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Global Economic Crisis and Spanish Wine, Portugal Pay Attention

I received today a press release that I want to discuss with the caveat that you please provide feedback and thoughts in the comments.

FEV, The Spanish Wine Federation, is a private group dedicated to tracking, promoting and defending the image of Spanish wine both nationally and abroad. In Spanish, they emailed me a decent newsletter full of information on Spanish wine sales and conferences which they host to discuss issues relevant to the industry.

In today’s press release from the FEV:

“Márgenes y Estrategias en la Industria del Vino” – Las empresas del vino analizan en Madrid los efectos de la crisis en el sector

“Margins and Strategies in the Wine Industry” – Wine Businesses analyze in Madrid, the effects of the economic Crisis on the Wine Industry

The “crisis”, as it is called in Spain, refers to the downturn in world markets that we are all surely aware of. However, it is far beyond a crisis here in Spain, and getting worse. High unemployment, expensive housing and immigration issues are all starting to take a toll on the Spanish economy. So far, we have not seen this become a huge issue within the wine industry, but it will eventually, so any preemptive talk is welcome in my opinion.

To the release: It states that 150 businesses in the wine sector helped support a study at the international level, focused on both the competitiveness of the Spanish wine sector and the current key markets for wine sales. They first took a look at a new report presented by Rabobank on the need for wineries to balance profitability and investment to ensure a healthy future. I believe you can find information on the report here, though there is no link to which report mentioned.

Through this analysis, they came up a with several factors which they felt were fundamental to the future success of European wineries, but more importantly, zeroed in on the Spanish market and singled out the following:

  • that Spain has huge stocks of wine – Ever been to a Rioja or Cava house?
  • a long return time on investments (one of the highest in the study)  – Can you say Gran Reserva aging in my cellar?
  • and a large investment in fixed assests – Maybe they mean stupidly big hotels?

The report then went on to say that Spain, above all else, needs to focus on brand building, while at the same time, maintaining sales growth. And as a result of a lack effort during boom times to both build strong brands and consolidating overall brands, wineries are now left in the position of having to do it now, during a “crisis”.

Finally they looked at both the North American and UK markets as potential areas to exploit. With respect to North America, they pointed out the need for distribution, selling wines at a good price and a nice range of products, which are all good points. But with respect to the UK, they were focused on restaurants and the food sector as a whole; which could be considered strategic, with the art of cooking currently enjoying a renaissance and restaurants continually improving their offerings. The Gastro pub could mean big bucks for the industry!

Finishing the newsletter, I was left with 2 images of the event and a conclusion that went something like this:

In conclusion, the Spanish wine sector is facing a national and world crisis; which although is complicated, offers great potential to compete for those who are willing to grow with the creation of strong brands and the increase of distribution capabilities.

Ta-da!! Anyone see anything missing? A conference on how to survive the economic slowdown and that brand builiding is ever so important, seems to be missing one very importent word? Anyone see it?

Yes, the word is the Internet. According to the Internet World Stats webpage:

As of June 30, 2008, 1.463 billion people use the Internet

Now if that number is even off by a billion here or there, it’s definitely a number that should not be ignored. But the report, from what I can see in this release, fails to mention it even once.

The US alone shows internet usage at: 248,241,969 individuals which is over 73% of the total North American user base. Seems like a great place to start if you:

  1. want to do some brand building
  2. don’t have a lot of money to invest

But you could make the argument that those billions of people are only young kids playing World of Warcraft and wasting time, thus not of interest to a Spanish winery. Well, that is until you see this: Direct to consumer wine sales topped 2.8 billion last year in the USA, with the internet seeing a 3% growth. The website, Digital Lifestyles quotes:

Investment firm Cowen & Co. put the total sales figure for 2006 slightly higher at 108 billion dollars, predicting that it will hit 225 billion by 2011.

Now granted, this is a figure for all internet sales, but what it shows me is that people are shopping online. And if your shopping online, you most likely are doing a few other things while your at it like researching information and communicating with friends and family; which are all things that could lead to people finding your brand.

Why would you NOT be online?

When you look at Europe the users are still impressive albeit not at large. 384,633,765 users were online last year in Europe, which equalled approximately 43% of the population. For the purposes of their focus on the UK market, you’ll see that it’s almost at 70% of the population plugged in. You can even dig a little deeper into this graph and find that there are some countries in Europe with as high as 90+% usage! WOW!

Seems like the Internet may be a good strategy for a winery looking to weather the economic crisis. Low start up costs, elbow grease investment, and great brand building all seem to be pluses as to why this might be a topic that should be looked at. But knowing Spain, they’ll wait till it’s too late and then point out the obivious benefits if you had done it. They’ll hold up the two or three wineries who did do it and hail them as pioneering examples, and then explain why their plan worked. Or not.

Portugal, you could do it. You could trumph your bigger neighbor, and actually begin the conversation on the web. Talk about Portuguese wine, and spread the news fast. But then again, you wouldn’t want to get your neighbor mad. Better to continue ignoring the web, avoid causing waves, and continue to leave the consumer high and dry when it comes to good information.

What do you think?

Ryan Opaz

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  • http://WWW.SilverSpringsWinery.com John D. Zuccarinoi

    I am a small wine producer and have found the web to be the best bang for the buck…one…you can connect in ways never afforded to small business before…so foe under $100.00 for the camera I now run a http://www.Wine101.TV TV show…I could of never done this years ago…Wine 2.0 is effective but you have to have a BRAND thus our brand promotions…ck out our web site to get a feel for branding…http://www.silverspringswinery.com …nice update thanks…John D. Zuccarinohttp://www.SilverSpringsWinery.comhttp://www.DonGiovanniWines.com http://www.LakeWine.comhttp://www.Wine101.TVhttp://www.Big7771846@aol.com

  • http://www.prgrisley.com Michael Grisley

    I was waiting for some news from Spain about all this as I just read their unemployment rate is the highest it has been in years. As a US based importer of mainly Spanish wine, I am curious and even more nervous about how this is going to effect Spanish wine producers, and in turn, business here in US. My main concern with Spain is one that isn't anything new, but something I feel needs to change. It is the concept of “regional” marketing. It seems to me that there aren't any “SPAIN” marketing campaigns (well, effective ones anyway!) and I think this is unfortunate. Regions such as Rioja, Priorato, Ribera del Duero and Rias Baixas have fantastic regional ad campaigns and marketing in the US, but I think for Spain to “weather the economic crisis” as you say, this could be another easy, relatively inexpensive way to help promote “SPAIN,” not just individual regions. These places are already paying top dollar to promote their regions, why not join forces, cut costs, and promote Spain as a whole? That being said, in my mind, this could be done VERY easily and INEXPENSIVELY through the internet as you mention. Anyway you look at it, I think that Spain and Portugal, hell, for that matter, every wine producing country needs to have a bigger presence in the online world. Especially with the problems that France is having with their advertising woes, now is the time to for Spain and Portugal to jump at the opportunity to promote their wines any way possible, but especially more through the internet.

  • http://passionatefoodie.blogspot.com RichardA

    I recently read “Buyology,” a new book about marketing and neuroscience. It has some fascinating data and info about marketing, and the reasons why consumers purchase items. I will be writing a more detailed post on my blog about the book and its findings but it does directly relate to your post. In 2007, US corporations spent about $12 Billion on market research. Yet 8 out of 10 new product launches fail within the first 3 months. Much of that research seems to be very unsuccessful. Traditional marketing does not work that well so something different is needed.I would agree that the Internet is fertile ground for marketing, that it can offer many advantages, including being much less costly than traditional advertising and marketing. The Spanish wine industry would be doing themselves a terrible injustice if they ignored the benefits of the Internet.

  • gabriellaopaz

    Michael, I would love to see this happen, but I fear that it never will. Why? Allow me to explain through an example. While at a conference here in Spain, I was chatting with a woman from Galicia about this very same issue. I could see her fingers dig deep within her palms, her jaw grind in a slow and meticulous circular fashion and her shoulders tense to the point of snapping, simply because she didn't want her region, culture, and life blood to be associated with the brand, Spain. Sadly, she is not alone, as you well know, Catalans would rather saw off their right foot than associate themselves with the peninsula. While trying to sell Steve De Long's Iberian map here in Barcelona, I stopped by a Catalan book store, hosting several maps of Catalunya, asking if they might be interested in an Iberian wine map. “No, if it is not solely of Catalunya, we're not interested and there's the door”, was his general response. My point being, that anger, fear and cultural discrimination during Franco's time has literally ripped this country into some large swaths of regional isolation, and regardless of an economic crisis, unless we're begging in the streets for someone to buy a bottle of wine, I doubt it will happen. But I'm happy to be proved wrong!!!! The best I think we hope for is some gutsy Spanish wineries to get on the ball and start using the internet to market their individual, or regional, brands.

  • http://WWW.SilverSpringsWinery.com John D. Zuccarinoi

    I am a small wine producer and have found the web to be the best bang for the buck…one…you can connect in ways never afforded to small business before…so foe under $100.00 for the camera I now run a http://www.Wine101.TV TV show…I could of never done this years ago…Wine 2.0 is effective but you have to have a BRAND thus our brand promotions…ck out our web site to get a feel for branding…

  • http://www.vinixa.blogspot.com Vitor Mendes

    Ryan, you are absolutely correct. In fact as you know, my strugle here in Portugal has been the same. No doubt that wineries can improve their results and build a brand using intensivly the internet!!! But how can we make them see that they are losing to much time, and that other countries have already discovered this fantastic tool? How to make someone see this, if i am now waiting for a week now, for a simple information of the percentages on the grapes, to get labels approved in the USA??? This is frustrating! That´s why i think that you idea of promoting a conference here in Portugal, would be a great idea and a big help fr all of us that everyday work hard to spread the word on the fantastic wines that Portugal has…Cheers

  • http://www.vinixa.blogspot.com Vitor Mendes

    Michael you are so right! One of the big problems here in Portugal, is that people are still very close minded! The internet is still a relatively unknown tool for the most part of the guy´s who decide the businesses in the wineries os wine companies. How to change this? Believe me i dont know… What i knoe is that we need a strategy, and the people that depends on this industry got to open their eyes to this tool, if not we will have a real crisis in the next years. The critics reviews are great, th wines are great to, but without a strategy to build a brand we will not be able to get there! At Vinixá our goal is to be different even on that point, and although we are still very young on the industry, and we are a little short on the advertising budget, we are trying hard to become one of the front guy´s. From your end we need to believe in us, and help us on the US market to spread also the word on our wines. Together we can make things hapend, in spight of all crisis and closed minds…Cheers

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  • http://passionatefoodie.blogspot.com RichardA

    I would also recommend checking out a book that was just published within the last week or two, “Secrets of Social Media Marketing” by Paul Gillin. It essentially is a book for businesses about how to harness the Internet for marketing and advertising, touching on everything from blogs to Youtube. It addressess many of the fears and concerns that businesses have about using the Internet for marketing. It provides plenty of examples of sucess stories. It provides plenty of interesting statisitcs on Internet use.

  • http://www.ourwinestory.com Dylan

    Couldn't the issues of regional loyalties be resolved by building the brand of Spain with them in mind? Imagine a Spain brand that boasts the separate regions for their own unique style, yet they are all unified through a passion for wine. This was a major point and challenge in communications for Bahamas Tourism (where the country's GDP depends on it)–it wasn't just one island with one thing to do, every island had it's own unique identity and it was branded as such. So while, it would be great to see those differences put aside, what's to stop embracing those differences and allowing the unification to be through wine?

  • http://www.cortesdecima.pt José Eduardo

    Dear Vitor Mendes,Please allow me – a portuguese winery representative (Cortes de Cima) – to suggest that you use us and Quevedo as examples for the other wineries. We where the 1st winery in Portugal (29/04/1999) to have a website and also the 1st portuguese winery to have a blog (06/2008). Right now we are using twitter, facebook, youtube, flickr, digg, …. and other social tools to improve and show a human side behind the enterprise. If a couple of good examples is not enough then it's just plain dumb…

  • http://www.quevedoportwine.com Oscar Quevedo

    In my opinion, the word that explains the absence “Internet” in the report and also the absence of wineries doing social media marketing is AGE. In the wine business the average age of the people running wineries is very high, probably over fifty, with a huge lack of technological skills and still thinking Internet is too complicated. They don't even know what a blog is. And if they don't know or they don't understand how Internet works they will not accept the suggestions from the marketing guy to do social media marketing.We have to wait and to be patient, because when the “traditional” wineries start to see the results in the “modern” wineries maybe they will want to understand what Internet can do for them…

  • Justin Roberts

    Even getting the producers within a single DO in Spain to work together is almost impossible. They are all so suspicious of each other. Here in Jerez the trade has been slowly and painfully descending into crisis for a long time, but many bodegas still have the “if he's there, then I'm not going” attitude. They would rather not sell a bottle than have it on the same shelf as a competitor's wine. Madness! I went to Sauternes recently, where there is an official AC shop in the village selling wines from every producer, they even had a blend of wine from every producer called Duc du Sauternes. If you tried even the shop idea in Jerez it would fall flat almost immediately. When I lived in London there were constantly tastings devoted to wines from particular denominations, regions, countries etc, but never anything for sherry. I always thought that was strange, given the UK is their biggest market. Now I know why…

  • http://lasegundadivision.blogspot.com Arch Bell

    I think Gabriella makes an excellent point here. You would be hard pressed to find a more regionalized country than Spain. I've been traveling regularly to Spain since 1996 and I can say that Spain winning the European Championships in futbol was probably the most unified time I ever saw the country.Anyways, I could spend hours on this topic but in regards to wine branding and marketing, I think you would be hard pressed to ever find Catalans willing to share the marketing space with Gallegos or with Manchegos. Imagine a wine from Priorat or Montsant being marketing in the same space as a wine from the Madrid D.O…. Hah! Not likely.

  • gabriellaopaz

    I've been seriously thinking about your idea Dylan, and I think the closest we've come to the idea of a brand “Spain” emphasizing separate and unique regions is this blog. And although we've made some headway here in Iberia, promoting any wine that crosses our lips from Spain to Portugal, getting a successful internet marketing campaign going here is like pulling teeth. However, I do have faith. As this economic crises bears down on Iberia, increasing our already 11% unemployment rate, fear will continue to take hold of businesses, forcing them to reevaluate what works and what doesn't. Clearly, you can't escape the influence of the Internet, as every major international organizations has, or are in process, of embracing web 2.0. That said, as Spain works on the peer pressure principle, once a few large companies jump on the bandwagon, the rest will scramble for fear of not being in the “cool crowd”. My point is that although the philosophy of brand “Spain”, while emphasizing individuality, is a solid idea, I don't think it's realistic for quite awhile. As 70 year old wounds need to heal from the civil war, I think the best we can hope for is that a handful of large, internationally respected wineries, will see the value of social media, whereby influencing the smaller guys.

  • troy

    I agree with the points here, but would add that it isn't enough just to “use” the internet. One has to put the same types of effort into internet promotion as one would put into traditional promotion and customer service. I just received an interesting 1967 tinto from a Ribatejo quinta, so I submitted a message on the quinta's website, asking about tasting notes from that vintage, plus availabilities of wines throughout the 60s and 70s as I was hoping to set up a vertical tasting. The response I got back was, “thanks for your message!” No response to the questions. So, instead of taking ten friends to stay in the quinta's lodge and have several meals plus the tasting, I'm just going to drink the wine and then forget about them. Good thing they have a website, right?

  • troy

    ah…now I have vented and feel better. thanks for bearing with me!

  • http://www.catavino.net Ryan Opaz

    Without a doubt, you need to make sure to use the Internet to “augment” your other efforts. If you try to do all or nothing with any approach you will fail!As to your experience, does it surprise you? :) So Sad, that something as simple as a return email is not understood!

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  • http://www.playbingoformoney.net play bingo for money

    At the time of financial crises we need to come together united and try to solve the problems which are responsible for such a hazard. We need to overcome it. It is meant to bring calm to the population and markets and display government strength and stability.

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  • Gonzlo

    Hias a marketer I think regions are missing the point and whoever positions itself as the spanish wine will ultimate win in exports markets. By the way what do you think of wines from Castilla La mancha?.RgdsGonzalo