Wine, Gastronomy, and the Spanish Economy
A land under vine
In early March of this year, a panel discussion entitled Wine, Gastronomy, and the Spanish Economy took place in Madrid, Spain. The forum was presented by ICEX Spain Trade & Investment, a government body chaired by the Secretary of State for Trade of the Ministry of Industry, Trade, and Tourism to a room full of ivy league MBA candidates. The chief goal of ICEX is to attract foreign investment into Spain.
Interestingly, the heart of the discussion around Spain as a greater investment opportunity focused on tourism, which naturally translates into wine and food experiences. The brilliance of the Secretary’s plan to promote this aspect as a selling point lies in highlighting the specific regionality of different Spanish growing regions. Rueda and Toro are geographically very close to one another, for example, but wine-wise, they are worlds apart.
As familiar as ‘wines from Spain’ actually is, both the concept and the brand, it is a market that’s equally as fragmented, and most quickly associated with Rioja (or La Rioja, to be correct), which is not surprising since La Rioja is the region with the highest number of registered wineries (over 860) and one that has benefited from some of the heaviest outside investment and longest production histories.
Spain has more land under vine than any other country, and its growing regions are spread throughout. There are 90 production Protected Designations of Origin (PDO) and 41 Protected Geographical Indication (PGI) wines. Each protects regional identities; from Galicia’s fresh, cool-climate whites to Atlantic-influenced, spritzy Txacholi’s, to Priorato’s powerful, elegant reds, to Andalucia’s Sherry Triangle and everything else along and inside that perimeter, including cava, rosé, and fortified wine. Regulating bodies create and monitor standards to guarantee that the wine from a specific area accurately reflects that area. Other agricultural and food products are similarly protected. The dedication to purity is further evidenced by the fact that Spain has most certified organic vineyards in the world at over 80,000 hectares (close to two million acres).
Tempranillo is the country’s most grown grape, and ‘still’ red wine (as opposed to sparkling or fortified wine) accounts for 70% of the value of Spanish wine sold worldwide. Spain is less well known for its whites, although some are glorious, especially albariño from Rias Baixas and verdejo and sauvignon blanc from Rueda. Airén is the most populous white grape, but is primarily used for distilling into brandy or for fortified wines and sherry production. Verdejo is the second most popular white variety.
A very short modern history
Spain has a 3,000 year long wine history that began, as so many regions do, with the Phoenicians around 1,000 BC. When the Islamic Moors arrived in 700AD, the industry ground to a halt until the late 1500’s since the Muslim religion does not permit drinking alcohol. After its liberation, the country’s wine industry began to reemerge, only to then suffer the effects of the Spanish Civil war, followed by the Franco dictatorship from the mid 1930’s through the mid-1970’s, when wine was only allowed to be made and used for church sacraments.
There were certainly no quality incentives for growers at this time, although a few forward looking producers such as Marqués de Riscal, Marqués de Murrieta, and Vega Sicilia remained dedicate quality, and their names live on to this day for this reason. When the Franco regime ended, Miguel Torres became a major player in bringing Spain to the world stage, and the EU wine reforms of 2008 introduced a new level of investment into the industry, allowing for more hygiene, technology, and research in winemaking, clonal selection, and vineyard care, which propelled quality levels.
Despite an arguably long production history, Spain’s modern winemaking history is very short, with development only really beginning in the 1970’s, aligning the country more similarly to the US and other New World countries. In addition to its turbulent political past, Spain also suffered from lack of local accessibility. Many wine producing regions are surrounded by mountain systems, and inroads either did not exist or did not allow for easy commercial activity. In the 1960’s the World Bank invested in improving the existing Spanish highway system and to build new roadways, resulting in the availability of more open markets. At one time a disadvantage, this prolonged relative isolation of individual wine producing areas offered preservation of regional distinction that today can be used as an advantage.
By 2016, Spain was the world’s largest volume exporter of wine, although most of that volume was comprised of bulk wine, which prompted other nations, and the French in particular, who went so far as to famously highjack Spanish tanker trucks to drain the wine into the streets as a form of protest, to make claims of flooding international markets and consequently lowering prices. More than two thirds of Spain’s annual production, around 24 million hectolitres, is sent to foreign markets. It is the third largest producer of wine in the world, after Italy and France who routinely trade places, but the value of Spain’s annual wine exports, around $3.3 billion, is still far from France’s or Italy’s at $10.3 billion and $6.8 billion, respectively.
A future centered on tourism
It has been said that the country is experiencing somewhat of an identity crisis and its history is undoubtably the reason for that conclusion, but where there is crisis, as it’s been so hopefully claimed, usually there also exists opportunity. Despite Spain’s quick pace of catching up with the modern wine making world, and its large export volume, the wine industry only makes up 2% of the current economy, and in many areas it is crucial to supporting jobs. The average price of Spanish wine abroad increased by 6.5% from 2016 to 2017 to $1.39 per liter, but is still much lower than the rest of the main supplier countries, whose price average is $3.28 per liter.
This means there is opportunity for growth. If not volume-wise, then price-wise as the Wines of Spain brand identity strengthens through its efforts in tourism. Already the plan seems to be taking root. Domestic wine consumption is some of the lowest in all of Europe, but the quantity of wine ordered in hotels and the tourism sector has grown since 2016 - surely as the result of efforts made by ICEX and the Trade Minister, who are so carefully promoting Spain as not only a whole, but as a sum of its parts.