Tuesday, August 15, 2006

The Tikves Transformation: from State-Owned Producer to Elite Winery

“If you want to know a nation well, sit at their table and drink their wine.” This is the motto of Tikves, the 60-year-old Macedonian winery that is becoming a sort of ambassador for the country’s emerging status as a wine producer par excellence.

Though most people wouldn’t know it, Tikves is the largest winery in all of Southeastern Europe. On average, it produces 35 million liters of wine annually, and has an on-site storage capacity of some 55,000 tons of wine. Now, a multi-million dollar investment in new fermentors, crushers and other equipment made in the last three years is generating enthusiasm about Tikves’ future. The winery is expanding its export markets, both in the region and further afield, and emphasizing its dramatic improvement in quality following the abandonment of the old Communist-era model of wine production. Indeed, the Tikves success story seems to bode well for little Macedonia’s chances for capitalizing on one of its major sources of future economic growth- agriculture.

As with so many other aspects of transition economics in former Communist countries, upgrading viniculture here hasn’t been easy. Aside from the need to reform managerial practices and introduce new technology and techniques, Tikves has had to placate farmers who in recent years have staged ever more vocal protests, claiming they are not being paid enough for their grapes, or, that the company is not taking enough of them.

The feeling that Tikves was supposed to be a sort of charity organization dates to Yugoslav times, and the old perception of what a state-owned winery was there for. “In the old days, the farmers just dumped all of their grapes, whether good or bad, on Tikves,” says Tikves’ Managing Coordinator, Giorgi Petrusev. “The company had to accept them.” Adds Chairman of the Board Svetozar Janevski, “the old mindset of the farmers was one of, ‘Tikves is here to take all our grapes and make us happy!’”

The former chief of Skopje Pivara (Skopje Brewery) that produces the famous Skopsko beer, and current partner in M6 Investments, Janevski acquired Tikves with the business conglomerate in 2003. They inherited a creaking company that was 10 million euros in debt, afflicted by old loans from the early 1990’s. In the last years of Yugoslavia, rapid and high inflation was all-pervasive and dramatically affected individual and corporate financial viability. Tikves too was afflicted. It was only last year that the new owners were able to pay off the company’s outstanding debt.

Simultaneously, the need to shift strategies to emphasize quality over quantity has also been undertaken. But it is this that has caused friction with the farmers. Macedonia has over 5,000 private grape producers, most concentrated in an arid stretch of vineyards located near the towns of Rosoman, Negotino and Kavadarci (Tikves is based in the last of the three), in fertile south-central Macedonia. While the farmers work with all of the small wineries now established in the country, Tikves’ legacy as the biggest has resulted in most of the complaints being leveled against them.

In the old days, farmers were paid for their grapes by weight; this led them to water the crops in the days before the harvest, making them bloated with water and thus heavier. However, the new focus is on sugar content. “Now we don’t accept anything with less than 18 brix sugar,” says Tikves Senior Oenologist Lazar Vlainkov. “And the quality difference compared to the old days- it can’t be compared.”

The 62 year-old has worked for Tikves for 40 years now. According to him, the fact that better quality grapes and higher sugar content naturally lead to better wine was no secret; “us oenologists knew this for a long time, but there was huge resistance from the farmers,” he says. Under the Yugoslav state-managed system, most Macedonian wine was shipped in bulk to Slovenia and passed off as ‘Slovenian’ or ‘Yugoslav.’ With no profit to be made under the collective system, there was little initiative for growers to change their practices.


The old and the new: Sleek new tanks stand beside art-deco Yugoslav-era open fermentation basins

But Tikves is now persuading farmers to grow better grapes in order to produce higher quality – and thus more lucrative – wines. This process goes hand in hand, of course, with the need to develop a specifically Macedonian brand image and to increase market visibility abroad, where the best chances for selling more expensive wines lie.

However, growing better grapes cannot be done overnight; according to the Tikves representatives, it takes 3-5 years to change over the fields from the existing grape to a new type. Thus, President Janevski contends, the difficult process has to be aided by the state, as the only body large enough to help alleviate the costs for farmers in transition. According to him, the government has to start recognizing that grape-growing is economically viable, and at the same time that it offers great opportunities for improving social conditions in the region, since it is a great potential provider of self-employment.. With the entrance of a new government onto the scene, he is confident that Tikves can “open a new page for relations between the winery and the government.”

In this regard, the policies and competence of the upcoming ministries of finance and agriculture - both much criticized during the previous government’s four-year reign - will be key. If the government takes an active role in developing agriculture through assisting farmers, there is a chance. If not, some 5,000 families who depend on private grape production for their livelihood will be affected.

The qualitative transformation has been steered most fundamentally through new technology. According to CEO Janevski, in the past 3 years Tikves has invested some $7.5 million in new equipment, including 16 new tanks, a new fermenter, a high and low-speed grape crusher, peristaltic pump, and more. The sleek Italian-made tanks have largely replaced the 60-year-old open fermentation basins, relics that look like a combination between concrete catacombs and military trenches. Although they had roofs, the old tanks were open on the sides, leaving the grape fermentation process, cracks Petrusev, “at the mercy of the gods.” Now, however, the fermenting process (which takes anywhere from 20-33 days) is done under controlled conditions. Management projects that the investment will pay off “in 3-4 years.”

Slowly but surely, the improvements in quality undertaken by Tikves have received acknowledgement from abroad. The company has appeared now at two wine shows in London, where “the people were pleasantly surprised by the quality of our wine, and the value for money,” says Janevski. Adds Petrusev, “we inspired 5 or 6 [British] wine agents to start looking east.”


For Lazar, Tikves’ chief oenologist, the wines produced with the old methods “can’t be compared” to today’s superior offerings.

Interest has also come from further east, however. In a rare proactive economic marketing venture, the Macedonian government took part in a Moscow wine fair in September 2004, and persuaded Kremlin tasters to try Tikves. “They liked three of them very much,” says Petrusev. “They were accepted by the Kremlin- we are now preparing the first shipment for delivery.”

The company is aware that success on the European and worldwide export market will depend on ever more proactive activities such as these examples, as well as marketing and brand-building. Aside from the former Yugoslav appellation that masked the provenance of the federation’s best wines, the post-independence name dispute with Greece and forced adoption of the clumsy ‘FYROM’ moniker has not helped. In wine, the country has a fierce opponent in the more economically powerful Greece, which has placed great emphasis on branding its own ‘Macedonian’ wines.

Given the geographical overlap of the historic region, and the similarity of soil and grapes, both countries have the right to label their wine ‘Macedonian.’ However, the branding battle is more important economically than politically perhaps. Greece knows this well, considering the great effort it undertook to (successfully) win the exclusive right from the European Union to market ‘feta’ cheese as an intrinsically Greek product.

But above all, “international success for the company and the country depends on being distinguished by good quality wine and local grape varietals,” says John Jonovski, an Australian-Macedonian consultant. “The new Tikves Chardonnay, vintage 2005, is far superior to anything similar you can find on the local market.”

Today, Tikves uses more than 30 varieties of grapes, allowing it to craft 24 different types of wine. The winery produces roughly equal amounts of white and red wines. The predominant white grape varietal is the celebrated Smederevka, and from the latter, the Kratosija. The Vranec and Temjanika are two other major grape varietals.


Tikves wines are presented in imaginative ways: here, for the Skopje Jazz Festival

According to Petrusev, Tikves is currently concentrating on the Bulgarian, Croatian and Serbian export markets. Among these, the highest quality wine is consumed by the more affluent Croats, while the largest growth by volume is predicted to be on the Serbian market; the country currently imports 40,000 tons of wine a year. While Greece, which has a strong wine industry of its own is also an importer, “it mostly imports cheaper bulk wine for package-tourist hotels” says Petrusev.

Indeed, the company that plans to almost double annual its sales of bottled wine by 2009 believes that it is possible for Tikves to restore its former leading position on the vital and large Serbian market. “The only thing preventing us is [the lack of] a modern distribution system,” says Petrusev. Within Macedonia, this is not a problem; using the vast network of Skopje Pivara, which has 85 percent market coverage in Macedonia for distribution, keeping Macedonian shops and hotels stocked with wine is not difficult. The challenge is to improve distribution abroad.

In the end, however, the main challenge is developing the brand image through aggressive marketing and creative, proactive promotion. Recognizing this, CEO Janevski notes, “we now have huge production, but not enough market. It will take at minimum 5-10 years to catch up.”

“And let’s not forget- wine is an international product. Tastes change, like fashions. So we must try to present Tikves as a fashion, as the taste for tomorrow.”


Tikves Managing Coordinator Petrusev shows off a special selection of wines at the tasting rooms in Kavadarci

Special Picks, from Wine Lover Jason Miko

Here, longtime Balkan resident, writer and budding wine connoisseur Jason Miko extols the virtues of his five favorite wines from Tikves’ Special Collection. (To learn more about Tikves’ entire special stock, visit their website).

2005 Chardonnay

Barrel Aged

This soon-to-be-released wine could well be a stealth hit that steals the hearts of many a California Chardonnay lover. Barrel aged in Slavonian oak for four months, (Slavonia, not to be confused with Slovenia, is the eastern part of Croatia and itself has a rich tapestry of history) this Chardonnay is distinguished by its smooth, velvety mouth. A full-bodied wine with hints of apricot and peach, this wine has a lingering and elegantly crisp finish, a delightful transparent golden yellow color and a splendid nose. Sublime!

2005 Temjanika

Special Selection

Temjanika is a quality dry white wine with striking emerald and yellow hues. It abounds in perfectly balanced muscat-flowery aromas, of which violet, rose and mandarin are the most distinct. It has a well-balanced and discreet body and a lingering finish. The International Sommelier Guild in its May 2001 newsletter ran a feature on Macedonian wines in which it specifically listed the temjanika grape, which is specific to the region, as one to watch in the next ten years for the Western market noting its “specific character and quality which is unique.” To say the least!


Visitors to Kavadarci get an enthusiastic welcome, as Tikves unveils its 2005 offerings- tipped to be their best yet

2005 T’ga za Jug

The Poetry of Wine

Best described as akin to a Barbera of the California kind, it has been a hit not only with the people of Macedonia, but also of the expatriate community inhabiting its geography, who take back more bottles than are allowed by the US Customs every time they return to the United States. With an intense ruby-red color, it carries an aroma of raspberry, strawberry, raisins and the subtlest of oak with the tiniest hint of sweetness. A hearty nose, light body and smooth finish round it off.

2005 Merlot

Barrel Aged

A delightful wine with a light nose, medium body and short finish that nevertheless has hints of several fruits. Dry, it has a wonderful ruby red color and hints of oak.

2005 Vranec

Barrel Aged

The Vranec grape, which is endemic to Macedonia and the region, is used in the T’ga za Jug but is a late harvest. The 2005 barrel aged Vranec is picked earlier in the season and has a medium nose, full body and smooth finish with a few spices, and several fruits including blackberries and currants.

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