result, on the Catholic side of the Mediterranean, Malta became the least country capable of separating the wheat from the chaff in wines. Fortunately, things have been looking up since the staunchest Euro-sceptics caught themselves toasting for and on cheap Italian wine on E-day.
On the business side of things, post-accession, competing in wine importation had become a matter of cost leadership so consumers just went wild and emptied the shelves. Importers mushroomed as prices and profit margins plunged drastically. Sadly, the wine industry ran the danger of becoming a matter of “either get cheap or get lost”.
There’s still a lot of rubbish reaching our supermarket shelves nowadays, and a vast number of self-proclaimed wine enthusiasts still swear by it. But as luck would have it, the market evolved, and as some of the consumers learnt about the product, the market split, forming two distinct ends: the one concerned with supermarket wines and the one concerned with proper wine.
The supermarket wine market quickly took a life of its own and is by far still the more popular one nowadays. There’s less competition for higher-end wines however, and whatever is found on the wine lists at fine dining restaurants and five star hotels is predominantly supplied by the larger importers. Had it not been for the model adopted by a slim minority of wine importers, such as John Farrugia’s Bicanter, this end of the market would have been the exclusive territory of the more established, traditional wine importers.
“In our case, we managed to penetrate the market because we persisted, but there are also other factors,” he started. “The brands we represent enjoy the reputation needed to sell. Many of our prospective clients would know where our brands stand before their first purchase. We have tapped into a market where quality is extremely important.”
Rightly so, Farrugia explains that when sourcing for additions to their current range: “If a brand has no history or no reputation then we’re simply not interested. This is mainly due to the fact that an unknown winery may produce an excellent wine this year and a hopeless one next year. The more established and reputable wineries cannot afford steering away from consistency. Our range comprises the most premium wines of the regions we import from, and that gives us a sense of security.”
But couldn’t he be overestimating the knowledge of his buyers, seeing that the market is so extensive? What portion of consumers chooses wine on the basis of how it looks rather than on how it tastes?
“Of course, there are those people who go for a wine because of the way it’s branded and because of the way it’s presented, but then there are others who would trust their sommeliers or wine waiters and try out different types of wines based on a qualitative value. The market is evolving. While consumers are becoming more discerning, we are lucky to have very competent people working in the local catering trade. This is of course a very vast market and there’s still a lot more to be learnt. Few people know for example, that when you order a Chateauneuf-du-Pape, you are actually about to drink a Grenache, and many a consumer would very much prefer to stick to a name or a brand they know because it feels safer that way.”
Incidentally, Bicanter do not import Chateauneuf. This is how they push their Grenache:
“We don’t sell our wines to supermarkets, so rather than being directly interested in the consumer’s wine of choice, we cater for the needs and demands of the restaurant or wine bar owner. Our core competence lies in being able to offer better quality for the same price offered by our competitors,” he said.
It is known that major wine importers must foot major bills for transportation, payroll, administration and storage. Farrugia doesn’t, and this is exactly why he can compete with the big fish. The operation at Bicanter is practically home-based and the wine is stored in a small garage close by. All sales pass through Farrugia’s mobile phone while he’s out and about taking deliveries. He is now contemplating on employing a delivery person but still, his overheads are close to nil.
“Bicanter started six years ago. At the time we had come across an upcoming Sicilian brand, Cosumano, which had turned its business model from the exportation of must to actual wine production. After researching on this brand, we could see that it would be a big hit, so we approached them and started off by selling their wines,” he said. “At the time the market was completely different. There were still levies and competition was not as fierce as it is nowadays. What has helped us though, was that Cosumano happen to have an exceptional Nero d’Avola, at a time when this grape variety was very much in fashion in Malta.
“Two years later we decided to extend our range, so we started out with Casa Lapostolle from Chile, then with Dinastia Vivanco from Spain, and Quinta de la Rosa from Portugal. We now have other brands such as Villa Matilde, Masciarelli and more recently Castellari Bergaglio from Italy, D’Aremberg from Australia and Finca Sophenia from Argentina.”
Typically, larger wine importers would source extensively and end up representing tens of suppliers. But in such cases, stock availability runs the risk of becoming an issue. Confusion in the stores and lack of availability may turn ordering wines into a nightmare. Caterers often complain of getting the wrong orders, if not at times half of what is ordered. As a result, end-customers complain for not finding availability of the wine they ordered off an establishment’s wine list.
It may be because they’re small, but Farrugia would at times bend over backwards in order to take up urgent deliveries to restaurants needing his wine.
“We cannot afford losing a weekend. Perhaps others can,” he said. “Restaurant owners want to ensure that a source is reliable. They want to know that you can offer deliveries efficiently and that your stock is available. People purchasing for restaurants, perhaps because catering makes a good margin on wines, do not necessarily adopt an approach where price is king. They want to know you’re reliable, rather than necessarily being the cheapest.”
While Bicanter plans on growing, Farrugia has promised himself not to lose focus.
“One of our key elements is that we are focused on the market we want to target. We mainly deal with clients who order frequently and substantially, without stocking any of the high-volume, low-tier wines. When we approach new clients, business becomes interesting once they have four to five of our labels on their wine list. So far we have managed very well, and we have now laid plans to grow – both horizontally and vertically,” he said. “We are now working on bringing in more brands appealing to the market, One such recent development is the addition of a fantastic Gavi to our range. Gavi is one of the best selling white wines in Malta, and as much as it is not easy to find a good one, we could simply not afford to do without one in our range. We are also working on bringing in South African wines as we look into identifying wines from some more important regions of Italy and France. We are now also discussing ways of collaboration with a number of prospective resellers whom we had either approached at the wrong time or who are committed to other importers. What gives me confidence in growth is the fact that more people are demanding our wines. End customers are asking for them at restaurants, even if they don’t find them on the wine list. A particular restaurant for example, had approached me after a client of his asked for one of our wines. We now deliver eight different labels to this restaurant.
“We do not want to lose our personal touch. What I have in mind is to dedicate my time to development and sales and employ someone on deliveries. Deliveries take up a lot of time, especially now that we have major accounts – including top hotels and restaurants.”
Most hotels and restaurants are investing in sommeliers or qualified wine waiters nowadays, and this has given the market a totally different feel.
“There is still a huge market for the €3 bottle of wine from the supermarket, but I am seeing that when people go out to eat it’s completely different. Restaurant goers have become much more discerning nowadays, their palate can tell the quality food and wine from the rubbish.”
Since Malta’s entry into the EU, foreign wines not only became so much more affordable but information has now also become much simpler.
“On every bottle there’s €0.12 eco tax and for those wines not imported from the EU there’s also an excise duty €0.15 per bottle,” he said. “But even though we have now signed the Schengen agreement, one cannot just import wine to Malta intended for commercial use. You still need a permit.”
Alcoholic drinks are still subject to excise duty in accordance to law. In the case of wine, it carries a zero-rated excise duty, but this does not exonerate importers from needing to acquire the necessary permits and undergo certain checks.
“You still have to declare wine unless it’s intended for domestic use. Of course, there are people who abuse of the system,” he commented.
This summer’s gaffe aside, tourism has generally improved in Malta since last year. Local wines will obviously do better, but how does tourism affect the consumption of imported wines?
“Every time there is a stronger influx of tourists, our sales boost,” he said. “This is primarily because we represent brands that happen to be strong abroad. Casa Lapostolle and Quinta de la Rosa for example, are popular in the UK, whereas Cosumano and the other Italian brands we import are well known in Italy and among Italians. The more refined the tourist, the better our sales. It is true that tourists would often drink local wines while they’re here, but they don’t necessarily stick to it.”
Why not?
“As a country I think we can produce very good wines. I think we have the capability of doing so. Perhaps the toughest challenge local wines face is due to economies of scale. Production cost turns out to be inevitably high, making imported wine all the more competitive.”
What must also be said is that Farrugia has recently been involved in the setting up and running of Townhouse No. 5, the new wine bar in Rabat. This, as he explains, has helped him a great deal in identifying customer needs.
“Working in catering directly has given me a first hand experience of dealing with the end consumer. As a result, I started approaching market requirements better. Catering is also helping me gauge the importance of knowledge needed when reselling wine. Customers often want genuine recommendations, and this presents an excellent opportunity for those resellers willing to educate the market.”
Finally, Farrugia was asked whether at the end of the month, the model he uses at Bicanter makes enough money to pay off his bills.
“You can live off it,” he said. “Volumes are interesting and in general, yes, it is good money. But at the end of the day, it’s not all about money but also about people.”