Page 49 - bne Magazine Apri20

bne April 2020 Southeast Europe I 49
of vineyards. Bad news for Ukraine, which saw half of its wine grape supply disappear overnight, but better news for wine producers in neighbouring countries such as Moldova. Purcari sees the potential to grow its business in Ukraine as “very high”.
A vintage year
Purcari’s 2019 results, released in February, show that its Ebitda was
up 25% during the year, reaching RON68.2mn (€14mn), while revenues rose by 18% to RON199mn.
At the same time, the company projected its revenue would grow by another 16-20% year on year in 2020. Ebitda margin is predicted to remain robust at 30-32% this year (compared with 34% in 2019), while the net income margin
is estimated at 20-22% (22% in 2019).
“We continued to deliver on our ambitious growth plans and look forward to sustaining that momentum in 2020 too ... We have a number of exciting innovations in the pipeline and count [on seeing] the payback from them in the upcoming years,” said Victor Bostan, CEO, when the results were published.
Indeed, the company’s story has been
a compelling one for investors. The 2018 IPO was more than four times oversubscribed, despite coinciding with a period of turbulence on global markets.
Its former majority shareholder, private equity investor Horizon Capital, recently reinvested. The fund originally invested in Purcari back in 2010, as a 64% shareholder via its Emerging Europe Growth Fund II (EEGF II), but it completely divested its outstanding shares by October 2019, after reducing its participation in the February 2018 IPO, earning circa 3.3 times the investment made.
However, demonstrating its belief in Purcari’s growth story, Horizon recently returned as an investor in the company, spending $7mn on a 6.8% stake in January from its new fund, EEGF III.
“Horizon believed greatly in the company and wanted to return. They managed to acquire a new 6.8% stake in Purcari so they are now back as part
of the shareholder community,” says Comendant.
Purcari perfectly fits EEGF III’s investment thesis of backing export champions with highly competitive cost platforms, catering to global consumers, Horizon Capital said in its press release announcing the investment.
“We believe that Purcari has significant further upside potential, hence when the opportunity arose, we moved swiftly to seize it and are privileged to return
as shareholders in the company from our latest fund, EEGF III,” said Lenna Koszarny, founding partner and CEO of Horizon Capital.
A growing market
As it expands in Central Europe, Purcari is benefitting from changing tastes that have seen a shift away from beer and spirits and towards wine.
“Research we see shows that beer is on the decline in Central and Eastern Europe and wine is picking up, especially the mid to high segments in the wine industry. We do not play in the low-price segments in any of the markets because we believe this is not where the long-term return on investment should be looked for, but in the medium to the upper price segments, which are growing as a share of the total wine category,” according to Comendant. “Overall, things are looking good for the wine industry.”
Unsurprisingly, there are different tastes when it comes to wine among
the countries Purcari exports to, with, broadly speaking, a preference for easy to drink dry wines in Western Europe, while wine drinkers in Central and Eastern Europe prefer semi-sweet wines and appreciate an oaky flavour.
“Dry wines do not yet have a big share of the market in Central and Eastern Europe. However, the overall trend in pretty much all the markets where we are present is that dry wines are picking up. This is a good sign for us and for the industry, because dry wines are usually in the premium, higher price segments that provide better margins to the wine producers,” he says.
Past to future
The history of winemaking in Moldova dates back millennia, and winemaking is part not just of the economy but of household traditions; most Moldovan men pride themselves on their ability to make wine, and the small country is estimated to have the largest density of vineyards of any county worldwide.
Comendant talks of the terroir that makes it possible to produce “fantastic wines” – the soils, amount of sun, the angles of the slopes. In terms of latitude, the Bostovan winery is about level with the wineries of Burgundy. Back in 1878, Purcari wine won its first international gold medal when it was selected at
a blind testing in France; the judges though the wine was a Bordeaux.
Today Purcari Wineries comprises three wineries – its flagship Purcari, Bostavan in the south of Moldova and Crama Ceptura in Romania, as well as brandy producer Bardar. The group has around 1,200 hectares of vineyards in Moldova.
Climate change is clearly the big long- term issue facing any industry – like winemaking – that depends to a large degree on weather and climate. Current projections are that with no action global temperatures could rise by as much as 4.8C above pre-industrial levels by the end of the century; the optimistic forecast if current pledges are honoured is around 2.8C.
There are already worries about how this will affect Europe’s wine belt, which is expected to shift northwards, with some of the southerly areas no longer fit for grape-growing, while new areas will open up to the north.
Purcari has already observed changes in recent years. There have been no spring frosts – one of the four main risks for wine grapes alongside hail, drought and pathogens – in the last few years.
“We have to acknowledge that climate change is real,” says Comendant. However, he adds, “Moldova, being slightly on the north side of the wine producing belt will be even in a better position to produce good grapes for good wine as this belt moves upwards towards the [north] pole.”
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