Spanish wine industry seeks more cohesive structure to raise its international profile

Wednesday August 02 2017 by Sharon NAGEL

José Luis Benítez, general director of the Spanish Wine Federation
As guest of honour at this year’s Vinexpo show in Bordeaux, Spain is ramping up its international profile. Vitisphere spoke to the general director of the Spanish Wine Federation, José Luis Benítez, about the industry’s plans for the future.

Frost affected Spanish vineyards in April.  Do you know the extent of the damage and its impact on wine production this year?

The upper part of the country, from Galicia to Rioja, was affected but in the South, there was no damage. Even within the same vineyard, damage varies according to the type of grape variety. Appellations that were affected include Rioja, Ribera, Rueda and Bierzo, with differing degrees of crop reduction. There is also another potentially negative factor affecting mostly southern parts of Spain and that is drought. It has been a relatively dry winter and spring, and May was hot.

Has uncertainty caused the bulk wine market to become more active?

The latest figures, to March, reveal an increase of nearly 19% in prices for bulk wines. Obviously this is not a consequence of the frost, the increase had already occurred. We don’t know what will happen now, what the impact of a combination of frost and drought will be and also how much of an effect the frost in France and Italy will have on demand for Spanish bulk wines. The increase in price so far can be ascribed to global demand for Spanish bulk wine. The quality and price of Spanish wines are still very attractive for international buyers. Some major markets like the United States and Russia are showing strong growth. By Spanish standards, last year’s crop was not that big and was lower than expected so prices began to rise significantly compared to the previous year.

How do you explain Spain’s ability to produce wines at such low prices and how long can it last?

The short answer is, we’ll see! We need to remember everything that has happened in Spain over the past few years. We have undergone an extensive programme of restructuring, both within a national framework and as part of the CMO. These measures have strengthened the competitiveness of the Spanish wine industry and boosted production, which has also been helped by irrigation. The result has been improved quality and higher yields and therefore better competitiveness. This is true not only of Castila La Mancha but also in many traditional wine regions, in appellations of origin. Greater focus is being placed on growing quality grapes. Also, Spain’s climate – which is hot and dry – reduces the need for agrochemicals compared with other parts of Europe, hence reining in costs. Similarly, warm temperatures produce higher sugar levels and therefore reduce the need to chaptalise. Sugar also has a cost. If you have healthy grapes, there is less need for some types of viticultural management and winemaking practices. How long this advantage will last, we don’t know, and of course our advantage may turn into a disadvantage in the future with climate change. Some parts of southern Spain already seem to be suffering. Remaining competitive whilst at the same time increasing our prices, especially for bulk wines, is a major challenge for us.

The FEV has highlighted the need to improve the value of Spanish wine exports. How does the industry intend to achieve this?

We have to work on several aspects. One of these involves the Organización Interprofesional del Vino de España and promotion of wine in the domestic market. We need to improve people’s knowledge of wine and demand. We also need to think about segmentation. We need a lot of bulk wine – it would not be realistic to say that we don’t and it would be ridiculous to say that we only need bottled wine. But we can work on segmentation and improve the quality of bulk wines, with varietal labelling for instance. We are working on ways of offering the international market different categories of bulk wines. There is also potential for bottling in Spain and developing brands. We want to promote Brand Spain in the domestic market. We have a lot to do!

Spanish pricing has caused tension with French wine producers. How would you describe relations between Spain and France and how would you like to see relations evolve in the future?

There is tension on some levels but at others, the relationship between the two countries is as it should be now and in the future. We must advocate common sense on both sides. Events that have taken place are nonsense and not useful for anyone. As the former French Minister of Agriculture Stéphane Le Foll pointed out, there is a deficit of wines without a geographical indication in France, which explains why wines are being imported from Spain. This is the reality. Some French shippers are buying low-priced Spanish wines and bottling them themselves to meet demand in supermarkets and other places. The labelling issues that have arisen are not the fault of Spanish wine producers, but of the French authorities. They are responsible for traceability and labelling.

French producers must also realise that the Spanish are not dumping wines. The truth is simply that Spanish wines are cheaper than French wines at the moment. It is not good for us either, because we would like to see our prices rise and be on a par with those of French bottled wines! We must work together and that means ensuring good practice on either side. I think Spain still has a lot to learn from France, particularly with regard to commerce.

A joint committee between the two countries has been set up. What are your hopes/aims for the committee?

The FEV general secretary will be part of this committee – I consider him to be one of the best European specialists in the wine trade. The committee as a whole can be instrumental in promoting good relations between wine producers and the wine trade in both countries and solving problems that occur from time to time. We already have a committee for horticultural products and it seems to have helped in avoiding problems there used to be between French and Spanish producers of fruit and various agricultural produce. This is a model for wine. Problems are resolved by talking not by burning things or other methods.

Wine consumption has risen recently in Spain. How do explain the rise and do you expect this trend to continue?

I think that 2015 and clearly 2016 were a turning point for the consumption of wine in Spain. After several years of economic crisis and a drop in consumer confidence, the Spanish stopped going out as much. The on-trade is an essential part of wine consumption, so obviously there was a drop, not only in wine consumption but for other drinks and foods consumed outside the home. With the end of the crisis and the change in consumer perceptions, we think we have now reached a turning point. Last year there was also a record number of foreign tourists to Spain so this has also helped consumption. Economists are optimistic as to prospects for growth over the next year in Spain. I expect the consumption trend to continue for several years.

What is the industry doing to encourage the trend?

The Organización Interprofesional del Vino de España was created in 2014. For the first time in wine industry history, we are gathering a significant amount of money to develop a promotional campaign in our domestic market. This is one of the main objectives of the Interprofesional, we want the growth in consumption to be sustained. The campaign should start by the end of the year and last for at least three years. We then expect to renew it for another three years. We are currently finalising the campaign strategy and will then be launching the tenders for agencies. Our target audience is thirty to mid-forties, people who drink wine already and are professionals that love wine and food. This will be one of the major focuses – we want to make wine more relevant to consumers. The budget is likely to be in the range of 5 million euros yearly so we won’t be using TV advertising.

What contribution has the Interprofesional made to the Spanish wine industry and what are its other objectives for the future?

Obviously this is the organisation’s main objective but it also has many other roles such as research and development where it is designed to liaise with all the branches involved in R&D. It will also focus on information, wine and health policies, aspects of the value chain from the grape to the bottle – this will involve developing contracts and bulk wines for instance. The new organisation has been slightly controversial, some wineries have refused to pay the levies. It is still too early to speak about impact because it took a couple of years to develop statutes and targets for the future and work only really started a few months ago.  

Last year the FEV announced it was strengthening its organisation. Can you explain how and why?

Obviously, my own position is one of the consequences of these changes. We want to reinforce our presence in our market. The FEV represents more than 75% of the Spanish wine industry – this is a lot but some of our members do not necessarily feel they are fully integrated into the federation whilst other wineries are not present. We want to change our model and our mindset. Our members are companies and groups of companies and we want to have a presence in all regions. We also need to reinforce the international aspect of the Federation via the CEEV for instance. Pau Roca has been designated to fulfil this role. We are being instrumental in the work of the Interprofesional. We want the Federation to be useful to its members, provide them with information and many other things. We want to have a more pragmatic approach.

Is the Spanish wine industry becoming more structured?

This is one of the objectives of the Interprofesional. We have a fairly fragmented wine industry with various representative bodies and we need to improve cohesion. We need to work in the same direction; this is something the entire Spanish wine sector needs. We didn’t have any regular dialogue with, for example, the growers’ associations and we need this at both regional and national level. We feel the sector needs to be structured in a more logical way so that organisations and tasks are not duplicated; we need greater rationalisation.

The FEV has introduced the Wineries for Climate Protection certification scheme. What are its goals?

To protect the future of our wine industry, we clearly need to address climate change. We want as many wineries as possible to join the scheme, big and small. The scheme requires companies to improve management in terms of efficiency, water management both for production and waste, CO2 emissions, energy savings and the treatment of residues. There is a protocol companies must comply with and they are audited by an external certification company. Every two years, there need to be tangible improvements. The aim is not only to combat the effect of climate change but to make wineries aware of the problem.

What other challenges must the Spanish wine industry overcome and what will the FEV’s priorities be in the future?

Increasing the value of our wines is a major priority, not just bulk wines but also some premium wines whose price tag is still lower than their equivalents in the international marketplace. One of our medium-term goals is encouraging the consumption of wine in Spain; another is responding to climate change. We also want to raise the profile of Spanish wines in the international market so that consumers not only think of Spanish wines for their value for money but are prepared to pay for higher quality. We don’t have the same level of awareness as France or Italy in markets like the United States. We have to become better known. 

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