3:51pm

Wed September 26, 2012
The Salt

Greek Credit Crisis Forces Winemakers, Food Canners To Adapt

Originally published on Wed September 26, 2012 5:54 pm

When the economic crisis erupted in Greece and the bottom fell out of the domestic wine market, the Kir-Yianni vineyard outside picturesque Naoussa decided to adapt. Like other wineries in Greece, it has increasingly tapped the export market, successfully marketing and selling wine in Europe, the United States and even China.

"If you ask me, this crisis has been good for us," says Stellios Boutaris, the son of the company's founder. "It's going to make us stronger."

But there's one big problem that poses a threat, even to the most competitive Greek companies right now, he says. It's become virtually impossible to borrow money in Greece.

"There's no credit. How can you do business without credit?" he asks.

Greek banks have little money to lend out, while foreign lenders, which once flooded Greek businesses with loan offers, no longer want to do business in the country. The possibility that Greece might leave the eurozone, however slim, makes lending money there too risky.

It's a huge challenge for companies like Kir-Yianni, which have to import virtually all of the materials and equipment they use in their production. Kir-Yianni buys bottles from Italy, paper from Turkey, barrels from France and cork from Portugal.

"Unfortunately, Greeks are very much traders, not producers," Boutaris says. "It's crazy, when there's not a single glass factory in Greece. It makes you upset that you have to bring in bottles from Italy."

Because credit is so tight, companies like Kir-Yianni have to pay cash for virtually everything they buy. In a capital-intensive business, where growing times stretch for years, that can be an enormous challenge. Boutaris has had to delay projects, like building a new wine cellar.

"You're squeezed from both sides," he says. "You have trouble collecting money from the markets, because some of the wholesalers have gone out of business, so it's very, very difficult to sell. So you try to get cash from them, but not everyone can afford it."

Meanwhile, he says, "your suppliers want to be paid in cash. So really, the circle has completely broken. The chain of business has completely broken."

It's a huge change from a few years ago, when a loan was as easy to get as a suntan in Greece. Successful Greek business owners were regularly flooded with offers of credit. Banks "would beg you" to borrow money, says Olga Panagopoulou, financial manager at Conex, a canned fruit company in Athens. "They would say, 'You just have to pay 3 percent. What's 3 percent for you?' "

Conex ended up borrowing money to upgrade its factory, which will produce 27,000 tons of canned peaches this year, exporting virtually everything it produces.

The credit crunch has greatly complicated life for Conex.

The company has a narrow window of time each year to process and can fruit, and needs tons of supplies, everything from sugar and citric acid, to tin cans and fuel oil. But canned fruit can sit on store shelves for years, so customers are slow to take delivery of their orders and even slower to pay what they owe.

In the past, Conex could borrow money to get by until it was paid for what it produced. But today, the credit flow has run dry.

But now that the banks won't lend, Conex has had to press its customers to pay what they owe sooner. It has also tried to persuade its shareholders to put more money into the company.

The company laid off some permanent employees over the years, but it can't afford to lose too many workers, especially during canning season, Panagopoulou says.

Conex's troubles are ironic, because for the most part the company is quite competitive. With production down in parts of the United States, demand for canned fruit is very strong right now, she says. But without credit, it has difficulty filling the orders it gets.

"Greece can export enough, and more," Panagopoulou says. "But the problem is not to export or produce. The problem for Greece is to find the funds in order to produce. This is the real problem, and the big problem now."

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Transcript

MELISSA BLOCK, HOST:

The crisis in Greece is taking a toll on the entire Greek economy because the Greek government has struggled to pay its debts, creating an atmosphere of uncertainty. Banks have pretty much stopped lending in the country. Now most businesses can no longer get loans. As NPR's Jim Zarroli reports, the problem is forcing Greek businesses to find new ways to survive.

JIM ZARROLI, BYLINE: Stellios Boutaris hails from one of Greece's best known wine making dynasties. His family owns the Kir-Yianni vineyard in a picturesque northern village. Today he walks through the room where the wine is made: an enormous dimly lit space permeated by the smell of red grapes.

STELLIOS BOUTARIS: Here's the winery. These are all stainless steel tanks.

ZARROLI: Nearly every piece of equipment we pass, he says, is imported.

BOUTARIS: Cork from Portugal, bottles from Italy, paper from Turkey. It's crazy. Unfortunately, Greeks are very much traders. They're not much producers.

ZARROLI: And that's left companies like his in a big bind. Boutaris heads into his sunny office overlooking the hills and settles down on his couch, dressed in a crisp monogrammed shirt. Boutaris, who studied at Wesleyan in Connecticut, has been pushing his industry to modernize. When the crisis began, the bottom fell out of the Greek market. Winemakers like Boutaris survived by exporting more with some success. But now, Greek banks no longer have money to lend. And foreign banks don't want to do business in the country.

BOUTARIS: In Greece, in general, the businesses have collapsed. There's no credit in Greece now. How can you do business without credit, you know? The thing has completely, completely collapsed.

ZARROLI: Because companies can't get loans, they have to pay for everything they buy - all those barrels and bottles and wine vats - in cash.

BOUTARIS: Now you're squeezed from both sides. Because you have trouble collecting money, because some of the wholesalers have gone out of business, so it's very, very difficult to sell. So you try to get cash from them. Not everybody can afford it. And your suppliers want to be paid in cash. So really, the circle has completely broken. It's, you know, the chain of business is completely broken.

ZARROLI: With credit so tight, Boutaris has had to delay some projects, like building a new wine cellar. It's a far cry from the old days. Before 2008, credit was as easy to get as a suntan in Greece. Olga Panagopoulou and her husband run Conex, a canned fruit company in Athens. She says bankers used to call her all the time.

OLGA PANAGOPOULOU: Because sometimes they press us, OK, take the money, take this equipment, do this, or prepare this or whatever. They beg you over money, you know. Eight years before they begged you.

ZARROLI: Today the money stream has dried up. It's a huge problem. Conex has a brief window each year to pick and can fruit. And during that period it needs to buy a lot of things like sugar and tin cans and citric acid. But customers tend not to pay right away. So the company borrows money to get by until it's paid. Only now, it can't get a loan.

PANAGOPOULOU: That means that we have to hurry up, to move fast, to find the funds, to press the clients to pay right away.

ZARROLI: The company has also had to press its shareholders for money. Conex has laid off some employees but it can't afford to lose too many workers during canning season. Panagopoulou insists that companies like Conex can compete on the world market.

PANAGOPOULOU: But the problem is not to export or to produce. The problem for Greece is to find the funds in order to produce. This is the real problem and the big problem now.

ZARROLI: But as long as the economic turmoil drags on, lenders are likely to avoid Greece. And even competitive companies will struggle. And with the unemployment rate near 25 percent, Greece needs to hold on to all the private sector employers it has. Jim Zarroli, NPR News.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.

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