Spain, the world’s largest exporter of wines, is turning its wine export ship around. It’s moving from a country known for cheap bulk wine prices to one increasingly known for the quality of its bottled wines.
The outbreak of violence in Southern France against cheap Spanish bulk wine imports in recent years may suggest otherwise, but the rise of new styles of quality bottled wines made from indigenous grape varieties in renewed wine regions is increasing the value of wine exports and helping to forge a new identity for Spain’s wines. Rafael Del Rey, director of the Spanish Wine Market Observatory, (OEMV), says that while bottled still wines accounted for only 38.9% of total still wine exports (both bottled and bulk) volumes last year they generated 74.5% of the value of still wine exports.
Since the height of the global financial crisis, the total value of Spanish exports has risen from €1.69bn ($1.92bn) in 2009 to €2.84bn in 2017, when wine exports increased by 2.5% in volume and by 7.6% in value. The Spanish Wine Federation (FEV) says an upward trend in wine exports continued in the first seven months of 2018, when exports increased by 5.9% in value. It says the increase in the value of exports in recent years shows a shift from quantity to quality.
Since 2014, the average price of Spanish bottled wines has risen every year, increasing in value from €2.12 a litre in 2014 to €2.39 in July this year. The average price per litre rose 5% to €1.25 in 2017, a notable increase on the €1.10 a litre recorded in 2015. Despite better wines and the revaluation of prices, Spain has still much ground to make up: it may be the world’s leader in wine exports, but average wine prices in 2017 remained much lower than average prices in France and Italy, partly due to low prices of bulk wine which, in terms of volume, still accounts for the majority of wine exported. Last year, the average French wine price of €6.00 per litre generated €9bn of exports – three times the €2.84bn value of Spanish wines - while the average Italian wine price of €2.78 per litre generated €6bn in exports. Only South Africa had lower average wine prices than Spain last year.
This year, however, the FEV says bulk wine exports jumped by 23% in value to July 2018, compared with the previous period last year, with the average price dramatically increasing, by 43.6% to €0.61 per litre. In Spain, the rise of bulk prices has widely been attributed to Europe’s historically low output in 2017: higher demand and less supply has triggered demand for Spanish bulk wines, pushing up prices. However, the FEV says there is no single reason for the leap in prices. “France and Germany, for instance, have imported more or less similar amounts, but at higher prices, while Italy has increased the volume of Spanish wine by 40.7% despite the increase in the average price,” says FEV chairman Miguel Torres. “On the other hand, the price increase has affected volume sales to Russia and China.”
The lower volume available for some export markets in 2017 has mitigated any increased returns from higher prices recorded this year, says Juanjo Raventós, director of the wine sector of Catalonia’s Federation of Agricultural Cooperatives (FCAC). And a rebound in wine volumes from this year’s harvest could end up curtailing average price rises. “It is possible that in the coming months there will be an adjustment in prices due to the greater volume of wine worldwide. Although of course our desired objective would be to move towards stability in the medium and long term that consolidates the growth in value of Spanish wine,” says Torres.
Raventós says that, faced with global competition, any further revaluation of prices could cost Catalonia and Spain market share. “Even a small price change can affect listings in supermarkets internationally,” he says. Indeed in the UK wine industry, a ubiquitous phrase among importers, distributors and the media in recent years has been that “Spanish wine provides great value for money”.
Despite any potential adverse market repercussions, a further revaluation of wine prices and increasing the export of bottled wines remains a key priority for the FEV.
“This is not something that will be achieved in the short term and with a single concrete action, but it must respond to a coherent, coordinated strategy with a long-term vision,” Torres says. “It is very important that Spain works to improve and consolidate its country image in the field of wine, and for this we have valuable tools such as our gastronomy and the international recognition of many of our chefs, who can be exceptional ambassadors of Spanish wines.” He adds that he believes it’s essential to work on a strategy to “increase the value of Spanish bulk wine, promoting varietal bulk and with higher quality and value, just as it is done in bottled wine.”
The move towards further revaluation of exports follows a rise in internationalisation of Spanish exports. This trend strengthened following the world financial crisis and the subsequent EU bailout of Spain in 2012, which forced many producers to export more of their wines. While key export markets for Spanish bulk wines are Germany, France, Italy, Portugal, China and Russia, bottled wine exports mainly go to Germany, the UK, the US, Russia, the Netherlands, Scandinavia, Japan, Canada and Asia.
FEV says removing trade barriers in many markets has been one of its priorities.
“Agreements such as the one recently reached between the EU and Canada (CETA) and those being negotiated with Japan and Mercosur [the South American bloc countries of Argentina, Brazil, Paraguay and Uruguay] are fundamental,” says Torres. “We firmly believe that trade agreements are a key tool to increase wine exports and eliminate trade barriers of all kinds, which are a great brake on many markets.”
The rise of white wines
Spain may be best known for its red Tempranillo, the revival of Garnatxa wines, its Cava and Sherry, but a renaissance of white wines has helped lead to a 20% increase in the value of total white wine exports so far this year. White wines made in Spain’s Denominación de Origen appellations represent less that 12% of production, but about 24% of export value. Red wines make up the vast majority of exports, but white wine is growing faster than red and rosé wine in value. “Between 2010 and 2017, the annual average value of white wine exports has increased seven point four per cent, whereas red and rosé wine has increased on average by four point four per cent in value,” says Rafael del Rey. “Historically, Spain kept whites for the domestic market, but now we are now operating much closer to what the market demands.”
Despite an overall 10% fall so far this year in the volume of Spanish wine exports to Britain, and a 1% decrease in value, exports of Spanish white wines to the UK appear to have overcome market uncertainty surrounding Brexit. According to Nielsen, rises in the Spanish white wine price over the past three years have not affected annual growth of more than 13%. This year white Rioja continued its upward trend for the fourth consecutive year, with the value of sales up by 34.9% and volume of sales up 32.0% to June 2018. Last year Britain imported €45m worth of Spanish white wine.
White Rioja wines, benefitting from the popularity of red Rioja, have overtaken white imports from the Rías Baixas Denominación de Origen, rising to 27,899hl worth €7.69m in 2017 from €5.5m in 2016. The vast majority of Rioja white wine exports are young unoaked whites; however, there are an increasing number of barrel-fermented and aged wines, with some producers switching from the traditional use of US oak to used French oak barrels. Newly permitted indigenous grapes such as Maturana and Tempranilllo Blanco are also appearing.
The rise of white Rioja wines has not dented Albariño exports from the Rías Baixas to Britain, which leapt 37.7%. Globally, Rías Baixas exports remain ahead of Rioja white wine exports, including to the US, its main market, where 2.4ml worth €13.7m were exported last year. In contrast, white Rioja exports to the US reached 3,607hl, worth €1.5m.
Meanwhile, in Catalonia, a boom in quality Garnatxa Blanc production in the Terra Alta region is providing importers with a new source of Catalan white wine. The region accounts for more than 30% of the world production of Garnatxa Blanca and more than 70% of its production in Spain. “Seventy per cent of production is exported and the rest is sold in Catalonia,” says Nani Ramon, export manager at Edetària, a vineyard in Terra Alta. The rise of Garnatxa Blanc follows the renaissance of Xarello – a grape known for it ageing ability and high acidity levels – as a still white wine over the past 15 years.
Catalan wine exports grew 3.3% between January and June 2018 to reach 97ml worth €288.4m while the average price per litre has jumped 11% to €2.97. As a key motor of the Spanish economy with a long history of trading, Catalonia wine exports including Cava have in recent years risen to more than 70% of its production. According to FCAC, Catalonia will become even more competitive through anticipated mergers between its 52 cooperatives, which supply about half of the region’s wine production. Exports to 140 markets, including its main market Germany, have provided greater value than selling wine in Spain outside Catalonia, which Ramon says is saturated by wines from other regions.