Rioja 'n' roll

With the Spanish economy faltering, Rioja producers are looking to export to ease the pressure at home and share a good thing

with new markets. Christian Davis reports
27 August, 2008
Page 42 
Spain is probably the most outward looking of the so called Old World or European wine-producing countries and Rioja in northern Spain produces the best-known wine in the most export-oriented region. With 70 per cent of its production consumed domestically, the region is looking to export even more as its economy falters.

" Rioja has had its ear to the ground," declared Tom Perry, managing director of the Rioja Wine Exporters' group. He was speaking at a round table discussion in London in May, convened by Drinks International's sister publication, Wine & Spirit. He added: "Traditionally, the Old World has made wines that wineries like, while the New World (Australia, California, Chile, New Zealand, South Africa, et al) has concentrated on making wines that consumers want to drink."

Also at the discussion, James Griswood, a buyer with Tesco, noted that loyalty to Rioja is very high among discerning wine drinkers.

Robert McIntosh of Dinastía Vivanco described the wines as: "quite commercially aware and adaptable". And Adrian Atkinson, wine development director of Pernod Ricard UK, noted the importance of brands such as his own company's Campo Viejo, along with Faustino (not forgetting Marqués de Cáceres, Marqués de Riscal and Marqués de Griñón).

While nearly everything in the Riojan vineyard looks healthy, if not rosy, the round table expressed a few concerns. First was the ability to keep pace with demand. For example, in the UK, Rioja's number-one export market, accounting for nearly 40 per cent of export, sales are up 13.5 per cent, and with the BRIC countries (Brazil, Russia, India and China) only beginning to register significant sales, supply is a long-term concern.

Secondly, there is the cost of buying in oak barrels and the management of inventory when the trend and marketing thrust is towards the more premium styles, Reserva and Gran Reserva (see statistics panel). Thirdly, Spain's best-known wine is seeing challenges from other Spanish regions, notably Navarra (or Navarre), Ribera del Duero, Toro, Priorat and Rias Baixas.

However, both Perry and Ricardo Aguiriano San Vicente, director of marketing and communication for the Consejo Regulador DOCa Rioja, play down those fears.

Perry says that, despite concerns about sales in the south-west of the country, Rioja has 40 per cent of Spain's on- and off-trade, with Navarra next at seven per cent. Perry dismisses growers' concerns that indiscriminate plantings to meet demand may mean the end of the region (as a premium wine producer), as "mumbo jumbo".

Aguiriano (San Vicente) insists that most plantings in Rioja are on the plateau, but that there are "good opportunities in the foothills and oenologists are studying soil types and day and night (diurnal) temperature variations to find new sites. Despite so many years of growing grapes, growers and producers are still trying to understand the different soil types - this represents a new opportunity."
== Shedding a conservative image ==

However, at least one producer believes Rioja is too dependent on domestic sales in an ailing Spanish economy. Victor Redondo Sierra of United Wineries is a maverick and a financier, with three wineries in the region - Hacienda de Súsar, Lagunilla and Haro. He owns brands such as Marqués de Griñón and Marqués de la Concordia, and in Hacienda de Súsar, boasts the only vineyard in Rioja Baja that has international varieties Cabernet Sauvignon, Shiraz and Merlot (planted before regulations banned them).

Speaking in his office in the City of London, he says: " Rioja is a powerful name, but it looks to its domestic market. It is fairly conservative."

With a huge empire not just in wine and not only in Rioja, London-based Redondo hopes to list United on the London Stock Exchange's AIM, and takes a long-term, outsider's view.

As domestic consumption falls, he sees a switch to export as harder than it seems. "We have a strong euro against a weakening pound and US dollar," he says. He points out that Rioja is roughly structured into one-third young or Joven wines at the cheaper end of the market, a third Crianza and a third the Reservas - Reserva and Gran Reserva. Also, Rioja is predominately a red wine (see panel on the following page).

"Crianza has no meaning internationally and Rioja is only thought of as red," says Redondo Sierra. "What about white and rosé? The latter is, in fact, the only dynamic growth sector."

Aguiriano is more upbeat, as the man charged with guiding, framing, articulating and defending the consejo's strategy. Although Rioja sells to 130 countries, five - the UK (by far the largest, at 38 per cent), Germany, Switzerland, US and Sweden - account for 70 per cent of the wines' exports. With forthcoming EU subsidies as a result of the new wine reforms, Spain and Rioja, along with other countries and regions, will get funds to promote exports outside the EU.

Aguiriano says the consejo is looking principally at Russia, China, Japan, Mexico and the US. Mexico appeals because the population drink wine, they are close to Spanish culture and it is seen as the gateway to central and South America, and to Asia. In China and Japan the per capita consumption is rising.

"Rioja is the flagship of Spanish wines," says Aguiriano. " There is already an awareness of the product, but people need more information."

Nevertheless, the consejo has announced a 35 per cent increase in budget for the UK. Forthcoming events include a Tapas Fantasticas street party in London's Brick Lane on June 28 and 29, celebrating the Spanish lifestyle with tapas and wines from Rioja.

There is also a "dine for £10 with a glass of Rioja" promo, across 500 restaurants nationally, in association with national and regional newspapers. In New York, Rioja is supporting a fashion show and in Germany, a film.

"We are trying to attract younger consumers," says Aguiriano. "In most countries, 40 to 60-year-olds are already aware of Rioja, so we have to renew and refresh our consumer base. We want to promote lighter, easy-to-drink styles, and emphasise that the wines go with tapas."

For the trade, there are education programmes using famous chefs to demonstrate that Riojan wines go not only with tapas, but also with international cuisine such as Indian and Chinese. But the main strategy is to link the wines with Mediterranean cuisine, which is perceived as healthy. Also lined up are tastings with sommeliers to show how wines have evolved from heavily oak-laden to more complex, fruitier styles.

Aguiriano is hoping to move exports from 30 per cent to 45 or 50 per cent and change the mix from 40 per cent young (Joven, sin Crianza) wines, to about 70-80 per cent Crianza, Reserva and Gran Reserva.

On the viticultural side, from this year growers can plant international white wine grape varieties, plus some indigenous varieties, for blending with Viura, Rioja's less than impressive indigenous white grape. It will be approximately three to four years before we see and taste those finished wines.

On the reds, Aguiriano says the regulations remain with the Tempranillo, Garnacha, Mazuelo and Graciano grapes, but there are still discussions about introducing international reds.
== Leading the way ==

Among the leading export-oriented producers in Rioja is Bodegas Patroncinio, a modest co-operative in Uruñuela, Rioja Alta. Its members have 600ha in more than 1,000 plots, with some vineyards up to 595m above sea level.

It used to sell in bulk, but recent years have seen innovation and investment, with general manager Fernando Villamor reporting growth of 20-22 per cent in each of last three years. This year, it will have certified organic wines.

Its biggest coup has been winning the contract to supply E&J Gallo's Erdo Rioja brand, a Joven wine that retails for US$15 retail. Villamor says the company produced 10,000 cases in year one and doubled that in year two.

With sales 80 per cent domestic, Villamor wants to move production up from 1.5m bottles to 3.9m, by 2012. "We have the capacity for four million bottles; we want grow quickly, but under control," he says.

The cooperative has traditional styles, as well as its Zinio brand, which is more modern, with more fruit, colour and higher aromas. It is exporting to some European markets and through Chicago and Miami. It has also gained a foothold in India. To match growth plans, Villamor is targeting the UK, Ireland, Denmark and Belgium, with China, Japan and Russia also in his sights.

Bodegas El Coto is another that has missed Rioja's major export market - the UK - but David Losantos, its export area manager, hopes to change that.

He points out that El Coto has one of the biggest wineries in Europe (110,000 sq m, producing 1.7m cases of wine). Its Crianza is Spain's largest Rioja brand in the off-trade, and the overall number two brand, with 14m bottles sold. He produces its Crianza under screwcap (the first aged Rioja under screwcap), purely for export.

Overall, 62 per cent of its sales are domestic, although some years can be 50:50, says Losantos. Germany is the number-one export market, followed by Sweden and Switzerland.

Although available in the UK for the on-trade with Wells & Young's spirit subsidiary Cockburn & Campbell, Losantos has forged a deal with Waverley TBS, one of the UK's largest wholesale distributors in the UK off trade. "The UK is the most important market and I want it to be our number one in the next four years," he says.

Losantos stresses packaging. In Asia, he says it is key to use gold and red on the labels, along with animals and symbols, hence the stag on the El Coto label ('el coto' being a hunting lodge in Spanish). While Germany and the Benelux countries are price-oriented, the Norwegians will pay higher prices for better quality.

El Coto is also in the Emirates through a Dubai hotel chain , but Losantos does not prioritise Asia in the short term. He says that 80 per cent of Russians have no money, while 20 per cent have lots - Rioja is booming there .
== The challenge ahead ==

Others are just as keen to keep exports booming. Domecq Bodegas, part of Pernod Ricard, claims to be the largest wine producer in Spain by value. It has four wineries in Rioja, and with a brand such as Campo Viejo, exports are vital: 9.4m cases of its 30m annual total go principally to the UK, US, Germany, Sweden and Switzerland.

International director Virginia Almagro thinks the gloomy prediction about the domestic economy may be "people talking themselves into it". Nevertheless, fluctuating exchange rates remain a concern. She acknowledges the high awareness of Rioja as a name or brand, but many wine drinkers do not really know what it means. " People recognise that Reserva means something more special, but while we have heritage and tradition, we need to be more progressive," she says.

Adriana Etchaberry Yustes, brand ambassador at Gonzalez Byass's Bodegas Beronia, also acknowledges a move to a more export-oriented style, using subtle French oak instead of the more brazen US oak. It also exports to the key markets of the US, UK, Mexico, Russia, Germany, Switzerland, and is looking at China and Brazil. It owns a mere 25ha and manages 404ha. Production is 97 per cent red, and 72 per cent of the total 400,000 cases is Crianza. She says the company is looking to turn some of the vineyards under its control to biodynamic use.

Bodegas Altanza is a relative newcomer to the market. It has 200ha of vineyards, 100 per cent Tempranillo and a capacity to produce three million bottles of wine. It uses micro oxygenation temperature control to extract the maximum from the grapes. Exporting to 38 countries, it boasts the sixth best-selling Reserva in Spain.

Altanza says it is all about quality, with 80 per cent of production being Reserva and Gran Reserva. The 2002/3 vintage was deemed so poor that all the wine was sold off as bulk. With the Olympics looming, its Chinese importer recently ordered six full containers of wine.

Luis Burgueño, export sales manager at Bodegas Marqués de Cáceres, says the brand is the number-one Spanish still wine in the US and number two in the UK. It goes to 115 countries producing one million cases a year, 50-60 per cent Crianza (0.5m cases); white and rosé 30 per cent, with 15 per cent Reserva and Gran Reserva.

He sees the US market as still growing , but Germany "not interested in quality or packaging, just price". Poland is a growing market, but dominated by five major players with high mark- ups. It is cheaper for Poles to shop in Germany.

Overall, Rioja has consistently promoted its wines, has international brands and financial backing, not just from major drinks companies. It has prioritised its export markets and identified up-and-coming ones. Its principal challenge is to appeal to 21 to 30-year-olds. The sort of challenge many wine producers would like to have.
----=== Rioja statistics ===l More than 30 million cases sold in 2007 - an increase of 4.4 per cent, +2.3 per cent domestic, +7.1 export

l Export sales represent 31 per cent of total

l Joven and Crianza wines account for 86 per cent of domestic market, but decreasingly

l Reserva and Gran Reserva are growing at 6 per cent and 10 per cent respectively

l Exports of Gran Reserva grew by 13.4 per cent in 2007 and Reserva by 14.8 per cent.----=== Main export markets (volume) ===UK 38 per cent (+13.5 per cent)

Germany 18 (+10.7)

Switzerland 8 (+4.8)

US 8 (-1)

Sweden 5 (-6.5)

The Netherlands 3 (-12.3)

Mexico 2 (+1.1)

Source: Consejo de Regulador Rioja----=== The Rioja region ===IIn northern Spain, near Bilbao in the Ebro valley. It is generally believed the name comes from rio (river) Oja, a tributary of the Ebro.

The 57,000ha of vines of the Consejo Regulador Denominación de Origen Calificada (DOCa) Rioja, are in La Rioja, the Basque country and Navarra. The average annual yield is 250 million litres, of which 85 per cent is red.
== Rioja Alta ==

Along the Ebro valley, west of the regional capital, Logroño, including Haro. Mainly Tempranillo grown, with Mazuelo and Graciano in warmer areas.
== Rioja Alavesa ==

North of the Ebro, in Alava. Smallest of the three, this is "Tempranillo heaven", according to Spanish wine expert John Radford and where the best grapes are grown in coolest vineyards.
== Rioja Baja ==

From suburbs of Logroño to south and east and includes towns of Calahorra and Alfaro. Traditionally regarded as hot and dry lowland where spicy Garnacha is produced for blending with Tempranillo from Alta and Alavesa.
== Grape varieties ==

Red: Tempranillo, Garnacha, Mazuelo, Graciano. White: Viura, Malvasia, Garnacha Blanc. From 2008, international varieties, such as Chardonnay, Sauvignon Blanc and Verdelho, can be included in the blend.
== Rioja styles, terms and conditions ==

Joven: Young wine, not necessarily aged in oak.

Crianza: Red wine aged in oak for a minimum of a year and a further year in the bodega, usually in bottle. May be released after two calendar years. White and rosado wines must spend a minimum of six months in oak and six in bottle.

Reserva: Reds - a minimum of three years in the bodega, of which 12 months in oak casks. White and rosado - two years in the bodega, with at least six months in oak.

Gran Reserva: Reds - a minimum of 24 months in the cask and 36 months in bottle. White and rosado - at least four years in the bodega, six months in oak.
----=== 2007 vintage ===The Consejo Regulador Denominación de Origen Calificada (DOCa) Rioja has officially rated the 2007 vintage in Rioja as "very good", following testing and tasting 4,093 samples of 272.8 million litres that were approved and allowed by the DOCa Rioja.

The total amount of grapes harvested from the 60,774 hectares in production was 412.72m kg (375.09m kg red grapes and 37.63m kg white). That was 2.2 per cent lower that 2006, despite 400ha more of vineyards.

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