Spanish wine is looking for its place: how to go from bulk to quality

The French, the same people who consider wine a kind of hallmark of civilization, are beginning to uproot their beloved vines.

Consumers are turning their backs on reds, which has caused an overproduction that has particularly affected Bordeaux and, to a lesser extent, Languedoc and the Rhône Valley.

So the Government has already approved aid to get rid of the first 9,500 hectares of vineyards, something that began to be carried out this week.

It is a first step to take up to 35,000 hectares off the map in order to balance supply and demand.

The situation, reports

, is far from temporary: the Bordeaux Wine Interprofessional Council believes that consumption will fall by 60% in ten years.

On this side of the Pyrenees, Spanish producers are beginning to be concerned.

Due to different circumstances, some areas have been left with enough bottles in the warehouse.

Bottled wine stocks in December were 5.1% above the previous year, which was bad enough, and totaled 5.6 million hectoliters.

In the supermarket, the data from the IRI consultancy show that the sale of wines and sparkling wines has remained stable in value because the bottles are 6.7% more expensive, but the demand in volume has fallen by 6.4%.

And that the price increases of wines have been more moderate than those of other food products.

As if that were not enough, the 2022 campaign, which will begin to be marketed this year, was quite abundant, especially due to the more than 3,000 million kilos of white grapes harvested.

Sitting in front of a strong coffee, José Luis Benítez, director of the Spanish Wine Federation (FEV), acknowledges that many wineries have not yet exceeded the pre-panemia figures, and that the sector, made up, roughly, of 75% by wineries medium-sized and 24% small, should be taken very seriously to promote joint wine promotions as a country brand, and not wage war separately.

“The food channel [sale to the final consumer] has fallen.

In this context of inflation, people prioritize the purchase of other products rather than wine”, reflects Benítez.

He contrasts that the national hotel industry is doing well, and exports, which ended 2022 with a historical record of almost 3,000 million euros, have moderated somewhat in recent months.

In Rioja, for example, the depression in consumption in the British market,

authorized cuts

European legislation allows Protected Designations of Origin (PDO) to take measures to contain the supply, but there is a great debate about the best way to do it.

José Luis Lapuente, general director of the Regulating Council of the DOC Rioja, acknowledges that they are not at their best moment and that they are considering subtracting abundance from the harvests.

“The council has some reference yields.

Within quality performance there are forks where you can be more ambitious or less”, he explains.

But he rules out asking for incentives to uproot plants as is the case in the neighboring country.

“It is something that has not been put on the table.

Rioja is not in the situation of Bordeaux, in 2022 we have sold 343 million bottles, a quite respectable figure, and in the national market we have obtained a moderate growth of 0.2%”.

He recalls that at the beginning of the 2000s, the grubbing up of national vineyards prevailed, “but it is a very simplistic measure.

In Spain, for example, there are 10% fewer vineyards than 20 years ago, but in terms of production we are at similar figures.

That shows you that it is not something so automatic, ”he reasons.

Benítez also objects to the most radical measures, especially if they are financed with public funds that could be subtracted from other more necessary items.

"The aid from Brussels channeled through the Common Agricultural Policy [CAP] generates value, helps to renew farms and promote them."

Reducing part of the stock would make it possible to achieve a more balanced stock compared to the wine marketed each year, something many professionals sigh for, because it would probably drive prices up.

But national problems do not have so much to do with a specific imbalance as with more distant and structural factors.

And the solutions are far more complicated than destroying a few clusters.

Spain, along with Italy and France, is among the three largest world producers, with positions that vary by year.

In the last campaign there were 35 million hectoliters for internal consumption that does not reach ten million.

Around 4,000 wineries participate in the production, including cooperatives responsible for where 60% of the wines come from, according to an AFI study.

Most of the wine that comes out of the country's warehouses is destined in bulk that is sold at an average price (2022 data) of 46 cents per litre, especially to France, Italy and Germany.

For each euro of demand, 1.75 in added value are generated.

"To be a historical power in the production of wine, we continue to sell very cheaply and we continue to have a great dependence on bulk," sums up Juan Manuel Bellver, director of Lavinia Spain, which has one of the most exclusive stores with the largest catalog in Madrid.

The price of bottled wine is 2.7 euros per liter on average, and 4.63 euros for still wines (without bubbles) with Protected Designation of Origin (PDO).

Domestic consumption, moreover, has hardly changed for a decade, below ten liters per person per year, compared to 22, for example, for the almighty beer.

"Where we have to make an effort is in the store, in the value of our product" insists the director of the FEV over and over again.

He points out that the ICEX promotions are on the right track,

“who has a commitment to doing coherent things thinking in the medium and long term”, and gives an example of the creation of quality seals such as Restaurants from Spain or the joint promotion of national wine.

But lifting the mark is not done in one or ten years.

France, he recalls, opened its first promotional office in China in 1945, under Mao.

In the domestic market, bringing wine to the new generations is a task that seems complicated in a country that identifies more with going out for a drink and where youth unemployment is the number one enemy.

The vocabulary that professionals usually use to describe wine, which sometimes resembles the slang of a cult of lunatics, does not help to break down barriers either.

The commercial dichotomy that reigns in the bar counters leads many consumers to invariably ask for a Rioja or a Ribera and close their eyes to other areas that also have quality wines.

And the scientific evidence of the harmful damages of alcohol make moderation an increasingly widespread recommendation, which leads the sector to a future that is looking gray as far as increased demand is concerned,

Javier Moro, president of Bodegas Emilio Moro (Finca Resalso, Malleolus, La Felisa), which markets some four million bottles among all its brands, believes that the sector has to face this drop in consumption by moving the product to the higher value ranges .

"We are billing 17% more with that orientation of making wines with excellent value for money, but observing trends very well."

But doing it globally, he acknowledges, is expensive.

The situation is not helping either, and only companies that can afford it avoid raising prices too much at the cost of penalizing their commercial margins.

Felix Solís, Director of Expansion and Marketing at Félix Solís Avantis, one of the three largest groups in the country together with Freixenet and García Carrión,

closed 2022 with a turnover of 360 million and some 300 million bottles sold.

"Sales have grown by 15% and volume by 5%, but the company's profitability has fallen by 25% because we have not been able to transfer the rise in costs to customers," he acknowledges.

Glass has skyrocketed and winemakers have few or no alternatives to changing packaging.

The cork, the packaging material, the price of the grape and the transport have done the rest.

Guillermo Penso, a telecommunications engineer who runs the Otazu family winery in Navarre, shares a similar reflection: "There is an inability in the sector to transfer the rise in prices to the consumer in a country very accustomed to affordable prices, where the fights are for pennies" .

This 2023 has started with new increases in the price of the bottles, which forces buyers to switch to lower qualities if they want to continue enjoying the wine.

"If you analyze the data from the PDOs, unsold liters can become a serious problem," adds Penso.

This does not seem to be the case: they export 85% of their wines.

On the other hand, other quality producers, such as the Alma de Carraovejas group (Pago de Carraovejas, Ossian, Viña Meín), have most of their clients in Spain.

Pedro Ruiz, his CEO, would sign to repeat a year as good as 2022. “It is difficult for us to meet the demand and we do not want to produce more, so we work with quotas.

We think it's the best way to adapt."

A few winemakers play in that other league, that of highly positioned wines, more valued by the consumer and much better paid.

It is a universe in which the illusion of scarcity floats, where quotas, which were previously only used by large houses like Vega Sicilia, are the order of the day.

"Either you produce more or you try to position the wines upwards, and that is what we have done, investing in the vineyard, improving quality," supports Ruiz.

The cellars of him,

airen grape

At the other extreme is the farmer.

The airén grape, the most produced in Spain and one of the most harvested in the world, was paid for around 17 cents in the last campaign in La Mancha, around 2.8 pesetas for the old ones.

“Because we speak in pesetas.

That alone gives you an idea of ​​what is happening here”, illustrates José Ugarrio, the person in charge of viticulture, from Asaja.

From the farmer's point of view, he says, the vineyard turns out to be a worse business every day.

"Year after year the vineyard area is decreasing."

our map

There are some 955,000 hectares in production and 47% are in Castilla-La Macha: “30 years ago there were 1.5 million.

Although production is increasing, there are more and more permanent rainfed crops, due to the lack of water”.

Bulk, an important part of the sector's income, however, leaves little money in the winegrowers' account, and even more so now, when the price per kilo is not updated with the CPI.

"On the other hand, diesel fuel, fertilizers have become more expensive... the law of the agri-food chain is not complied with, which tells you that no link can pay another the price of the product below production costs."

The norm, however, has more holes than a Gruyère cheese, because the production costs are difficult to quantify.

A family may not stop buying eggs, but it may give up wine.

In addition, if the French neighbors uproot thousands of hectares, they will also stop demanding so much Spanish bulk, reasoned from the agrarian union, which last week participated in a tractor-trailer in La Rioja.

The ministry has approved aid to encourage green harvesting next season, and almost all producing communities, with a few exceptions, plan to join the measure to lighten fruit vines for the 2023-2024 season.

Another possible alternative would be to distill to eliminate the surplus, but that could push prices down.

Not everyone agrees that they see difficulties in the outlook.

Félix Solís believes that the industry is changing, moving bulk towards bottled wine and creating more powerful brands that are beginning to be a reference, especially in varietal wine, "which has risen 12% in value and 7% in volume and has great potential in medium quality wines”.

In the higher segments and in the channel of hotels, restaurants and cafeterias, the return of tourism means that, on many occasions, there is a lack of wine.

And in terms of marketing, the boom in internet sales that was unleashed in the pandemic is beginning to emerge as clear winners.

"Supermarkets have also improved, they have purchasing product departments that take care of the range", assesses the director of Lavinia.

Another issue is that companies take marketing seriously,

export and sales, as is the case with many small wineries that have stopped investing or do not have clear successors.

There are also interesting flashes that make consumers begin to recognize the value of varieties such as Godello, Garnacha or Mencía.

“Consumers want fresher, fruitier wines… but that doesn't mean they're cheap.

That is the crux, in defending value ”, they conclude from the Spanish Wine Federation.

Climate change hits the palate

The trend is undeniable, no matter how much some winemakers insist on seeing it as a simple cycle.

Years like the past, which were extremely warm, are irremediably changing the world of wine, and Spain is a country that may suffer painful consequences.

Most of the world's wine regions are located in areas where temperatures average between 12 and 22 degrees during the growing season for clusters.

A study, collected by The Economist, describes that these are found at latitudes between 30 and 50 degrees.

However, as the planet warms, the bands are moving towards the poles and in the European case, they will shift the northern frontier of grapevine cultivation by 20-60 km every decade between now and 2050.

Grapes with more sun generate more sugar and alcohol content after fermentation, which leads to heavier and more unbalanced wines.

"But people want to drink lighter, softer wines, they are incompatible trends," says the manager of Bodegas Otazu, Guillermo Penso.

That opens the hand to increase the corrections of sugars and acidity.

A normal harvest in Ribera del Duero would begin on September 25: "Last year we started on the 13th," recalls Javier Moro, from Bodegas Emilio Moro.

The years of quality more or less repeat themselves, but it is clear that there is a climate change that brings harvests forward, which produces more extreme temperatures”. 

Everywhere the use of hybrid varieties, more resistant but offering worse qualities, is being studied.

The types of pruning, regrafting, support irrigation, limiting the thinning of leaves or meshes to shade the vineyard are tools within the reach of winegrowers, but training is lacking, they believe in the sector, so that the new uses reach everyone the corners.

Planting at higher elevations is also a good idea, on slopes that were once considered worse for cultivation due to cold or shade, which in turn detracts from plots with greater exposure to extreme heat.

In the Pyrenees, for example, there is an explosion of small wineries in the Pallars Jussà region that seek to protect themselves from thermal variability.

"If we do not take serious mitigation and adaptation measures, our vineyard will suffer in many areas of Spain.

Especially in the Mediterranean basin and in the south”, warns the FEV. 

Felix Solís, director of Expansión in the group of the same name, remembers that before, the rises or falls in temperature were mild, but now they have seen peaks of up to 50 degrees in La Mancha with losses of 30% of the crops.

The problem, they point out from the DOC Rioja, is that the measures that are taken end up changing the organoleptic profile of the wines: “In this way we will be offering things that are different from what the consumer expects.

There is a characterization of attributes of the grape that cannot be sacrificed”. 

Respecting the vineyard has its positive and negative part for the pocket of businessmen.

The impact on nature is motivating more and more winegrowers to stop torturing the soil with phytosanitary products and move towards a more respectful agriculture, a path that other countries, such as France, have been following for decades.

Regenerative viticulture seeks to turn around all the harmful transformations of farmers by making the land recover the lost life and thus increase its capacity to capture carbon and reduce its concentration in the atmosphere.

This, in turn, helps to promote wine tourism that is more aware of the natural and cultural values ​​of each territory.

But everything has a toll.

Yields per hectare drop, harvests become less predictable, and work in the winery becomes tense. 

mills and panels

Other circumstances that also have to do with the weather surround the vineyard.

Don Quixote fought against the windmills thinking that they were vile and cowardly creatures.

The winemakers, in a joint manifesto published last summer, pointed to a similar threat: "The uncontrolled proliferation of disproportionate energy production projects."

Uncontrolled renewable energies, they believe, can endanger the agricultural environment.

"Photovoltaics that occupy hundreds of hectares, large wind farms, with wind turbines 200 meters high, new livestock farms that generate bad odors that can affect wines or high-impact industrial estates."

Panels or mills may be more profitable for growers with low grape prices.

The balance, in short,

it can only occur with concessions by all parties.

In Spain, as the engineer Pedro Ballesteros describes in his book Understanding wine (Planeta Gastro), "good wine is a country under reconstruction."

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