SPAIN REGIONS: Viva moderno!

Despite a slight drop in volume sales, the Spanish category is a dynamic place to be, thanks to significant investment and innovative winemaking. Fionnuala Synnott reports

Spanish volume sales are down by 3% in the UK off-trade as rival categories such as Italy steal market share. Value sales are up largely thanks to the popularity of premium Rioja but other regions are also attracting attention. Spanish sommeliers and consumers alike are looking beyond the traditional offerings of Rioja and Ribera del Duero for something a little different and Spanish wine lists are moving on to the less well-known eastern areas of Spain such as Valencia and Priorat, which are seen o deliver value for money.

According to Natalia Celemin, brand manager for Freixenet, Priorat is one of the up-and-coming wine regions of Spain, “where the unique terroir produces extremely concentrated, complex and age-worthy wines.” Meanwhile, La Mancha, traditionally known for producing volume wine, now has an interesting mix of traditional cooperatives and new showcase wineries, often owned by quality bodegas in Rioja.

There is also increasing interest – both domestically and internationally – in Toro, Navarra, Rueda, and Rias Baixas. These regions have attracted considerable investment from producers, including established Riojano bodegas that relish the relative flexibility of these DOs. Faustino, for instance, began developing the regions outside Rioja in the 1990s. Lisa Duckenfield, marketing manager at UK agent Cellar Trends, says: “We have been able to push the boundaries as the DO rules are more flexible outside Rioja. Having a large company coming into an area is also good for the region as it leads other groups to innovate and consider the quality of their product.” Spain has also witnessed the emergence of a number of boutique wineries built with money from outside the industry – with many people who have made their fortune in construction investing in wineries.

A world of its own
Yet despite Spain’s potential, so far investment has largely come from domestic sources with few international companies (apart from notable exceptions such as Pernod Ricard and Laurent Perrier) venturing into the country. Louise Steel, category controller at Waverley TBS, explains: “Foreign investors are likely to invest where they know they can build brands. Spain has great potential due to its regional strength and the excellence of its fruit but, with the exception of Torres, Cava and Rioja, its brands are currently underdeveloped.” The DO rules, combined with linguistic and legal barriers, can also be off-putting for large multinationals. Miguel Torres, marketing manager for Torres, adds: “The Spanish wine industry is its own world with its own special rules. There are a lot of regulations and you have to invest for the very long term. Big wine groups tend to focus more on New World countries because it is easier to work there than in the DO regions.”

But it is not just up-and-coming areas that are attracting investment. Funding continues to flow into Rioja with the likes of Félix Solís investing in the DO in recent years. Félix Solís’s latest project is the Fuenmayor winery in which it has invested around e30 million. According to Félix Solís Ramos, international sales director, this is one of the largest projects that has taken place in La Rioja lately. He says: “With a total production capacity of 15m litres of wine, warehousing capacity for over 15m bottles, as well as 15,000 barrels, it is one of the most ambitious projects in the region.”

Although there has been a boom in regional wines in the Spanish domestic market, it remains to be seen whether this trend can be exported. In the UK, Rioja continues to drive sales, making it difficult for other Spanish regions to build significant market share. Alex Cannetti, business development manager at PLB, feels that Spain, when compared to other wine-producing countries, is still quite a conservative category, largely dominated by Rioja. He says, “Not that much has changed. At around 2.6m cases, Rioja accounts for nearly 50% of exports to the UK.” Chuck Cramer, assistant director, Wines of Spain, attributes Rioja’s success to the strength of its brands. He says, “Rioja has excelled because brands such as Faustino and Campo Viejo are driving the category. Outside Rioja, regions need to push their brands and work harder to increase their market share.”

There is some debate about whether UK consumers know enough about Spain’s geography and language to be able to relate to its wines on a regional level. Adrian Atkinson, UK wine development director at Pernod Ricard, says: “Unlike the New World, where you can talk about regions in terms of their brand equity, in Spain, producers have to operate a long-term strategy offering the right wines at the right price instead of focusing on the region.”

Meanwhile, Bill Breen, Codorníu’s MD, thinks that Spanish wines should have “sensible” ethnic cues so as not to be too complex. “Today’s consumers want more than just a brand – they want a story. Spain’s future shouldn’t be based on blockbuster wines called Mañana, priced at £3.99 with a distribution of 500,000 bottles, as this is a very short-term view of the market,” he adds.

Some wine companies prefer to build brands rather than market their wines by region. Richard Macadam, MD at United Wineries, the largest distributor of Spanish wine to the UK market, feels that brands reassure consumers and can lead them to trade up within a category. He says: “We have to accept that the majority of consumers don’t want to be connoisseurs and are put off by jargon on labels. For many consumers, the comfort factor is high up when deciding what wine to buy – you have to meet consumers on their territory. Each region needs to deliver something that the consumer wants.”

Rafael Masoliver, general manager and founder of the SWD Group, feels that UK buyers are holding back the category. He says: “The market is demanding modern wines but buyers are often quite traditional in their outlook.”

This appears to be backed up by recent Drinks Insight research commissioned by Wines of Spain, which shows that consumers have a greater understanding of Spanish regions and wine styles than UK buyers think. But, according to Cannetti, regional marketing prices importers out of the market by pushing prices up. For instance, wines from Rueda have become more expensive as they have grown in popularity among Madrileños.

It appears that the UK market version of Spain is more conservative than the domestic market. But this is changing with certain on-trade venues breaking the mould. “Away from the supermarkets, on-trade venues such as Brindisa are creating interest in esoteric wines”, adds Cannetti. Keith Lay, marketing director at Ehrmanns, comments: “Although regional marketing doesn’t translate immediately there are elements that will work within certain parts of the UK. We have seen listings for La Mancha but it is too early too tell whether this is filtering down to consumers.”

Beyond Rioja
As well as moving beyond the geographic confines of Rioja, Spanish winemakers are moving beyond the classic Rioja style in a bid to attract new consumers to the category. According to Steel at Waverley TBS, instead of posing a threat to classic wines this modern style adds to Spain’s complexity. Anne Vallejo, PR director for Marqués de Cáceres, agrees: “One of Spain’s assets as a wine-producing country is that it is both traditional and modern at the same time. In our experience, younger, fruit-driven wines such as young whites, rosés and Crianza reds tend to appeal to younger consumers while the more traditional style gran reservas attract connoisseurs.”

According to Macadam, today’s consumers are looking for more flavour and fruit character. “They want something smooth and soft without too many edges – until now there has been too much reliance on alcohol and oak. We are trying to make Spain relevant to future generations. This is not to say that Rioja has had its day but we don’t want to be seen as a producer of classic wines for a classic palate.” Moving away from heavily oaked, oxidized wines needn’t mean losing the personality of the wine.

Torres comments: “Modern Spanish wines will taste different but they will also be easier for consumers to appreciate.” Lindsay Talas, deputy buying director at Thierrys, feels that having lots of different styles of wine will attract more people to the category.

“It is great to see more roble styles developing,” she says. Bodega Aranleón, based in the region of Utiel-Requena, is trying to introduce new consumers, particularly abroad, to Spanish wine. “We wanted to make interesting wines from blends of indigenous grapes. Our flagship brand Solo comes from the Utiel-Requena region and is made from the Bobal grape. We wanted to change the reputation of the region, which used to be known for making bulk wine,” says Maria Sancho, export director. Sancho is confident that the new generation of winery owners, who tend to be graduates from agricultural schools rather than the heirs or heiresses of family businesses, can build Spain’s profile abroad. She says, “In the past, owners tended not to have a technical background but we have the knowledge to be able to communicate directly with importers and are therefore capable of adapting more quickly to the demands of the market.” Sancho feels that old school wine producers don’t have the capacity to adapt the wine, package or their sales technique whereas the new generation is capable of translating new trends from Spain to export markets such as the UK. But Miguel Torres junior does not think that change can come overnight. He says: “It takes a lot of investment and years to establish a winery. Most wineries that try to go fast don’t work so well. I don’t expect to see any major changes in the short-term but the new wineries are bringing life to the category.”

The family-owned bodega has recently launched Salmos, a Priorat wine, and has plans to open a new single varietal winery in Penedes this summer. The family have also made no secret of their search for land in Rioja on which to build a winery.

One of Spain’s great strengths is its indigenous varieties. Tempranillo, in particular, has gained recognition abroad and is popular among UK consumers, while other varietals are slowly raising their profile. Sarah Pollard, brand manager at González Byass, says: “We are definitely seeing more interest from buyers in certain varietals such as Verdejo but it is a question of making them accessible to the consumer.”

As with other countries whose varietals are difficult to pronounce, the Spanish wine industry is divided as to whether to use indigenous or dual international varietals. Alan West, MD of the Oakhouse Wine Company, thinks that putting more famous varietals on the label is a commercially positive move. Duckenfield agrees: “We need to be able to use both single and dual varietals in order to create specific blends for specific markets.”

Value and variety

So Spain can certainly offer an extensive variety of wines from several wine-growing regions, but the challenge is to raise awareness of them. Atkinson says: “There are opportunities for a series of premium regions that already have a little equity such as Penedès, Navarra, Rias Baixas and, to a certain extent, La Mancha. Spain should be building on these strengths at all price points.” Thierrys’ Talas thinks that retailers will play a significant role: “Retailers looking to diversify their ranges are starting to look at own-label wines from regions outside Rioja. This will make consumers more aware of the different Spanish regions.”

Meanwhile, West feels that Spain’s greatest strength is the value it offers consumers. “The money that Australia would spend on marketing, Spain spends on subsidising its wine prices. Large regions such as La Mancha and Valencia produce fantastic wines at around e1 or e1.20. While the heavyweights remain strong and dominant, the exceptional value available in these other regions is giving them access to the UK consumer.”

However, as with many categories, it is difficult to get consumers to trade up unless you own a big brand. Talas says: “Spain has a lot to offer the consumer but it is hard to get past the £5 price point unless you are Rioja, Torres or Cava.” Spanish brands are still under-represented  (there are still no Spanish brands in the world’s top 20 wines) but, judging by the number of launches taking place, this is not likely to be the case for very long. Hopefully, these new brands will persuade buyers and consumers alike that there is more to Spanish wine than Rioja.

© db April 2007