How Greece's Debt Crisis Is Impacting Its Wine Industry

Greece contains some of the oldest wine-producing areas on the planet, with vineyards having been in some parts of the country for more than 4,000 years. As the European Union engages in protracted negotiations over the fate of Greek debt refinance and the status of Greece in the common currency union of the euro, changes have been felt at many levels of Greek society, and certainly in the wine industry. Greece is among the top 10 wine producers of the European Union, with over 300 indigenous varietals, and wine is one of Greece's top exports to the US.

But how has the financial crisis specifically played out for wine drinkers and wineries? It seems to have both isolated Greek wine drinkers on one hand, and conversely, brought them more in line with modern consumption trends on the other. Taking a short view, the state of Greek wine seems good. But as with so much else in Greece, there are some looming challenges that could bring catastrophic outcomes. Here's what's happening with Greek wine:

Graffiti in Athens.

Greeks Are Still Drinking Greek Wine

The isolationist mood of Greek wine drinkers is underscored by statistics mentioned recently by Konstantinos Lazarakis, a Greek Master of Wine and author of the definitive book The Wines of Greece. According to Lazarakis, imported wines make up only about two percent of current wine consumption inside Greece. That is to say, some 98 percent of the wine that Greeks drink in their own country is of Greek origin. This does not carry over as much into the spirits world, as restaurants stocking only Greek wines will also commonly carry global liquor brands on their shelves, such as Beefeater Gin, Bacardi Rum, and Johnnie Walker Scotch.

98 percent of the wine that Greeks drink in their own country is of Greek origin.

"Greeks are very enthusiastic embracing imported goods in our country, and this is true for practically everything but wine and food," says winemaker Yiannis Paraskevopoulos of Gaia Wines in Greece. "Greeks remain totally faithful — traditionalists, you may say — to the foodstuff that comes out of their own country. To the point that — even in the economically very obscure days that we are going through — they would be willing to pay more money for, let's say, a fresh grouper, if they know that that comes from the Aegean Sea and it's not imported... They would be willing to pay more in order to get that. They believe strongly in their own production, and they have been extremely faithful to all the Greek wines."

Taxes Favor Wine

The current excise taxes (inland taxes imposed upon the sale or manufacture of specific goods) levied in Greece have also favored consumption of wine over spirits, and local over imported. While wine has no associated excise tax, the excise taxes on spirits have more than doubled since austerity measures began to be introduced in 2010. Spirits produced in Greece, however, are taxed at half the rate of imported liquor. As beer is also subject to excise tax, wine is the only alcoholic beverage that is excise tax free. Significant escalation in liquor prices resulting from the higher excise taxes have brought on steep declines in liquor consumption, over 20 percent, and some customers who might once have chosen liquor have shifted to purchasing wine.

A shelf of Greek spirits in Athens.

Tourist Trade and Exports Are Holding... For Now

Greek wineries face different challenges depending on their size; some are content selling in the domestic market and to tourists, Greek tourism having remained strong. "We haven't seen a drop in domestic sales," says Stellios Boutaris of the Kir-Yianni Winery in northern Greece. Boutaris, who has a Kir-Yianni wine bar at the Athens airport, notes that "the tourism market has been doing quite well, and it looks like our sales to tourists are holding."

There has also been a renewed focus on exports. "We see a positive trend for Greek wines [in the United States]," says John Sellar, who represents one of America's key Greek wines portfolios as the president of Frederick Wildman. The American appetite for Greek wine is growing, and countries that have not in the past imported Greek wine may be more open to doing so. However, one of the natural advantages that most countries in economic distress have to offer to export markets — a devalued currency making their goods appear cheaper in other countries — is not available to Greece, as it uses the euro and cannot intentionally devalue the common currency.

New Habits Are Forming

Wine bars, previously near-unheard of in Greece, have been flourishing in recent years as many restaurants close their doors.

Gregoris Michailos, who buys wine for his family's Italian restaurant in Athens, serves Greek wines with an Italian menu, noting that imported Italian wines are mostly out of reach for Greek consumers. "Greek wine is cheaper," Michailos says, citing 20 euros per bottle as the typical cutoff point above which his customers will not go. "It is important that the wine be inexpensive." Michailos has also seen wine by the glass, wine on tap, and simple bulk wine served in carafes gain in consumer appeal while bottle sales decline.

Michailos has noticed the dining landscape of Athens change considerably since the beginning of the Greek financial downturn several years ago. In addition to the excise taxes charged to producers, value-added taxes (better known stateside as "sales tax") have also risen significantly, including a so-called "restaurant tax" on eating out. Within 12 months of this tax being raised to 23 percent in 2012, an estimated 4,000 restaurants in Greece closed their doors. "Celebrated restaurants with renowned chefs have opened and then soon closed," Michailos says. The tax on restaurant dining decreased the following year, but the damage was done. "Greeks like to go out to eat and drink, but now when I talk with the owners of other restaurants, they are excited if 19 people come in an evening," Michailos says. That is a good night. Sometimes they only get two or three customers to come in." A 2013 survey found that 93 percent of Greeks had reduced their frequency of eating out in restaurants.

"Greeks are a sociable people who like to go out, to dine outside, to visit with their friends outside," says George Athanas, who organizes winery tours on behalf of New Wines of Greece from a home base in Athens. But as Michailos indicated, wine by the glass consumption has skyrocketed in recent years as consumers trade in a full meal al fresco for a glass of wine at a wine bar with their friends, and wine bars, previously largely unheard of in Greece, have been flourishing in recent years. These venues, with names as direct about their intent as By the Glass, make it clear that food is not a requirement of service, and provide a spot for friends to meet without the expense of a meal.

The Greek wine industry has a combined annual output level that is 15th in the world.

There's also the issue of the younger demographic not spending as much as they might if economic circumstances were better. Younger Greeks have been especially hard hit by the fiscal realities in their country, and youth unemployment is estimated to be higher than 50 percent. Youth purchasing power is limited. "There are smart kids, well-educated, who speak three languages, but cannot find a job," points out Athanas. Dimos Tzanakos, who is 19 years old and works for a tour company based in Patras, Greece's third-largest urban area, says most of his friends do not have jobs. They use their time to go to school when in session, with university schooling mostly free of charge in Greece, or to go to the beach, where they might not drink anything at all. "My friends go to the beaches around 2 a.m. and stay there until the sun comes up," Tzanakos says. "If they need money they ask their parents for it."

He goes on to say that he doesn't know a single young person who works at a winery, since "those are mostly jobs you would get working for your family." The Greek wine industry, which has a combined annual output level that is 15th in the world, and one-third that of Germany's, largely consists of family-run wineries.

A wine barrel with a carving of Odysseus and wine grapes.

Real Problems

One of the large issues looming for Greek wineries, beyond the difficulty of sales, is the approaching harvest. Many wineries are having trouble sourcing the bottles they need from abroad and shipments of bottles can require significant lead time to purchase. With bank transfers out of the country recently on hold, many Greek wineries are wondering if they will have enough bottles for their wine. Winemaker Yiannis Paraskevopoulos of Gaia Wines notes that most bottle suppliers have stopped delivering, or are requesting to be paid in cash, up-front. This is especially challenging for Greek winemakers like him who make wine in regions, like Santorini, where harvest may be as early as August.

And to compound the issue, Paraskevopoulos and other Greek winery owners have asked their importers not to pay them on outstanding invoices for the time being, fearing that bank deposits might disappear, or be reduced, as happened in Cyprus in 2013. "It is certainly anything but business as usual," says Michael Skurnik, an American wine distributor who represents a substantial portfolio of Greek wines. Nor do the headaches end with bottles, as winemaker Panagiotis Papagiannopoulos of the Tetramythos Winery indicated. He explained that he may not be able to acquire French oak barrels this year, possibly necessitating adjustments in the aging of his wines.

Further adding to recent troubles is the fact that in many parts of Greece, the 2014 vintage was a difficult one. There were heavy rains and reduced yields in most of the country, and growers struggled with ripeness. Boutaris has decided that there will be no wine released from Kir-Yianni from 2014. The double hit of weather difficulties in 2014 and financial difficulties in 2015 may prove challenging for some smaller producers without significant resources to draw upon.

The Silver Lining: EU Subsidies

But however disconcerting the current situation may be for Greek wineries, many have also been past recipients of significant EU funding, with the price tag of winery construction being subsidized up to as much as half of the cost for several notable projects. Nor have the subsidies been limited to construction. Vineyard replanting, equipment purchase, and promotional activities are all eligible for EU financial support. "In the past decade there have been a lot of subsidies given out to the Greek wineries," says Boutaris of Kir-Yianni. "Right now, I have 11 active programs for my winery that are EU-subsidized. They include vine research and buying a new tractor. Without the EU, we are alone."