Local winery goes from strength to strength

29 August 2015
Local winery goes from strength to strength
Aythaya Winery in Shan State is located 25 kilometres away from the tourist hot spot of Inle Lake and is a 15 minute drive to the bustling state capital of Taunggyi. Photo: Jessica Mudditt

Hans-Eduard Leiendecker’s interest in producing wine dates back to his childhood, as his parents owned a small winery in western Germany.
“I grew up not with milk, but with wine,” he told Mizzima Weekly with a laugh.
Mr Leiendecker went on to study at one of the world’s oldest wine schools, Geisenheim University, before spending 16 years at one of Germany’s most highly respected wineries and won four awards for excellence.
However when Mr Leiendecker saw an advertisement in a magazine to become the director of technical operations at Myanmar’s first winery in 2006, he leapt at the chance to take on a new challenge.
Aythaya was founded in 1998 by a German winemaker called Bert Mosbach, whose persistence at winemaking in Myanmar eventually paid off. He first started doing business in Myanmar in 1989, but turned to vines after his basmati rice farm was confiscated by a government minister. Following trials on no less than 10,000 vines that had been imported from France, Myanmar 1st Vineyard Estate made its debut with its Aythaya label in 2004.
Aythaya Winery in Shan State is located 25 kilometres away from the tourist hot spot of Inle Lake and is a 15 minute drive to the bustling state capital of Taunggyi. With an elevation of 1,200 metres, the temperatures are refreshingly cool and the scenery nothing short of spectacular.
The number of visitors arriving at the winery, which also has a restaurant and three state-of-the-art bungalows at Monte Divino Lodge, has been doubling year on year – with as many as 300 people passing through each day during the peak of the tourist season.
According to his Kalaw-born wife, Naw Ei Ei Brown, who is Aythaya’s Restaurant Administration Manager, in the last financial year the winery received 23,000 visitors, which was up from 11,000 in the 2013-14 financial year.
The restaurant area is expanding and a café is in the process of being built. A second bar will open in September.
Aythaya has several things going for it. It is one of only two wineries in Myanmar and imported wine has been a rarity since a government crack-down two years ago that led to supermarket shelves being emptied and the stocks of distributors confiscated. Although the green light was given to import wine at the beginning of this year, it is clear that most retailers remain hesitant to do so.
However the fact that Aythaya has a near monopoly on wine consumption at present in Myanmar “doesn’t matter,” says Mr Leiendecker.
“Let’s take a look at wine consumption around the world. In Germany, it’s 30 bottles per head a year. In France it is 70 and in Italy it’s 90 bottles. You know how much it is in Myanmar? A tenth of a glass. Even if that figure were to rise to a full glass, it would still be nothing. The opportunity here is huge,” he said.
Mr Leiendecker added that due to the higher current tax regime of 50 percent commercial tax plus 30 percent in import duties, the cheapest imported wines would be priced at around $12. In the past, wine bottle prices were as low as $6.
“Imported bottles of wine priced at $12 wouldn’t really affect our sales, as we’re on a par with that. And there’s room for everyone. Wine is steadily becoming a part of the lifestyle of wealthy Myanmar people,” he said.
However taxation policies on local wines continue to be a source of frustration, as Myanmar is unusual in that it doesn’t tax progressively according to alcohol content. Wine is taxed at 50 percent while whiskey is 60 percent.
“Wine shouldn’t be taxed as a spirit. Wine in Germany has zero percent tax, as does beer. In German supermarkets you can get a drinkable wine for three Euros. Anyhow, we just push on regardless,” he said.
Mr Leiendecker also said that the company’s accounts are checked especially rigorously due to the company being 100 percent foreign owned.
“Our books are checked every three months. As we have to import raw materials, when a container arrives [customs officials] unload it and count the bottles so that they know exactly how many we have and aren’t smuggling anything in. This year we were given an award for being the 46th highest tax payer in Myanmar. We’re very proud,” he said with a laugh.
In his native Germany, some 25,000 wineries are operating, whereas in Myanmar there is only two that produce traditional wines made from grapes – the handful of others have taken a more experimental route by opting for the likes of damson wine.
In fact Aythaya is unable to fulfill the demand for its wine in Myanmar’s market: Mr Leiendecker said that Aythaya needs more than the existing 28 contract farmers to help increase their own supplies generated from the 35 acres of land that is leased from the Ministry of Industry.
Contract farming is preferable due to soaring land prices and the fact that the company is 100 percent foreign owned.
“It would be very expensive to buy a large plot of land and investment in a business like ours takes eight to ten years to get a return, so it would be hard to get a local investor onboard. Therefore we use contract farmers who are already growing table grapes. We send our plants to the farms for grafting and they then graft it onto an existing plant. This means that it usually takes three years for a new farm to be able to supply us: the future is in contract farming,” Mr Leiendecker explained.
However making wine in Myanmar isn’t cheap: Mr Leiendecker said that costs are around double that of traditional wine growing countries.
“Following a harvest in September, winter arrives in Europe and the leaves fall off the plants, which means that from November until April there’s nothing to do. Yet here we have 11 months of growth and only one harvest. Plants in Europe only need to be sprayed eight times to protect them against fungi. In Myanmar it’s a minimum of 25 times and all the chemicals are imported, so it’s expensive.”
An import license is required for everything from the equipment to the cork and paper labels, and for every licence a fee of $800 is incurred, regardless of the quantity.
And during Myanmar’s rainy season, grass grows at a staggering rate: “It’s about a foot per week, so we employ 15 people just to cut it.”
Moreover, yields in Myanmar are 50 percent lower than in Europe due to differences in the length and intensity of sunlight hours.
For the third year in a row, Aythaya has been experimenting with a second harvest of two wine varieties in order to lower overall production costs.
“It looks promising at this stage, but we’ll have to wait and see,” he said.
Revenue is boosted through the company’s South African Monte Vino wines, which are priced at 30 percent lower than Aythaya’s local wines.
Despite the many and varied challenges inherent in producing wine in Myanmar, the entrepreneurial spirit of Aythaya’s owners appears indefatigable. Plans are in the offing to open a high end resort on the property that comprises a total of 35 acres, with only 18 being used as a vineyard.
Three stunning bungalows already cater for guests at Aythaya’s Monte Divino Lodge, and Mr Leiendecker said that talks with several potential resort operators are underway.
“The number of bungalows will depend on the outcome with investors. We are in discussions with four or five parties, including Accor, Shangri-La and Novotel. Each is interested but we will work with the party that’s the best fit,” he said.
He added that the outcome of the negotiations will be determined after the general election on November 8 – after which time he believes things could move very quickly.
He expressed doubt as to whether the project could be of the five-star variety, as service standards in Myanmar remain challenging. However he said that achieving four star standards is both possible and necessary, as a number of high end accommodation options have recently opened in nearby Inle Lake.
Mr Leiendecker is confident the resort will be popular with both expats and wealthy locals, the latter of whom already flee from Yangon’s monsoons to the more temperate climate of Taunggyi and make up 80 percent of the winery’s clientele.
“A very interesting future lies ahead,” he said.