Message

Tokaj wine region socialization

Feedback mechanisms

Small-scale wineries, High Quality

  • Wine quality and markets (R1): if a winery is following high standards in quality, it needs sufficient knowledge, good vineyards and technology to achieve this goal. Producing consistently high-quality wine, they can reach the quality sensitive markets where they can have much higher revenues than elsewhere. Access to the quality sensitive markets has a relatively high threshold (due to international competition) and a significant delay. The higher income makes it possible to maintain and develop the appropriate technologies and to pay a more experienced workforce. International competition and the costs of production are the most important constraints on this loop. Experience in high-quality wine production has a reinforcing effect on the knowledge level in the wine region.
  • Wineries and Knowledge (R2): the number of wineries determines the number of people working in this sector, the competition among them and the possibility of experimenting and knowledge sharing. The number of wineries has a reinforcing effect on the local (collective) knowledge in the long run, however it is a slow process and very dependent on the social relations (trust) among the winemakers. The experience of the winemakers in creating high quality wines improves their overall knowledge about wine making.

Large-scale winery, Large Quantity

  • Low price effect (B1): if a winery can't reach the quality sensitive markets, it can sell its product on cheap, price-sensitive markets where even big quantities can be sold. They can make some profit, but as the margins are lower and the quantity demand is higher, they can't pay for the best technologies and sufficient workforce to increase quality. Thus this balancing loop is stabilizing the wine price and quality on a low level (the price is 5-10 times lower than in case of the high quality strategy). This setting needs much less technology and workforce, thus it is not capable to reduce unemployment and poverty in the region.
  • Large quantity effect on vineyards (R3): if a winery is following a cost effective strategy, it needs to increase the quantities of the produced wine to increase revenues. This demand has an intensifying effect on the vineyards, which is lowering the possible quality levels of the plantations. This reinforcing feedback loop is competing with the "wine quality" loop described above in the first stable state. As in 1989 the state owned company was privatized, the successor company is buying up the produced grapes from the private owners for a price high enough to maintain the quantity oriented cultivation methodologies. Thus the entire system remained surprisingly intact.
  • Winery expenses (B2, B3): the operation expenses of the wineries are present in both stable states, but the amount of workforce and quality of technology are different (high quality wine making needs more and more educated workforce and better technology). The knowledge of the workforce and the equipment used are stabilizing the organizational knowledge and long-term strategy of the wineries.

Drivers

Shift from small-scale to large scale wineries

Important shocks that contribute to the regime shift include:

  • Dictatorship: The region was forced to transform to socialist planned-economy. From a more abstract point of view, this shock increased the state's share in the region to 100%, the quality standards were lowered and the quantity demand was increased.

These drivers were driving the transformation of the system. The main external direct drivers that contribute to the shift include:

  • Social relations (trust): mistrust is one of the hardest heritages of the socialist era. It hinders long-term planning, knowledge sharing and any kind of multi-stakeholder perspective in the region. It is stabilizing the second regime.
  • External investment would be necessary to change the vineyard structure, improve technology and set up new wineries. It is one of the most important drivers of a possible regime shift back to the small winery regime in the future.
  • Subsidies: nowadays, 60-70% of the produced grapes in the region are sold to major winemaker companies. As the biggest company is a state owned winery the price is a hidden subsidy to produce larger quantities.
  • Quality standards: the "Tokaji" brand showing that a wine was produced in this area is strictly regulated. The maximum harvest rates, allowed technologies, methodologies and wine chemistry expectations are setting the minimum standards for the whole region. This regulation is dependent partly on national, partly on local authorities.
  • International competition is contributing to the stability of the regime since the political regime-change in 1989. Meanwhile, the international wine-market developed and the competition increased. Having lost the traditional knowledge, it was extremely difficult to reach the standards required to escape this state.
  • Share of the state operated wineries: it has a lowering effect on the number of independent wineries in the region, which is a major source of knowledge and development.

Slow internal system changes that contribute to the regime shift include:

  • Knowledge: the local knowledge includes geological and ecological knowledge about the historic landscape and advanced winemaking knowledge, including the use of the most recent technologies.
  • Access to quality sensitive markets: even if a winery is producing high-quality wine, it takes a lot of effort and investment to reach and maintain the market relations to the buyers, who can afford a higher price for the wines produced in this area.
  • Vineyard quality: the transformation of the vineyards and the re-cultivation of the abandoned areas require several years and a significant investment. It is a slow process even if the required financial resources are available. The limiting factors are poverty, the Natura 2000 protection of the abandoned vineyards, and the lifecycle of the vineyards (up to 100 years).
  • Poverty: local economic conditions are depending on local, national and global factors. Poverty is a result of a major economic downturn following the political changes in 1989. It is one of the most important factor hindering the local people from investing into private businesses, knowledge or better technologies. Poverty is increasing the dependency on external subsidies.

Summary of Drivers

# Driver (Name) Type (Direct, Indirect, Internal, Shock) Scale (local, regional, global) Uncertainty (speculative, proposed, well-established)
1 Social relations (trust) direct regional speculative
2 Share of state operated wineries direct local speculative
3 External Investment direct local speculative
4 Subsidies direct local speculative
5 Quality standards direct local speculative
6 International competition direct local speculative

Key thresholds

There is an important but hardly measurable threshold in the transition between the two states: the quality of the wines has to be high enough to compete with the other white-wine producing regions in the world. Competitiveness is necessary in order to access the quality sensitive markets. Once this access is gained or lost it has an enormous effect on most of the parts of the system.

Leverage points

  • Knowledge: education could significantly contribute to the local knowledge, if the right incentives are present in the local community and in regulations to change strategies.
  • Quality standards: if the local governance increases the quality standards and the new regulations were successfully enforced, after a transition period the average wine quality would increase, however the transition period would be a major economic shock to the region.
  • Subsidies: today the subsidies are maintaining the large-scale system, but well targeted subsidies could also contribute to a regime-shift to a high-quality state. Better international marketing: it would be necessary to help the region to reach the markets faster (decrease the delay as much as possible).

Summary of Ecosystem Service impacts on different User Groups

References (if available)
Provisioning Services
Freshwater 0
Food Crops -
Yes
Yes
Feed, Fuel and Fibre Crops 0
Livestock 0
Fisheries 0
Wild Food & Products 0
Timber 0
Woodfuel 0
Hydropower 0
Regulating Services
Air Quality Regulation 0
Climate Regulation 0
Water Purification 0
Soil Erosion Regulation 0
Pest & Disease Regulation 0
Pollination 0
Protection against Natural Hazards 0
Cultural Services
Recreation -
Yes
Yes
Aesthetic Values -
Yes
Yes
Cognitive & Educational -
Yes
Yes
Spiritual & Inspirational 0