Price cut hits Spanish wine export growth

Related tags Cent Table wine Spanish wine Spain

Spanish wine producers posted an impressive rise in export volumes
in the first eight months of the year, but an inexplicable 14 per
cent drop in the average price per litre meant that revenues were a
mere 4 per cent higher.

Spanish wine exports grew by 4.4 per cent in the eight months to August to €882 million, helped by a rise in sales to core markets such as the UK and Germany. But lower prices meant that value growth fell well short of volume increases.

The latest data from the Federacion Espanola del Vino (FEV) show that volume sales were 22.3 per cent higher during the period at 794.2 million litres, but that a 14.5 per cent slump in the average price meant that wine makers received just €1.11 per litre.

FEV said that just seven countries accounted for the lion's share of exports, led by Britain and Germany, which accounted for 14 and 19.6 per cent of sales respectively.

High margin denomination of origin wines registered a slight increase in volumes (up 2.6 per cent), but remained stable in value terms because of the fall in average prices.

Ironically, given the lower price of quality wines, it was table wine which showed the greatest surge in sales, rising 26 per cent in value and 37 per cent in volume. Cheaper table wine sales would normally improve during periods of high prices for quality wines, not the reverse.

The disparity highlights the serious problems facing the Spanish wine industry. This year's poor harvest, caused by the exceptionally hot weather in the summer, has led most Europe wine producing countries to increase the price of their wines, to compensate producers for the inevitable slide in volumes.

But Spain is the exception, prompting several farmers' groups there to criticise the decision not to increase prices, especially at a time when export volumes are booming.

Exports to the US this year have improved considerably, for example, with Spanish wines replacing French in many supermarkets and other stores following France's opposition (and Spain's support) for the war in Iraq.

For Spanish producers not to take advantage of this growing popularity by increasing prices is unfathomable, but perhaps reflects the continued fragility of the market there. Several years of vastly fluctuating prices related to bumper and insufficient harvests took a serious toll on sales of Rioja - Spain's most popular export wine - and producers there are perhaps concerned about a return to such uncertain times.

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