Spanish Sparkling Wine: The Hangover of Spanish Cava | Economy and business


The workers of Codorníu protest against the dismissals in the company.Albert Garcia

Presenting the sales results for 2016, Cava Regulatory Council Chairman Pere Bonet downplayed the domestic sales drop of around 700,000 bottles (0.8%) and predicted better results on the basis for a general economic recovery in Spain.

A “necessary” price hike hurt sales of Spanish bubbles in foreign markets

However, two weeks ago, cava giant Codorníu announced that it would halt production for third parties, with 93 workers to be made redundant. Freixenet, meanwhile, is plagued by infighting among its major shareholders, suggesting an altogether flatter outlook.

“The sector is starting to crack,” warns Miguel Ángel Domínguez, who heads the food industry division of the CCOO General Workers’ Union in Catalonia.

Over the past 10 years there has been a 12% drop in cava consumption in Spain and, despite Bonet’s confidence, there is no sign of the trend reversing. During the crisis, the sector was supported by exports, which accounted for 65% of the market. And while overseas consumption continues to rise – especially in non-EU countries like Russia – domestic sales remain stagnant.

Freixenet bottles inside the cellar of Sant Sadurní, Catalonia.
Freixenet bottles inside the cellar of Sant Sadurní, Catalonia.Ignacio Adeva

Both the government and the industry believe part of the fault lies in the underpricing of the product, which led to higher prices last year, which Bonet said was a “necessary” decision – although it did not go well in countries like Germany, where sales fell 14%, and Belgium and Britain, where Italian prosecco is proving popular.

According to Bonet, “A marketing push on high-end champagne is vital for consolidation.” This strategy has been adopted by both Freixenet and Codorníu, which are increasing their profit margins by investing in luxury brands which now account for 12% of sales.

House brand

On the other hand, this strategy led to the end of the production of house brands and layoffs in Codorníu. Spain’s oldest family business makes cava for huge supermarket chains in Britain like Tesco’s but while the brand’s production accounts for a fifth of the group’s production, it accounts for just 5% of revenue, according to union sources.

The cava sector begins to crack Miguel Ángel Domínguez, union spokesperson

Freixenet reduced its production for third parties four years ago. However, the company, which is owned by the Bonet, Ferrer and Hevia families, made a net profit of just 2.35 million euros in 2016, a 6.7% improvement over the previous year, but little impressive for such a prestigious brand. And while shareholders have expressed their disappointment, the three families are struggling to find a consensus on how to satisfy them.

English version by Heather Galloway.

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