Rafael del Rey
Spanish wine is more international now than ever. Spain has always exported wine, since the age of the Phoenicians to the discovery of America through to the development of our leading brands from Jerez, Rioja, Catalonia and of many other large production zones in Spain. But the massive move of Spanish wines into global markets is a relatively recent phenomenon that appears to be here to stay.
In the last 18 years, between 1997 and 2014, sales of Spanish wine abroad expanded from 917 to 2,257 million liters, i.e. growth of 146%. During the same period, exports of Italian wines increased by 40% and French wines slipped by 5%. This stunning progress by Spanish wines has made Spain the leading global exporter of wine in terms of volume, ahead of Italy. But advancing so quickly has its share of problems.
There are basically two positive aspects of the internationalization of Spanish wine. First, it reflects a radical change in the mindset of companies' leaders. Internationalization is no longer a passing trend, a small part of the business or a less important strategy when domestic sales start to wane. Now, exporting is a strategic decision for Spanish wineries, which involves allocating a good portion of company resources and is likely to be maintained and increase over time to become a major source of revenues. Not even a recovery in the Spanish market would cause exports to decline.
Second, exporting Spanish wines has proven to be a valid option for all types of wineries, of all sizes and with all kinds of wines. Every winery has been able to find a niche market, an importer, a place to sell its products; this proves that wine is a very versatile market, with options for everyone and with a slightly smaller trend towards saturation than other large consumer sectors. In the last 15 years, the total number of wine exporting companies has increased, from 1,249 in 2000 to almost 3,900 in 2014.
However, the massive shift abroad of Spanish wine to global markets in such a short period of time also reveals notable weaknesses which, if identified and corrected, can become great opportunities.
A brand's ability to market itself internationally requires careful planning. Having to sell a lot of wine abroad, and do so very quickly, has led to a situation where the bulk of Spanish wine exports are provided as a raw material to French, Italian, Portuguese and German wineries, which they then distribute in their own domestic markets and they also export. In fact, despite progress by our leading wine brands famous for their quality, 55% of our exports last year were bulk wines and 75% of bulk wines exported by Spain head to the abovementioned four countries. That, together with the trend of competing mainly on price in other wine categories, such as bottled and sparkling wines, leads to a situation where the prices at which we sell our wines is still a far cry from what our main rivals obtain. The value and average price of our wines, which also impact our image around the world as producers of quality wines.
Now, can these negative aspects—the major increase in volume, strong sales of bulk wine, and low prices—be corrected? Yes.
The performance of Spain's winemaking sector in recent years confirms its capacity to adapt to the market and to survive. Until the COM (Common Market Organization, i.e. the main European legislation on wine) was reformed in 2009, Spain received large subsidies to distill a significant portion of the wine produced, to store wines and must, and even export, with aid. The legislation also protected European winemaking companies and regions from the competition. When many of these barriers were eliminated, it was believed that the areas that had received the greatest subsidies (as well as other areas), would be hard put to remain operational.
Six years later, Spain produces the same amount, or even more, wine than before, due to vineyards which have been restructured, are more productive and able to produce much better quality wine depending on the vine grower. Even with domestic consumption declining, the distillation of much less wine than before, and after suffering through the global financial crisis, most Spanish wineries have seen their sales improve compared with previous years. With a lot of hard work. Prices are not as high as we'd like them to be in the markets or segments, but the wine is selling. And tools are already being implemented to improve sales in the future.
Again, mindset is a fundamental factor. In the Spanish wine sector, there is a major consensus as regards identifying an improvement in value and image as basic industry objectives. It's not necessarily about selling a lot and at any price; it's about selling it right. The main goal is medium- and long-term profitability. And the path to take revolves around strengthening brands, increasing bottled wine, and providing better value bulk wines in markets where higher margins can be obtained. To achieve this, companies have been investing for several years to substantially improve their sales departments, international promotion and marketing, and to reinforce their sales networks, to innovate products that are better adapted to different markets and, little by little, to better understand markets, distribution, and consumers around the world. But there's still a long road ahead, and these investments, which will be strengthened further in the near future, will take time to bear fruit.
However, if the path taken to date is correct, Spain has become a global leader of a sector with a future, and the weaknesses which have come to the fore thus far are clearly identified and remedies are in place, all of which seems to support a relatively optimistic outlook. Moreover, the Spanish Observatory of Wine Markets (OeMv) recently highlighted interesting examples of actions that can be taken. If we look at Italy, we see that barely 15 years ago it sold more bulk wine than Spain and at the same average prices as we did. In 15 years, it stopped selling most of the bulk wine it had sold to France and advanced its bottled and sparkling wines, especially in the UK and the US; its revenues are currently twice those of Spanish wines. It can be done. Perhaps with other tools and focusing on other "secret weapons", but Spanish wine will continue to more forward in the global markets, it will improve in terms of value and image and, for a long time to come, it will remain one of the drivers of Spain's economy, due to the progressive, effective internationalization of our brands.