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Andrea Davaz, Innovation breeds success
ECHO-INTERVIEW, APRIL 2015

Innovation breeds success

ELIPSLIFE ECHO - INTERVIEWS WITH PROMINENT BUSINESS LEADERS

Innovation breeds success

echo-interview with Andrea Davaz, owner and manager of the winery, Davaz in Fläsch Graubünden

elipsLife echo: Mr Davaz, you are one of Switzerland's renowned winegrowers. Your wines regularly collect awards at the Grand Prix du Vin Suisse. What does a winegrower from your region need to be successful?

Andrea Davaz: There are many factors in play. You need solid vocational training, a lot of experience and above all else, a passion for the work. And it goes without saying that the climate and terroir are crucial as well. We're very lucky in our Bündener Herrschaft growing region, since it enjoys the warmest climate in German-speaking Switzerland. Conditions are perfect for the vines, and they have been for centuries. In fact, grapes have been cultivated around here for more than a thousand years. I would say that success is down to the interplay between human beings and nature. You just need to guard against greed and the urge for success in the short term. Thinking in the long-term is the only way to go.

The world is still producing too much wine. But despite this development, wines from your region continued to sell out quickly. Is this still the case?

Fortunately for us, it is. But you do need to take the sheer size differences into account here. Our region only stretches over 440 hectares. This compares to 5,500 hectares in the Valais region. And don't forget, the wine growing regions in Switzerland as a whole only cover 15,000 hectares. These numbers are drops in the ocean compared to the major wine-growing countries of France, Spain and Italy, each of whom has over one billion hectares of vineyards. We in the Bündener Herrschaft are niche producers within one region. Our advantage is that Switzerland is a very consumer-friendly country, something which is also reflected in high per capita wine consumption.

That said, Swiss growers as a whole are only responsible for about one-third of the total wine drunk in the country. Of overall domestic output, we in the Bündner Herrschaft only account for around three percent. And if you take the country's overall consumption of wine into account, Graubünden's contribution is even more modest, at a mere one percent. In other words, only one in a hundred bottles of wine enjoyed in Switzerland comes from our vineyards.

ECHO-INTERVIEW, APRIL 2015

Are Davaz wines also sold abroad?

The volume involved is insignificant, but I should point out that our winery quite deliberately does not pursue an export strategy. We do, however, have a vineyard in Tuscany where more than ninety percent of the product is for export. So I do know about selling wine abroad. But I should point out, to be honest with you, that as long as demand outstrips supply here in Switzerland, we don't need to worry too much about exports.

Have the Bündner Herrschaft vineyards expanded or shrunk in recent years?

Since the turn of the millennium, the land under cultivation for growing wine has increased by roughly 50 hectares. About thirty years ago now, wine production in our region began to move away from quantity to quality. And the result, of course, was a sharp downturn in profits. So if you're only going to generate modest returns you need to expand the land under cultivation in order to maintain the economic viability of your winery. And to get this expansion going, we naturally needed some lead time. By the nineties, we had everything on track and by 2001 our new vineyards were beginning to bear fruit, both figuratively and literally. As you can imagine, this was an enormously important time for us.

A couple of new-wave winemakers have also been putting their stamp on the image of the Bündner Herrschaft. Has everybody benefited from this development?

There's no question. These types of people have an extremely important role to play. In my view, there are a dozen or so other top growers who also belong in this new-wave category. They give our region its positive image that we all benefit from. Growers like these are the engines that drive progress in many vineyards throughout the world. These crème de la crème producers are vital everywhere.

How many growers are there in your district?

We're 60 all told and some of the vineyards are very small indeed. Sixty growers on just 440 hectares mean we're all crammed into a very small space. I can't imagine there's as dense a population as this anywhere else in the world. Our 13 hectare winery is the largest in the Bündner Herrschaft. But as I've already pointed out, you've got to see this in perspective: A year ago I was visiting some of the winemakers in California's Nappa Valley and many of them couldn't believe how I was managing to scrape a living from such a small vineyard !

Andrea Davaz in an elipsLife echo-Interview

Switzerland's wines continue to benefit from tariffs on imported products. Are these tariffs necessary for the survival of the domestic industry or just counter-productive?

Up until the nineties, it was only permitted to import a limited amount of foreign wine. But 20 years ago now, this quota restriction was lifted. Today, the import tariff amounts to just 60 cents a bottle, a really insignificant amount. I believe the lifting of the quotas on imported wine has had a very beneficial impact on the Swiss wine-growing landscape. Whether they liked it or not, our producers were exposed to stiff competition from abroad and had to make a huge effort to survive and thrive. This is one of the reasons why today Switzerland can boast numerous excellent winegrowers, not only in the Bündner Herrschaft but also in the Valais, in Waadtland or in the eastern region of the country. My conclusion from this development: if you're overly protective, there can be no innovation.

What is he main challenge facing Switzerland's winegrowers right now?

To run a modern winery successfully, you need to bring four qualities to the table. As a vintner, you require profound specialist knowledge both of grape cultivation and methods of production. You also need to be a very accomplished oenologist given the increasingly sophisticated approaches being applied in the wine cellar these days. In addition, there are the new challenges in administration, marketing and distribution. In this connection, I only need mention the topic of internet sales. And if you as the winegrower also want to do the selling personally, you also need the qualities to win over potential customers. For small wineries, combining all these four qualities under one roof, or in many cases, having them rest on one person's shoulders alone is a huge challenge - and for many companies one that is quite simply impossible to master.

What are the ingredients for entrepreneurial success in your view?

As far as wine growing is concerned, it has to be the quality of your product. This is the fundamental requisite for success. But across all industries, it is your specialist knowledge that counts, which also means your ability to have the appropriately skilled and experienced people on your team. In addition you have to have a nose for the promising business niches. When I see the extent to which the wine business is dominated by the big retailers – they account for around 85% of the market – I realize how crucial it is to find the right niches and to stay innovative. At the end of the day, the drivers of success are not the investments you make but your innovations. Our competitive edge compared to the big retailers is our proximity to the customer. So we have to do everything we can to drive home this advantage. It's all about finding the right ideas to seize the interest of the market.

Davaz employs approximately 50 people. How important are the social security benefits you offer when it comes to hiring new people?

Very important, especially with regard to those in managerial positions. We often have people joining us from larger companies that have provided their employees with outstanding fringe benefits. And of course no one wants to willingly accept anything less than they were getting before. In fact last year, we improved our social security benefits package in order to stay attractive as an employer. Our company pension scheme is a special incentive when it comes to attracting and retaining good employees. Pension plans are also important for tax optimization. In good years we pay in substantial sums and in leaner periods just the statutory amounts.

ECHO-INTERVIEW, APRIL 2015, Andrea Davaz

Switzerland has a highly developed retirement benefit scheme which combines state and private benefits. Will this three-pillar-system survive into the future do you think?

I believe so, yes. However, there is an urgent need for reform. The Swiss system is one of the best worldwide. That said, demographic developments, a less than favourable economic climate and also political constraints are posing massive problems which need to be addressed. In light of the financing shortfalls we will soon be facing, we need to act quickly. I'm always amazed at how long it takes before parliament and our politicians decide to tackle these issues. I believe it's irresponsible, frankly. Because the longer we wait, the harder the landing will be. If it were up to me, I would straightaway raise the pension age to 67 for men and to 65 for women. Our longer life expectancy would certainly justify such a move. And we also need to be more flexible when it comes to fixing a minimum interest rate. It stands to reason that with negative rates, it's going to be all but impossible to generate adequate yields. Only after these measures have been taken, can we talk about adjusting benefits or raising pension contribution payments.

To understand the proposed changes to the country's retirement and pension system (AVG-Revision 2020), you need to know the details. So a dialogue with employees is important. Is this on your company's agenda?

Not within our company yet. As soon as this topic becomes more concrete, we'll sit down with our employees and take a look at the proposed measures in detail. Everything is still at the consultative stage at the moment. As soon as it's certain which changes are coming into force, we'll ask our expert to inform our employees.

Among the proposed changes are restrictions on the usage of an individual's pension savings before retirement age. This would affect the freedom to use these funds to finance the purchase of property or to start a business. Does this measure mean that the state no longer trusts citizens, or is the move necessary in your view?

Basically, this is a vote of no confidence by the state in its citizens, yes. But on the other hand, it's not really sensible to allow people to spend their pension savings in advance and to subsequently have them relying on government handouts. To pass judgment on this issue, one would need to know how many people there actually are who have to rely on social welfare as a result. To be accountable for your own actions is a basic right which should be upheld. Personally, I'm very skeptical of attempts to introduce policies which could be seen as paternalistic.

Andrea Davaz, Winegrower and entrepreneur

Should pensioners also have to make a contribution to the recapitalisation of the retirement benefits system in Switzerland, or is this topic taboo?

Old age savings have been accumulated in by the pensioners, so it's their money. The debate is more about how high the conversion rate should be and how much money is actually paid out to the pensioner. In my view, pensions should not be tampered with. It would be intolerable should people of pensionable age be denied the full amount due to them, having paid in regularly over the whole of their working lives. At the same time, I believe quite strongly that Switzerland as a center for work and entrepreneurial activity – already under severe strain – should not be burdened still further with higher pension contributions.

The pension funds are in stormy waters, above all due to our ageing society and rock-bottom interest rates. Are they – and indeed all of us – going to fall victim to financial promises they can't keep?

If we keep kicking the can down the road in regard to the necessary reforms, this is certainly a possibility. There is, indeed, a danger that we won't be able to expect the benefits in the future that were promised us in the past. One consequence of this development would be the increasing importance of making private retirement provisions. So tackling the overdue reforms is of the utmost urgency.

If you could give the pension funds in Switzerland some advice, what would that be?

They need to focus on those issues that they can actually influence themselves. In other words, getting a grip on internal costs and staying innovative. But to do this, our legislators need to create the proper conditions, conditions that are both equitable and realistic. The politicians need to act. The pension funds can change neither demographic developments nor the economic climate. So they need to get their own houses in order, as it were.

Personal Profile
Andrea Davaz
Winegrower and entrepreneur

Born in 1964, Andrea Davaz grew up on his family's wine-growing estate in Fläsch. Following formal training as an oenologist he took over the running of the family winery. In 1990, he and his brother acquired the Poggio al Sole vineyard in Tuscany, Italy. Four years later, he founded a wine trading business, von Salis and in 2003 acquired a 50% stake in the wine traders, Valentin & von Salis in Pontresina. 2012 saw Davaz purchase Zanolari Chur, a wine business founded in 1875. Davaz spends his quality time with his family, likes to meet up with friends over a glass of good wine or is in training for a marathon.