A farmer takes the helm in Rioja

For the first time in its 87-year history, a grape grower has been elected president of the Rioja Interprofessional Committee and the Regulatory Council. Luis Alberto Lecea, whom we’ve visited on Inside Rioja, will take over from Victor Pascual as soon as the Ministry of Agriculture publishes the order ratifying his appointment in the Official Journal. It’s about time.

Luis Alberto Lecea (Photo:  Tom Perry)

Luis Alberto Lecea
(Photo: Tom Perry)

Lecea, a well-respected leader of the Riojan chapter of ASAJA, one of Spain’s farmers’ unions, carries a lot of weight on his shoulders. Farmers and wine co-ops here have complained for several years about low prices of grapes and wine, a situation that practically paralyzed the Rioja Interprofessional Committee and the Regulatory Council for the last 18 months of Pascual’s nine year tenure.  The producers were hoping to pressure the wineries into paying higher prices by refusing to approve the Council’s advertising and operating budgets but last minute negotiations, promises and the lack of unity between the co-ops and the unions always allowed the budgets to be approved.

Victor Pascual (Photo:  vinetur.com)

Victor Pascual
(Photo: vinetur.com)

Lecea brings a lot of experience and a cool head to the table but my first impression is that fellow growers expect him to push through a deal for higher grape and wine prices.  In his first interview he said, “Minimum prices aren’t possible and reference prices in the wine business are a complicated matter, but we have to be capable of putting in place a means to guarantee a minimum price because the added value of bottles should be reflected in the price of grapes.  I insist that if Rioja doesn’t pay a fair price (for grapes), quality grapes won’t be produced.” Spoken like a true politician.

The Grupo Rioja, the largest winery association whose members include all the big wineries, and whose support allowed Lecea to be elected, picked up the gauntlet by convening a press conference on June 24. “Grape and wine prices are set by supply and demand” was the association’s message.

So, once again, swords have been drawn, confirming my contention that if there’s no political conflict in Rioja, one has to be created.

Fortunately, if we look at the big picture, we can see that in spite of low grape prices, Riojan vineyards continue to be exquisitely tended. On the winery side, there is more variety and more interesting wine on the market than ever before in spite of shrinking retail prices. So, as one prone to sarcasm like me, these political statements sound like a lot of hot air. As much as I sympathize with the economic woes of the growers, I don’t see distributors and supermarkets around the world willing to pay higher prices for Rioja in the medium term unless individual wineries come up with products that these gatekeepers think are worth the extra cost. Because of their weight in Rioja, the onus is on the big wineries to provide these added-value products and sell the hell out of them. Mr. Pascual said in his farewell speech, “Nine years ago it was unthinkable that Rioja would sell 100 million liters outside of Spain.” Spaniards would respond that Mr. Pascual doesn’t have a grandmother (in Spain, grandmothers are the people that heap praise on their offspring.  “Not to have a grandmother” means you have to praise yourself!) On a serious note, it is indeed a testimony to hard work by wineries and a willingness to invest in international generic and branded PR by both wineries and farmers that this figure has been reached, but there has also been a healthy dose of price cutting, starting, in some cases, long before the economic crisis hit in 2008.

If, however, we forget about internal politics and concentrate on what’s on the shelf, today is a great time to get great deals on good wine. To me as a consumer, that’s what matters.

The long and winding road

long winding road

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.