Hungary’s Largest Winery Looking to Balance Quality and Cost
With 15 million bottles sold annually on what is a 120-million bottle market, Varga Winery is currently the largest wine producer in Hungary. Besides making some smart investment decisions, the company says it owes much of its success to the use of high-level technology and marketing.
Founder Péter Varga (left) and his son Máté at their state-of-the-art winery.
Varga Winery has come a long way from a lower-segment mass producer to the country’s largest winery. Twenty-five years after its launch, Varga Winery aims to strengthen its premium wine selection while maintaining its market leading position in the market of mid-range wines.
Varga wines were long identified with lower-quality and mass-production. This comes from the fact that the family-owned business started out in the lower-segment and has been building up from there. Over the years, however, it has achieved quite an improvement in terms of quality which, to a large extent, is the result of high-level of technology. Another key to growth is quality offered at a favorable price.
“We continually improve quality by using the latest technology while trying to maintain a decent price,” Máté Varga, son of founder/owner Péter Varga told the Budapest Business Journal.
The use of state-of-the-art technology in large-scale production is something smaller wineries could also benefit from, says Péter Bakonyi, founder and owner of the Bakonyi Winery in Villány, if only they could afford them.
“All the technology used by large producers including filter systems, bottlers, containers, etc., allows for better and more automated quality assurance. Small wineries could also take advantage of these, but they hardly have the funds for such large scale investments,” he adds. This doesn’t mean that the wines produced with less technology are not on par with those of large-scale production, but they do require more attention and human interaction.
“The rate of investment per bottle, with which large producers can achieve roughly the same quality as we do, is far lower than that of small wineries,” Bakonyi says. Fortunately, when it comes to the wine market, versatility still matters, he adds. “Wines have to be unique and need some charm that justifies the existence of small-production wineries as well.”
Organic cultivation is another field where small wineries, including Bakonyi, stand out. “Among traditional wineries, going organic is quite commonplace. Large ones are not there yet,” Bakonyi says. For small cellars, this can be a path: being closer to nature and using methods that enhance the terroir aspects of the wine. This is in contrast with reductive wine production, but a growing number of large producers are starting to look at it.
Market presence also counts. Varga contributes a large extent of its success to marketing. “We were the first to run a TV commercial and have a strong presence on social media as well,” founder/owner Péter Varga says. He also recognized the importance of being on the shelves of hypermarkets and discount-chains early, important as this is the place most people would buy wine.
Though Varga winery says it is planning to increase the share of its premium wines from 500,000 bottles to roughly two-to-three million in the next five-to-ten years, it doesn’t want to do it at the expense of the mid-range wines to which it owes its market-leading position.
“We wish to keep it as this provides the basis of our income,” Máté Varga says. “In fact, this is what I find challenging: to be able to offer wine that earned a gold medal in Bordeaux at HUF 700-800,” he adds.
Traditional and Large Scale
Smack in the middle between the mall- and large-scale win producers sits Skizo, a winery in Badacsonytördemic (172 km southwest of Budapest, three-quarters of the way down the northern shore of Lake Balaton), whose owners have decided to produce wine both with traditional and large-scale industry methods (hence the name, Skizo).
“Originally, it was pure ideology which later turned out to be an economically sound choice as well,” founder and owner Balázs Sike told the BBJ. “At the time, there was a stark contrast between the proponents of both methods, each party claiming their wines to be superior to the other,” he adds. By now, this conflict has mellowed. Consumers have also become more aware of and apt to the differences of wines made in small or large-scale production.
Sike started off producing wine using large-scale technology due to his track record and ties to large-scale production wineries. Later, he added traditional wine production to the portfolio. “This is completely different from the other line,” he says. “Using little technology, we are able to produce really nice wine.”
Wines produced with large-scale technology provide the basis for the winery’s production. They come in large volumes and the selection is also wide. Wine variety in small-scale production is far more limited – in fact, it is the specified region that puts a limit on growth. The vines of such regions cannot be replaced with other varieties either. Thanks to their unique character, this vine doesn’t require that much technology – it is the quality of the vine defines the wine.
Varga: the Path to Number 1
Varga Winery Ltd. was founded in 1993 by Péter Varga. The winery cultivates 200 hectares of vineyards around the country: 125 ha in Badacsony, 20 ha at Balatonaliga and 55 in the Eger wine region. The sales revenue of the winery was HUF 4.6 billion in 2017, while the number of employees stood at 186. For more than a decade, Varga Winery has been the top seller of bottled wine in Hungary, shipping nearly 15 million in 2017. Its wines can be bought in almost all stores in Hungary.
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