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| September 1st 2011 |
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| Castilla-La Mancha’s new priorities |
By Jürgen Mathäß
The structural problems of the world’s biggest wine region have been a headache to both the EU and the region itself for more than two decades. The former general director of the Ministry of Agriculture, Francisco Martínez Arroyo, however, takes a positive view. |
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The Castilla-La Mancha region of Spain has the distinction of being the largest winegrowing acreage in the world, with more than 450,000 hectares under vine. The region is characterised by its high proportion of relatively economically rigid and very large cooperatives, which still market only a small share of their harvest as bottled wine. For decades now, a large portion of the vineyard area has been occupied by the very simple white variety Airén, grown on a large portion of the vineyard area. Altogether, there are eight D.O. regions, which have a generally low international profile. Among them is the largest D.O. in Spain, La Mancha, with a vineyard area of 190,000 hectares.
Considerable modifications to the winegrowing structure have been carried out with millions of euros provided by the European Union in recent years. With the aid of EU subsidies for clearing, 52,000 hectares of vineyard area were uprooted. Restructuring measures took place on another 120,000 hectares. The measures in the latter case revolved mainly around the replacement of old goblet vines by irrigable wire frame ones; at the same time, the old Airén and Tempranillo vines were replaced by new Tempranillo vines, along with international varieties.
Unfortunately, making single vineyards more profitable by modernisation does not resolve the problems of the whole region, if such modernisation work results in raising the overall production volume, which, even before work began, was already too large. Spanish critics of such projects complain about the fact that new vineyards are being planted with the aid of substantial subsidies, which mainly bring in high yields, thus aggravating the structural problems instead of solving them. With regard to these accusations, Francisco Martínez Arroyo explains: “The producers decided on each individual vineyard. We did not do so as the local government. What the vintners wanted to be uprooted was uprooted; what the vintners wanted to plant anew was planted anew.” He explains that today, there are 90,000 hectares of wire frames in Castilla-La Mancha, supporting a wide range of international varieties. “Many wineries now pay the vintners more money for the newly planted varieties than for the grapes from the old vineyards, even when they achieve higher yields than the older, non-irrigated facilities did. In the process, a solid prerequisite has been established for ensuring a future to the vintners affected.”
In order to support the marketing, the local government decided a couple of years ago to collect money through a mandatory contribution from the producers. The money was to be deployed for promotional actions aiming at draining the barely diminished sea of wine. The Fundación Castilla La Mancha Tierra de Viñedos, created for this purpose, soon had a two-digit million euro sum at its disposal. Since no agreement could be struck in terms of how the money was to be used, there was no contribution collected two |
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years later. The Minister of Agriculture took over the direction of the Fundación itself in 2009 so as to carry the work forward.
To begin with, the Vinos de la España de Don Quichotte brand along with a corresponding logo were developed. Among other things, the aim was for all wine bottles to display this logo, creating a high recognition value for the wines from the region. Furthermore, a worldwide promotional programme with a plethora of action plans in various countries was developed, naturally promoting the same logo. The ministry sees the priorities of the programme mainly in “the new growth markets. Roughly 80% of the funds are invested outside Europe, primarily in the United States, Russia, Japan and China. That amounts to around €6m. Twenty percent of the funds flow into measures in Spain and in Europe.”
This resource allocation is contentious inside the region, since its principal customers, with an export share of more than 60%, are European countries. As to the question of why the activities do not take place where the big wine markets are situated, the director general replies: “First, because we already have our customer structure in place in the European countries. In contrast, the countries I mentioned before are important growth markets where we anticipate quick results given the potentially high growth rates there. Secondly, the European Union grants substantial subsidies for activities in third countries, so that our own funds can have a bigger impact if we do not deploy them in the EC.”
The region has achieved a noticeable jump in sales in the last years, as proven by the export figures. Red wine in particular became scarce on the market after the last harvest, because purchase options prevented the marketing of existing wines. These temporarily blocked wines have gradually become available on the market again, so that red bulk wine is again on hand. Some experts, however, assume that the good sales situation currently is, at least to a considerable extent, the result of the globally low harvest yields, not least for the 2010 vintage. That is not how the ministry views it. It explains the success by the promotional activities, extensive restructuring and other internal improvements: “The crux of the matter is we must strengthen our producers and our marketing on all levels. For example, we promote the collaboration of the cooperatives among one another in terms of marketing,” says the director general. “Whenever possible, they should market in common and not mutually undercut one another’s prices. What we already noticed is the sales of Castilla-La Mancha have risen exponentially this year. We sold more than 10 million hectolitres of wine and must in the last 12 months—more than half of an entire harvest. That is not only due to the fact that our wines were easier to sell worldwide after weak harvests in Italy, France and Chile.” A clear export improvement is actually becoming apparent in a long-term comparison with 2000, despite price reductions.
The share of must, alcohol and bulk wine – the areas in which Castilla-La Mancha can only compete on price – is still dangerously high, however. The share of bottled wine was below 20% of the entire export sales in 2010. According to Martínez Arroyo, the ministry is working to strengthen the Castilla-La Mancha brand. He says the sale of must, alcohol and bulk wine should decline on a long-term basis, whilst the proportion of the prestigious bottled wines, by means of which the region may distinguish itself, need to rise. As it happens, the proportion of bottled wine is already increasing outside Europe, where the image of Castilla-La Mancha is more neutral. In Europe and even in Spain itself, the name of the region frequently arouses negative associations, since the region is linked to outmoded production technologies and the poor quality of the past. “By the way, it is wrong to believe we mainly sell inexpensive wine in countries outside Europe,” says Mr Arroyo. “In Europe, the price goal stands at perhaps €2.50 or €3.00 per bottle; in Spain it’s even a bit lower. In China, on the other hand, we can sell at a higher price.” Although this also takes in a great deal of bulk wine, it is also considered a success story: “Five years ago, nobody in Castilla-La Mancha sold bulk wine to China. Roughly 20 cooperatives and 40 private companies are doing so this year.”
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