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Quality vs Quantity – What Works for Wine Exporters?

In the past few years, the global wine market has witnessed significant disruption. The emergence of new wine markets like the US and China has led to a shift in wine economics. Historically, wine production and consumption were concentrated in a handful of countries. United States, China, France, Germany, and Italy used up half of the wine consumed in the world in 2016, for example. Whereas wine production is primarily dominated by three countries — Italy, Spain and France produced nearly 140 million hectolitres of wine in 2016, equivalent to around 50% of world production (see Figure 1).


Figure 1  World Wine Market
Millions of Hectolitres – 2016

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Estimated to be worth about 30 billion euros in 2018, wine export is also dominated by France, Spain and Italy. However, there is a clear disparity in revenues generated from exports between leading exporting countries. As shown in Figure 2, Spain has become the world’s biggest wine exporter which is indeed a significant achievement. Yet the stark reality is that France earn far more than Italy and Spain from its exports in terms of euros per liter.

Put another way, French wine exporters earn three times more than their Spanish counterparts. Why?


Figure 2  Top Wine Exporters (2016)

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Wine exports are currently dominated by bottled wine in most countries, but bulk-wine exports (i.e. unbranded wine bought in containers) are also common. The fact is exporting bottled wine is far more lucrative for wine-producing countries. Bottled wine exports account for a half of the volume exported worldwide yet almost 75% of the value generated from wine exports.[1]

Spanish wine exports, however, are still dominated by bulk-wine. In 2015, Spanish bottled wines accounted for 33% of volume for all Spanish wine exports and 61% in value, while the bulk meant only 20% in value and 58% of volume. In 2015, the average price of a liter of bottled wine was $2.25 per liter, more than five times the price of bulk-wine (0.40 USD per liter).[2]

It is clear that bulk-wine is depreciating the value of wine exports in Spain. Bulk-wine is either mixed with other wines and sold under foreign brands or sold unbranded in restaurants and bars. Either way, the country exporting bulk-wine can hardly reap any marketing rewards. Therefore one may argue that Spain must try to weaken its bulk-wine industry in favor of making bottled wine.

Yet the major importers of Spanish wine must also be examined before reaching a conclusion. Although it is consistently ranked among the top wine producers in the world, France has been the biggest importer of Spanish wine in terms of volume. In fact, France imports around 75% of its wine imports from Spain and 25% of Spain’s wine exports go to France. This is arguably because most (over 85%) of the Spanish wine imported by France is bulk-wine and Spanish bulk-wine is often mixed with French wine or branded and sold by French companies.

This practice leads to low revenues generated from wine exports to France. France and Portugal imports from Spain represent the least values in terms of USD per tonne. In 2016, the USA paid over $4500 per tonne of Spanish wine on average, which is almost nine times the amount paid by French importers (see Figure 3). Unsurprisingly, the vast majority (around 70%) of Spanish wine imported by American companies is bottled wine.[3] This discussion suggests that Spain should attempt to transform its wine industry in order to export more bottled wine. But the problem here may require a more holistic approach.


Figure 3  Spanish Wine Importers (Spending per tonne, 2016)

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One should ask why and how French companies are able to gain high earnings selling branded wine that occasionally include wine originating from Spain. For example, it is reported that France earned €5.91 per liter of exports (bulk and bottled wine) in 2015, far more than even what Spain earned for its bottled wine. These figures signal that Spain may suffer from a marketing problem. Bottled Spanish wine does not enjoy the same status as French and Italian wine.

Underlying Issues & Solutions

This phenomenon could partly be explained by historical associations. Yet it is also known that a particular strategy has been pursued by the European Union and Spanish wine producers to maximise the production level in the country. For example, the European subsidies that poured into the Spanish wine industry up until 2008 supported Spanish vineyard owners to increase production by aiding distillation processes. Thanks to such policies and cheap labor, along with relatively low taxes, Spanish wine makers have managed to sell wine at a lower rate than their French or Italian counterparts.

Paradoxically, this competitive ability to lower prices might now be damaging the wine industry in Spain. Low prices may further enhance the country’s current reputation as a bulk-wine producer and hurt its efforts to improve the reputation of Spanish wine. After all, the strategy mentioned above has not helped Spanish wine producers market their product abroad more effectively nor establish Spanish wine as a quality brand.

As seen above, it is clear that bulk-wine is devaluating Spanish wine exports. Spanish wine producers are encouraged to sell their products in bulk, rather than creating distinctive and powerful brands and exporting quality bottled wine. It can be advocated that Spain must instead specifically target emerging wine markets, such as the United States, Canada and China, where consumers seem prepared to pay premium prices for Spanish bottled wine. On one hand, all relevant stakeholders in Spain must implement a holistic strategy to encourage wine producers build reputable brands and export bottled wine. On the other hand, Spain must focus on regions that pay the most for its bulk-wine (i.e. Northern Europe and North America) instead of its traditional bulk-wine markets, such as France and Germany.

Within Europe, there are still opportunities for growth, especially in the United Kingdom and Switzerland, where consumers pay relatively more for Spanish bottled wine. The UK consumers even seem to favor Spanish wine over Italian wine and wine is getting increasingly popular in the country. Hence Spain wine exporters should make every effort to increase the demand for their bottled wine in the UK, for example. This being said the European market is largely saturated and increasing sales might prove difficult in a market already dominated by France and Italy.

A more viable approach might be targeting developing countries with untapped wine consumption potential and limited local production. The developing countries that share historic ties with Spain in Latin America would be the best markets for this expansion policy. Portugal’s implementation of an identical strategy was met with resounding success. The European country strengthened its commercial ties with Angola, a former Portuguese colony, and as a result, benefited from the country’s economic growth. Until 2015, Angola was the biggest importer of Portuguese bottled wine, with the Portuguese wine market share estimated to be around 90%.[4] Even though local demand decreased after the decline of global oil prices, Angola remains one of the biggest importers of Portuguese wine.

Most importantly, Spanish wine producers must either create unique brand identities from scratch or revitalise their tired brands, along with launching successful marketing campaigns to help enhance their reputation abroad. The country could also look into establishing regional brands like Bordeaux and Rhone in France and Port wine in Portugal.

Countries looking to follow in the footsteps of Spain should not fear specialising in bulk-wine production. Exporting bulk-wine can be useful to enter the global wine market. But this strategy should ultimately help support a transition towards the more profitable bottled wine. In addition, up-and-coming wine exporters should explore growth opportunities in developing countries instead of getting into harmful competition in more established markets.

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[1] International Organisation of Vine & Wine (2017) State of the Vitiviniculture World Market 
[2] Carmen Valverde (1 April 2016) US Department of Agriculture FAS – GAIN Report No: SP1607 
[3] FAO (2016) Detailed Trade Matrix. Access: http://www.fao.org/faostat/en/?#data/TM
[4] Macauhub (2 July 2015) Angola Continues to Prefer Portuguese Wines

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Karim Haidar is a recent graduate from the National Institute of Applied Sciences of Lyon.

The views and opinions expressed in this article are those of the author(s).

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About the author

Karim Haidar is a recent graduate from the National Institute of Applied Sciences of Lyon.

The views and opinions expressed in this article are those of the author(s).

More from the author

Publish articles

Inquisitive university students and recent graduates are welcome to collaborate with our team to produce insightful articles.