The long and winding road
June 18, 2013
A few days ago I came across an interesting article about Spanish wines in the Wall Street Journal online (http://stream.wsj.com/story/latest-headlines/SS-2-63399/SS-2-248715/ ) that contained a number of true statements about the performance of Spanish wines in the USA as well as several really big boo-boos. Unfortunately, the mistaken ideas came from the New York office of Wines from Spain, something I honestly don’t understand. They said, “The domestic market has really dried up. Winemakers are desperate to export.” Let me set the record straight.
According to the market research company A.C. Nielsen, wine sales in Spain decreased by less than 1% in 2012. The decrease since the beginning of the economic crisis in 2006 has been 8%. This is an important drop, attributable mostly to the crisis but can hardly be described as ‘drying up’. Two things are happening in the drinks market in Spain: first, the share of sales to retail outlets, especially supermarkets, is rising, while sales to bars and restaurants are decreasing. The increased share of sales to supermarkets means that prices and consequently winery profits are being squeezed to the max by voracious buyers. Some of this has carried over to the traditional distribution network. I heard the story of a big distributor who invited his suppliers to a meeting and proceeded to dictate to them the prices at which he was prepared to purchase their wines, with no guarantee of volume.
Most of the well-established wineries in Rioja that I’ve talked to are tired of this game. They’d rather sell less and make a decent profit than sell practically at cost. “Times will get better”, they tell me.
“Winemakers are desperate to export.” I don’t sense any feelings of desperation from wineries here. What I do sense is a deeper understanding of positioning their products to make them more attractive to buyers. Figures from the Spanish Wine Market Observatory are positive, showing that bottled DOP (with denomination of origin) wines sold abroad increased by 10% both in volume and value while bottled table wine exports increased 6,4% in volume and 18,8% in value. Exports of wine in bulk are flat, but as everyone knows, bulk wine is a commodity whose sales go to the lowest bidder.
Exports of Rioja reached a record high of 96,9 million liters in 2012, a 5,5% increase over 2011. In the USA, Rioja’s third largest market, wineries sold almost 12 million bottles, a 9% increase over the previous year.
So, the situation isn’t so bad after all. In the wine business, you have to take the long view. It’s a long, winding road that fortunately, almost always goes up.