Every year on 23 April, Catalonia celebrates its patron saint, Sant Jordi, with the spectacular exchange of books and roses in the streets. This year, Cava producers aim to lighten the sombre mood caused by the impact of pandemic restrictions on bars and restaurants. For the first time, dozens of established contemporary writers will sign their books in Cava wineries, rather than at street stalls. The aim of the initiative is to boost greater domestic consumption of Cava.
In 2020, Cava shipments to the domestic market’s on-trade sector plunged by 38.8 percent, according to the Cava DO board (Denominacion de Origen). However, sales prospects were raised in April, when several leading Cava companies, including Vallformosa, Juve y Camps and Codorniu, reported signs of a recovery based on increased sales in March. Cava producers expect sales in all markets to be further lifted in the run-up to Christmas, when 30 percent of Cava production is traditionally sold.
The upturn in sales follows a downward trend in 2020, when total Cava shipments fell by 13.62 percent to 215 million bottles. Despite the collapse of the on-trade in Spain last year, resilient Cava exports fell by only 7.12 percent in 2020, according to the Cava DO. Cava’s export ratio in 2020 increased more than six percent, to 71 percent of total Cava shipments.
Producer’s perspectives
Vallformosa, the fourth biggest Cava producer, which exports 75 percent of its Cava, says it has continued to be a disruptive force in the market by adopting further novel approaches in its ambitious bid to attract new consumers. Having increased sales by ten percent in 2019 to €35.5 million, Vallformosa’s annual turnover fell by 20 percent in 2020, to €28.4 million, a fall that was less, it says, than it initially anticipated.
Despite the fall in annual sales, in 2020 Vallformosa launched a new range of organic Cavas, and the new Reserva Cava ”Solo Vida” with Tomorrow World, the annual Belgian electronic dance festival. Over the past decade it has secured a strong foothold in Belgium, a key sparkling wine market. “We sell 35 percent of the Cava sold in Belgium,” a Vallformosa spokesman says. Its range also includes low- and zero-alcohol sparkling wines.
Having secured fresh investment in 2011 from Josep Graell, its current chairman, Vallformosa has shown that there is room in the market for players looking to increase value rather than volumes, especially in exports. Its success, it says, revolves around innovation, quality, offering vital additional services to growers, and not selling Cava at basement prices. It has ruled out selling private label Cava to supermarkets.
Juve y Camps is well-known for its longer aged Cavas; Vallformosa’s range also includes low- and zero-alcohol sparkling wines
Vallformosa and Juve y Camps, a specialist in Reserva and Gran Reserva, report that sales in select supermarkets and online, as well as exports, helped curb the decline in on-trade sales in Spain and elsewhere. “Consumers in the off-trade have been willing to spend more on higher quality Cavas,” says Joaquin Blasco, Exports Director at Juve y Camps. “In 2020, our usual 50-50 split in off- and on-trade sales shifted to 70 percent to the off-trade, and 30 percent to the on-trade, as consumers increased home consumption of Cava,” Blasco comments.
Juve y Camps reports that in 2020 it managed to maintain the same level of turnover reached in 2019, €22 million; € 3million of this was generated by exports. Nonetheless, exports present their own difficulties. “In exports, we spend a lot of time explaining why our aged organic Reservas and Gran Reservas are two or three times more expensive than the prices of Codorniu or Henkell Freixenet,” says Blasco.
Despite a ten percent fall in exports to the US, and a dramatic fall in shipments to South America, Juve y Camps increased exports to Russia, Asia and Canada, where exports quadrupled in 2020. Total exports account for 15 percent of sales.
Freixenet was able to partially compensate for on-trade losses with off-trade increases
Meanwhile, Henkell Freixenet, the biggest Cava producer, says its Cava export ratio increased from 80 percent to 85 percent in 2020, due to the disproportionate losses in the on-trade and duty-free business in Spain. “Worldwide, supermarket and online sales helped Freixenet to compensate for the decline of on-trade and duty-free sales. Sales markets in Spain, Italy and France, which are significantly influenced by gastronomy, were more affected by declines during the pandemic. On the other hand, German and UK sales increased because of their strong performance in off-trade and online channels,” a Henkell Freixenet spokesman says.
Strategies worth discussing
Codorniu says its export ratio in March climbed ten percent, to a 50 percent share of total sales, above pre-pandemic levels. Highlighting concerns over domestic market prospects, it says its objective is to increase its export ratio to 70 percent. Codorniu, however, has come under scrutiny from the Cava DO board for returning to produce private label Cava for Tesco and Sainsbury’s in the UK markets. A spokesman for the Cava DO regulatory board described private label Cava as a “form of unfair competition.” A Codorniu spokesman played down the concerns, saying that private sales “only account for 0.5 percent of the Cava we make.” However, the move goes against the Cava DO regulatory board’s strategic push to increase value in exports and show how Cava provides better value compared with Champagne.
The OIV’s (International Organisation of Vine and Wine) World Sparkling Report published in 2020 shows that France and Spain reached the same market share of world sparkling wine exports (21 percent) in volumes in 2018. The value of these exports was, however, diametrically opposed: France’s exports accounted for 52 percent of the value of the world’s total sparkling wines exports, whereas Spain’s share was a mere 7 percent.
New rules, zonification and segmentation
This year, Cava DO is embarking on its biggest regulatory changes in more than 30 years. These are aimed at transforming Cava’s fractured sector and its reputation for producing high volumes of Cavas at relatively low prices, towards the production of higher value, longer-aged, better quality Cavas for all markets. “Our aim is to create more value in sales, and to increase the number of Reserva wines,” explains a spokesman at the Cava DO board. The Cava DO’s new regulations, which will start to come into effect as of the 2021 harvest, will increase minimum ageing for Reserva wines to 18 months, and will be named Cava de Guarda Superior. They will all have to be organic.
Cava producers want to push sales with marketing campaigns, such as on the Catalonian holiday Sant Jordi
New ”Integral Producer” (Elaborador Integral) stamps on bottles for producers who carry out the entire Cava production process themselves, instead of buying wine for Cava made elsewhere, is optional. New zonification and sub-zone areas on labels mean consumers would be able to identify the provenance of wines, so the Cava DO believes. The move partially resolves problems associated with Cava DO’s cross-regional territory; instead of representing the Penedes, its original territory, Cava is made in numerous regions of Spain.
Henkell Freixenet says it is not particularly concerned by the changes. “For us, this is secondary: we rely on our brand strength and the Cava category, which we drive forward internationally,” says a company spokesman in Germany.
In a further move to address an imbalance in supply and demand, in March, Spain’s Ministry of Agriculture agreed to demands by the Cava DO to severely limit new plantations over the next three years. Regional authorities in Extremadura have, however, launched a legal challenge over the planting restrictions. Prior to the pandemic, growth of Cava production outside Catalonia had increased significantly.
Cava’s regulatory changes and moves to reduce excess volumes, come as it faces increasingly stricter rules from rival classifications. This year, the Classic Penedes group has proposed toughening rules on ageing for all production to a minimum of 18 months. These rules bring it closer in line with the high-end Corpinnat producers, whose talks with Classic Penedes over the establishment of a new, organic sparkling wine appellation remain inconclusive.
In the meantime, the Cava DO is launching a new digital campaign in the UK, Japan and the US, to inform trade and consumers on the new rules, traditional method production, and ageing. “Cava is taking steps in the right direction, but there needs to be a sustained long-term campaign to change the perception of Cava internationally,” says Joan Cusine, co-owner of the high-end, biodynamic Cava producer, Pares Balta. “In 2020, we were hit by the double whammy of the pandemic and a severe outbreak of mildew prior to the harvest. 2021 can only be better.”
Barnaby Eales
