Spanish wines hit shelves at rock bottom prices to clear stock

By Gemma McKenna

Published: 21 July, 2014

Spanish wines will start hitting shelves at rock bottom prices of below £3.99 as exports drop by 3% in value despite increasing by 17% in volume.

Producers are struggling to clear inventory of the bumper 2013 harvest, ahead of 2014's crop, which is just months away, prompting the Spanish government to take steps to help bring the market into better balance.

Spanish wines are hitting shelves at greatly discounted prices of sub £3.99 Spanish producers are struggling to clear stock ahead of the 2014 vintageThe result of the glut is rock-bottom pricing for Spainsh wines, with export volumes soaring by 17%, and value for the same exports falling by 3%.

The growth in Spanish export volumes was led by a 30% increase in bulk wine with no denominated origin, thanks to a huge 33.7% drop in average price, according to Rabobank's Q3 Wine Quarterly report.

But exports to the UK of bottled wine with denominated origin grew by 15% in the same period.

Stephen Rannekleiv, executive director of Rabobank International's Food & Agribusiness Research and Advisory division, told Harpers.co.uk: "The Spaniards are indeed taking their pricing down to move inventory. Through April, the average price of bulk wine (w/o DOP) was down 34%, which led to a 29% increase in volumes. The 29% increase is a good start, but there is a lot more ground to cover. There is still a lot of juice in the tanks and the 2014 harvest is looking quite healthy so far, from what I hear."

Kevin Wilson, wine buying and vineyard investor at Kingsland Wines & Spirits, told Harpers.co.uk: "The major Spanish wineries and cooperatives are really feeling the pressure at the moment, with there still being lots of wines in tank and a big vintage looming in front of them, we are seeing prices lowering by the day, especially on generic red and red varietals. This is in total contrast to two years ago when we had the very small 2012 vintage, supply was limited and pricing doubled overnight. There were even wineries in Spain importing generic red wine from Chile following the very small 2012 harvest.

"We are very fortunate in that we work very closely with our supply partners in Spain, and we always take a long term view in our relationships. There could be interesting pricing which would help some of the retailers in their battles against the hard discounters in the UK market, so we could be seeing some offers on shelf below £3.99 shortly."

Felíx Solís-Yanez, president and chief executive of Felíx Solís Avantis, which owns a number of well-known brands including Viña Albali and supplies Asda with its £3.50 Consigna range, said Spain's 2013 harvest made it the "largest wine producer in the world, while in previous years we were second or third place in the rankings".

It is forecasting its stocks will go up by 20% on 2013, once its new 'wine year' starts in August 2014.

The situation has prompted Spain's Ministry of Agriculture to step in to help regulate the market by ordering wineries to distil 4 million hectolitres of table wine - this will be announced within days.

Solís Yanez said: "With this measure, it is expected that offer and demand [will be] regulated."

Last month Justin Knock MW, wine consultant at Encirc told Harpers.co.uk: "Spain is still pumping out that monster vintage. They're sweating bullets as they're three months from the next harvest and they still have a gazillion litres of wine. Prices have halved in the last 12 to 18 months."

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