Growers in Catalonia are to launch strike action in September over a dramatic fall in Cava grape prices.
Grower union, Unió de Pagesos (UP) said the prices large Cava companies pay for grapes had plunged by as much as 28% this year.
Strike action has been tabled for September 5th. It comes after several hundreds of growers from three grower associations and unions took to the streets of Vilafranca del Penedès in August to protest against what they described as economically unsustainable cost-cutting measures.
Large Cava companies including Henkell-Freixenet, Codorniu and Garcia Carrion (Jaume Serra) determine the prices paid for grapes.
Talks held between Cava producer Henkell-Freixenet and growers in late August broke down after the UP said the company refused to raise prices to 2018 levels.
It said Henkell-Freixenet had offered to pay €0.30 per kilo for grapes with a potential alcohol level of 8.5%. Rival producer Codorniu has dropped grapes prices to €0.35 per kilo, and to €0.44 per kilo for organic grapes.
Henkell-Freixenet blamed the low output in the 2016 and 2017 vintages for cutting grape prices, which it said had resulted in a “high and disproportionate increase of approximately 125% in terms of costs and wine prices”.
“The situation has caused several imbalances in the markets and has negatively influenced the competitiveness of our Cava, especially in terms of exports,” it said in a statement to Meininger’s. “At the same time, this situation has generated a high surplus of product in the whole sector, which, in parallel, has put pressure on the wine market.
“Given this scenario, Freixenet is committed to maintaining a more stable pricing policy that benefits the entire cava and local wine sector in a short and long term. The company is also committed to adapting to demand and supply in the sector.”
Freixenet Group’s net profits to the year ending April 2018 had plunged from €8.4m in 2017 to just €1.06m. Codorniu’s financial figures during the same year also show a fall in Cava sales.
Catalan wine institute Incavi has voiced support for growers, but it warned that excess stock in the market showed there was a growing imbalance in supply and demand for Cava.
A 12.1% slump in Cava production for the Spanish market in 2018, has been attributed by the Cava DO to a boycott of Cava in Spain outside Catalonia, in the run up to Christmas of 2017, which led to excess stock in 2018.
Cava DO Vice-President, Xavier Farré told Meininger’s that grape prices had increased in 2016 by 25%, but that prices for base wine had since then dropped down by 23% following an abundant crop of 2018.
“The dramatic fall in grape prices diametrically opposes the new strategy of the Cava DO (Denominacion de Origen) to create greater value for Cava production, by putting the livelihoods of growers at risk,” the UP’s head of wine, Joan Santó, told Meininger’s.
The UP added that the Spanish government’s decision to increase Cava DO ’s production area by 6,000 ha since 2015, from 33,000 ha to 39,000 ha would have a further impact on demand and supply with the potential addition of 72m kilos of grapes coming on to the market over the next two years and beyond.
Codorniu was sold to the The Carlyle Group, the US-based private equity firm, in June 2018, while Freixenet was sold to Germany’s sparkling wine giant Henkell in March 2018.