A shot glass full of uncertainty

This article is available for reading in Trade magazin 2024/2-3

Unpredictable future

László Nagy, owner of Kunság-Szesz:

“The future of distilleries is unpredictable for the time being, and we are witnessing significant movements on the producer side. Rising fruit prices and a shortage of the necessary quantities are causing serious problems for pálinka makers. Our Mátyás pálinka is made from top quality fruits, so it is important to modernise production for higher efficiency”.

Flavour variations and traditions

Krisztina Páll, brand manager of Dunapro:

“The past two years have brought exciting challenges for Márkházi Pálinkafőzde. We haven’t seen a drop in demand for quality pálinka: despite the inflation crisis, we have realised steady growth in both volume and value. We have opened our second distillery in Pincehely in spring 2023”.

Handicapped market presence

Dávid Gábor Kovács explained that it is more expensive to make good pálinka than vodka, gin or white rum. In terms of added value and production costs, pálinka is like cognac and malt whisky brands, which are aged in barrels for many years, but the pálinka category’s recognition is decades or perhaps a century behind. László Nagy talked to us about the continuous development of their existing retail channels, and establishing closer cooperations to develop the direct sales network, getting in touch with HoReCa units too.

Krisztina Páll emphasised that Márkházi Pálinka is widely available in the market, in every region of Hungary. Bars and restaurants can buy their premium pálinkas from almost any wholesaler, but they can also purchase them directly from the company. János Szicsek told: the competitiveness of pálinka against other spirits is only realistic if the burden on producers is reduced, and this doesn’t depend on the size of the distillery. Distinguishing pálinka from other products is the best way to ensure its acceptance.

No place for the genie in the bottle

“Once again pálinka is facing several market challenges this year. Unfortunately, the fruit shortage is a problem this year too, with the average yield of some fruits falling significantly due to the extreme weather. Rising fruit prices have also increased the cost of making pálinka, which distillers have been unable and don’t want to pass on fully to consumers. Pálinka sales are also affected by the black market –the illegal selling of home-distilled pálinka. PNT is in close cooperation with the authorities to curb the black market, but the lack of inspection capacity make this task nearly impossible. Representatives of the sector are therefore facing a number of economic problems, about which they are in constant consultation with sectoral leaders and the authorities. Pálinka isn’t just a spirit, it is also a national treasure that should be protected and its producers should be defended from adverse economic effects. Pálinka, our No.1 Hungarian product is in a difficult situation. Consumers are unwilling to pay for the high costs of legal production because, on the one hand, there are cheap home-made variants available and, on the other hand, young people prefer other drinks – gin, whisky, vodka, etc. Foreign competition is also strong in the spirits category. What is more, the production of grain-based spirits is much cheaper than that of fruit-based spirits. The price positioning and image of pálinka is therefore the most important thing today”. //