Distribution of Wine in Hungary

Hungary boasts an old and distinguished wine tradition. Since the beginning of the ‘90s, following the collapse of the Berlin Wall, the number of vineyards has increased, and due to foreign investment, technology has been significantly renovated. Before the ‘90s, the industry was oriented towards quantitative production, whereas nowadays, thanks to the country’s economic development, a qualitative approach has been adopted.

Between 2010 and 2018, the average wine production was around 350 million litres, of which 65% of white wine and 35% of red wine.

Wine is an essential product in Hungary and Italy has traditionally been Hungary’s number one wine supplier: just think that exchanges between the two countries lead to a turnover of around € 15 million, representing the 46% of the total import and this percentage reaches the 88% if restrict the focus only on bulk-wines.

Given the importance of wine in the Hungarian economy and society, there are also several magazines specialized in wine and wine production, e.g. Borigo, Bor es Piac, Gusto, VinCE, and many of the main economic newspapers also have columns and sections dedicated to wine.

”Good wine needs no bush” says the old proverb. Yet trademark is becoming increasingly important nowadays due to the fierce competition in the wine sector, as producers must differentiate and distinguish their brand from competitors.

As in the rest of UE, it is possible both to register a national Hungarian trademark (also through a WIPO international trademark registration), or an EU trademark, which will be valid in all EU Member states.

The following paragraphs briefly describe the Hungarian trademark application process.

Step 1: Decide your trademark. First you need to decide what type of trademark you wish to register. A trademark may consist of any signs, e.g. words, colours, packaging of goods, sounds, etc. In Hungary, wine trademark can typically refer to: 1) name of producer 2) place of production (e.g. silhouette of the hill where it was produced), or 3) a fantasy name.

Step 2: Clearance searches permit the registrant to check if there are any existing registered rights for the same or similar trade marks, covering identical or similar goods or services, all of which could present problems. Clearance searches, therefore, are a great tool to avoid potential trademark infringement and refusal to register a trademark. Research can be carried out either by the applicant or by its legal representative in the national, European or international database. As successful and efficient research activity requires special knowledge and experience, it is advisable to hire an expert.

Step 3: Registration. The trademark application shall be submitted to the Hungarian Intellectual Property Office (HIPO). Once the application is reviewed by the HIPO, there is a 3-day window during which anyone may file an objection, requesting the trademark not to be registered. Any such objection shall be communicated to the applicant and taken into account in the final decision.

Step 4: Registration of the Trademark. If the trademark application meets all the requirements, HIPO shall register the trademark. The date of the ruling on registration shall be the date of registration of the trademark. Application fee for national trademark is usually between HUF 50,000 and HUF 150,000 and shall be paid to the Hungarian Intellectual Property Office.

Geographical Indication (GI)

Geographical indication is the general term for indications used to identify the geographical origin of goods. The Protected designation of origin is the name of an area, a specific place or, in exceptional cases, the name of a country, used as a designation for an agricultural product or a foodstuff. To receive the PDO status, the entire product must be traditionally and entirely manufactured (prepared, processed and produced) within the specific region and thus acquire unique properties (e.g. Tokaj).

To receive the PGI status, the entire product must be traditionally and at least partially manufactured (prepared, processed or produced) within the specific region and thus acquire unique properties (e.g. Csabai kolbász). Unlike trademark, geographical indication gives collective rights: all producers within a specific area are entitled to use it for an unlimited period. The fee for submitting an application for GI is HUF 107,000 regardless of the number of product groups included in the application.

Hungarian specialities

Protecting their products is becoming increasingly important for Hungarian wine producers: already in the early 2000s, around 400 wine trademark applications were filed annually.

A great example of geographical indication and trademark protection was the debate between Hungary and Slovakia regarding the Tokaj wine region.

A small northern part of the Tokaj wine region was transferred to Slovakia under the Treaty of Trianon, and therefore Slovakian wine producers considered themselves entitled to use in the E-Bacchus system the ”Tokajská/Tokajské/Tokajský vinohradnícka oblast” Vinohradnícka oblasť Tokaj expression, later replaced by the name ”Vinohradnícka oblasť Tokaj”. The problem with the latter one was the use of the word "Tokaj", which – according to Hungary – could confuse consumers. However, the Court of Justice of the European Union ruled that Slovakia is entitled to use the expression in the E-Bacchus system. However, the pure “Tokaj” designation can still only be used by Hungary.

Counterfeited wines

In Hungary the obligation to classify wine before placing it on the market is prescribed by law. According to the legislation, wine can only be exported from the country if the oenological authority carried out laboratory and organoleptic tests and determined its quality. Thanks to this, wine counterfeiting has now been dramatically reduced in Hungary.

Since Hungary is an EU Member State, exporters and importers have to comply with relevant EU laws (please refer to the EU guide). More specifically, Hungarian law requires following:

Labelling

The labelling of products on the Hungarian market is governed by European legislation, so please refer to the National institute Responsible for the labelling is the NÉBIH (www.nebih.gov.hu).

Origin and analysis certification

Presenting this certification is not mandatory for the shipment. However, in case of a sudden control, it must be presented to the National Alimentary Security Office (NÉBIH).

Import Customs Declaration

Hungarian wine importers must hold a valid certification and authorization for wine import activities, and have a (temporary) warehouse of at least 100 square meters registered with the authority in accordance with the applicable legislation on excise duties. Sparkling wine (e.g. Prosecco and Spumante) and other alcoholic beverage importers have to deposit HUF 20 million (approx. € 65,000) which will be reduced by 50% after 2 years of operation.

Excise Duty System

There is no duty payment obligation on wine, except for sparkling wine duty is HUF 16,460 (approx. € 55) per hectolitre.

Value added tax (VAT) is at 27 %.

Wine consumption in Hungary is around 2.5 million hectolitres per year, but high-quality wine consumption remains low, accounting for 7% of total consumption.

Retail price of cheaper wine varieties, often mixed with foreign wine (mostly Italian) is around HUF 260 to HUF 500 per litre (around 0.8-1.5 €).

Hungarian vineyards located in Hungarian Plain produce mostly table wine, of medium or low quality. In this category, foreign wines generally have a lower production cost per litre.

Hungarian vineyards that produce premium quality wine use modern technologies, whereas medium and low quality wine producers use technologies that are less profitable and less cost-efficient than those of large-scale foreign producers.

Unlike some decades ago, when Hungarian consumers made no real distinction between wine products from different regions, nowadays they have raised their level of knowledge, so they are starting to look for specific products, e.g. choosing a specific region of origin (e.g. Chianti from Tuscany, in Italy).

In addition to the considerations regarding the distribution and agency agreements in the EU part, we suggest to consider also the following issues when negotiating and drafting a distribution contract in Hungary:

• who is your distributor? To verify that a Hungarian commercial partner is reliable is the first and most important step. To do this we advise to contact an expert lawyer, who will extract a certification the trade register in order to analyse its company data and financial status.
• quality control. Before drafting the distribution contract you shall take into consideration that, in order to be able to place wine on the Hungarian market, the law requires a verification of the quality of the wine through laboratory tests, which are carried out by NÉBIH. The application for quality control and distribution can also be submitted electronically after registering on the Consumer Portal (Ügyfélkapu). For wine imported from other member states of the EU, the analyses carried out by the local authorities are valid.
• bilingual contract. Under Hungarian law, a distribution contract is valid in any language; we recommend, however, having at least the text in Hungarian, so that it is possible to file it before administrative authorities or in court without any translation.
• applicable law and jurisdiction. As an EU Member State, the choice of law and jurisdiction are governed by the relevant EU Regulations (Rome I and Brussels I bis) so sentences rendered by EU Courts can be enforced smoothly. Furthermore, Hungary is one of the states that ratified the 1958 New York Convention, so foreign arbitration awards are generally recognized without major problems. Thus, arbitration remains a good choice in the case of a contract with a counterparty located in a non-EU state.