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The Finnish Monopoly

The job of an Export Director takes you to all corners of the world. Many are exciting cities where you are guaranteed to have a blast. Hong Kong, Singapore, London, Paris, New York, well, you try and get your work done in-between the riotous good times. Unfortunately, Helsinki was not on the list of my favorite destinations.

Cold, grey, depressed, and in serious need of modernization. It didn’t seem like much progress had been made since World War 2. Perhaps it was because I always seemed to go in the depths of winter when the place resembled scenes out of a Jason Bourne movie shot in neighboring Russia.

The best part of Finland was the Finns themselves. They seemed very keen on washing down Crus Classes with a few shots of vodka and some raucous laughter in a dimly lit tavern with a blizzard blanketing the city outside.

To penetrate the market we held a tasting of some very fine wines at the smartest hotel in Helsinki, which was anything but fancy. We invited the media, as usual, and some of the key restaurant buyers. But frankly the whole event was put on to attract the one person that counted; the Buyer for the state-run Monopoly called the Alko.

Just like in Sweden and Norway, and almost all of Canada, the government runs the alcohol business in Finland. It is the opposite of a free market. And just to be clear, I’m totally against it, despite having many friends who work for various Monopolies. Friendship has nothing to do with it.

To explain why in a paragraph is like trying to explain why I believe capitalism is better than communism in a few words. Good thing there’s space to elaborate when we get to those other countries. But here’s one key reason strictly from the perspective of a winery: If the Monopoly Buyer does not purchase your product then you basically have no other options, and so you’re out of the market. And hat’s just wrong because one person should not decide your fate. There is too much power in the hands of one single Buyer for your country or region’s wines.

In other markets a winery can go and speak to alternative importers if his products are rejected by the most desirable company. You can shop around different companies, and potentially you can have multiple importers selling different lines of your portfolio. Some may focus on retail, others on restaurants, maybe you have a mail order company in there, maybe a bulk wine buyer too, or you can break a country up by region and give exclusivity in geographical areas. In the UK we had at least 20 different importers.

But in Finland, if the Alko Buyer didn’t like your wines, or you, then ciao baby. Try your luck in Sweden. Fortunately for me a young, wine knowledgeable MBA chap strode in and introduced himself with an Alko business card. Kate Moss had arrived. Everybody else instantly became a second class citizen. We discussed, tasted, and when he took a liking to one of our wines I went for the jugular and pointed to the chateau on the label, and told him that the top left window was my bedroom. How could he say no?

The bonus of the Monopoly is that once you manage to get listed the volumes can be very large, and you tend to stay listed for a long time, provided you make the sales quota. So effectively it can be a very short 1 day trip to the market. See your agent, go together and see the Alko Buyer, have dinner, a few shots of vodka and then warm up in the sauna before getting outta there first thing in the morning.

Corruption in Sweden

It’s a short flight from Helsinki to Stockholm. You’ve barely shaken off the aftermath of the fiesta with the Finns before you have to do it all over again with the Swedes. There is little glamour in Export Sales. It’s more like being on an episode of Survivor for 4-6 months a year.

But Stockholm has a certain charm. Beautiful architecture, more vibrant and modern, and the people are much “cooler” than the Finns. There are the stereotypical guys with long blond hair, just like in ABBA, and the girls look like movie stars. Add to that their beautiful melodic language, a penchant for a glass of wine or two, and maybe a shot of vodka in an ice bar and well, there are worse places to visit than Sweden.

The market is the largest of the 3 Scandinavian countries, compared to Finland and Norway. Vodka is a staple. It’s no coincidence that “Absolute” is made in the country and yes, our dear Viking friends have a bit of a reputation for binge drinking.

The wine market has some peculiarities. One of them is that the consumption of bag-in-box is off the charts. It is an unusually high percentage of sales and this is partly because Swedes love to go off to the hundreds of little islands at the weekends and bag-in-box is more convenient to travel with. They also say that bag-in-box sales are high because people are very conscious of the environment.

Like in Finland and Norway the alcohol business is controlled by the government, through the company called the Systembolaget. So it is another Monopoly. Now, one of the key statutes of these state-run Monopolies is that they claim to be fair to all suppliers, totally impartial and independent. Everyone gets a fair crack at the business. And as part of this there are strict rules and regulations governing the behavior of the Buyers, both at the head-office and also at the store level. It is strictly prohibited for them to show favoritism to certain suppliers, and they are certainly not allowed to accept inducements like a free trip to visit a particular winery or concert tickets. Monetary bribes? Unthinkable.

That’s the theory. But the reality can be very different. When I was a sales rep in Ontario my agency spent all day piecing off store managers with golf games, long lunches, branded clothing, and even teddy bears for the kids. Bottles of wine were routinely deposited into the trunk of cars, and keys returned to the store manager. I dare not say right now what happened at the head office level, but some high profile Buyers have certainly been terminated over the years.

You see it is a false expectation to believe that a Buyer won’t show favoritism to a certain supplier, and it can be a very grey area around some of the inducements. Let me try and dream up an example… A major supplier puts on a lavish 3 day “education” conference in, shall we say, California. Key media and major restaurant Buyers are invited, and so are the Buyers for the Monopoly. It’s education after all, and so this should have a benefit to the Buyers ability to select the right products for his customers. But, in my mind, where it comes off the rails is when the winery hosting the conference only focuses on theirown wines (quite naturally) pays for the airline tickets, a nice hotel, hot air balloon rides and other lavish entertainment in their attempt to “buy” the Buyer. Mmmmmm.

Back to Sweden. Wikipedia says, and I presume it is true:

The corruption scandal first gained widespread media attention in the autumn of 2003, with Systembolaget issuing its first press release regarding the preliminary investigations on 7 November 2003.[8] On 11 February 2005, 77 managers of Systembolaget stores were charged with receiving bribes from suppliers, and one of the largest trials in modern Swedish history followed. 18 managers were found guilty on December 19, and then on February 23 another 15 managers were found guilty.[9][10]

How’s that for some juicy reading darling?!

My trips to Sweden were great, and my own Bordeaux company would never do more than take a Buyer for dinner, partly because we didn’t have the budgets for anything more, and also because my boss had some strong ethical feelings about bribery and inducements. It was not a noble way of doing business, and his was a noble family. I’m glad that this was the case as it made my life much easier.

Sell the dregs to the Germans

I’d already been given responsibility for exports to the English speaking countries in Europe. But then one day at the office in Bordeaux the owner decided I could have the Germans too. It wasn’t like it was considered to be a promotion or anything. More like a punishment, just for being British. So starting at the end of the 90’s we added Germany to the list.

You always seemed to arrive at Frankfurt airport at 7 am. Painful. I feel obliged to sample the wines during the flight. It was part of my job to sell to airlines and we had a few clients in Hong Kong and Japan. But that stuff from the Pays D’Oc can sting, and makes for a rough start.

What always strikes me about Germany is just how many people are sitting in the airport bars drinking beer at this ungodly hour. I feel like going up and saying something to them. But any guy who wears bright red pants, a scarf, guzzles beer and reads financial newspapers at 7 am isn’t to be messed with.

Some mock the Germans. True, yet again they rule Europe and so they have a tendency to boss everyone else around. But who can blame them for getting sick and tired of bailing out the Greeks? Personally I love their military efficiency, that Lufthansa won’t cancel your flight, and your taxi will be a big fat Merc.

The wine market is HUGE. Massive. By far one of the most important in the world, and certainly in Europe. On the production side there is an oceanload of white. And just to be clear, German Riesling is by far and away the best Riesling in the world, at the top level. Sorry, no debate. OK OK the top wines from Alsace are outstanding too… There is a strong trend towards making Trocken, or dry styles of Riesling, which the Germans themselves prefer now. So the landscape is changing. But a fine Spatlese Mosel or Rheingau, with just 8-9% alcohol, is still one of the greatest wines in the world, especially with a decade of age on it.

But then there is all the locally made Sylvaner, Pinot Gris, Muller Thurgau, and other stuff. Plus all of the sparkling, or Sekt as it is known. And now what the Germans love is their red wines, the Pinot Noirs, especially from Baden and the Ahr. These can be spectacular and some of them shame Burgundy. So the Germans naturally drink a lot of the wines they make themselves.

But bless their hearts, they also love New World wines and they have always been serious consumers of French, Italian and Spanish wines too. They tend to be quite thrifty and so most of what we sold was in the low to mid price range. It wasn’t like Hong Kong where it was crus classes or nothing.

So to make the transition I went to see our clients with my boss, and there’s no faster way to do that than by going to Dusseldorf to the most important wine trade fair after Vinexpo in Bordeaux. It was time for Prowein in Germany. The dreaded trade fair.

My boss had been visiting our clients in Germany for decades and so he had a feel for the place. He spoke German, and gradually he had learnt our client’s taste preferences. This is one of the most important skills in selling wine, because you have to choose samples that will appeal to each particular client. As a negociant we had a range of over 100 labels so there was choices to be made for each market.

But the first time I saw the list of samples we were taking to Prowein I was shocked. It was all the wines I hated. Thin, lean, austere, astringent, light in color, and acidic. I told my boss we’d never sell a bottle.

“Mais non, non, Monsieur James, our dear friends in Germany will love these wines,” he told me.

And what I learnt was that it was a very different selection we showed when selling to the Germans compared to, for example, the Americans. Different nationalities have different taste preferences and major wineries like Gallo and Beringer actually tailor certain wines to certain markets – eg they’ll make the White Zin sweeter or drier depending.

And so we welcomed our clients on our stand and tasted them on the selected range. And when Fritz ordered 500 cases of some dreadful petit chateau my boss could barely contain his amusement. To a Frenchman in Germany, well, it was justice. Vive La Resistance!