""

Required Report - public distribution

**Date:** 11/19/2003

**GAIN Report Number:** SP3040

PO3040

**Spain**

**Wine**

**Annual**

**2003**

**Approved by:**

![](media/image1.wmf)Lloyd Fleck

U.S. Embassy

**Prepared by:**

Diego Pérez

**Report Highlights:**

> Spain\'s 2003 wine vintage is estimated at 37 million hectoliters, or
> about 1 million more than in 2002. Domestic wine consumption has
> continued to decline except for quality wines. Wine exports were
> stagnant in 2002 but have been are growing notably in the first half
> of this year. The wine industry faces challenges in boosting both
> domestic and export markets. The renewal of the EU-US wine accord
> continues to drag on; Spain favors a comprehensive agreement that
> protects the names of its geographic production areas.

Includes PSD Changes: Yes

Includes Trade Matrix: Yes

Annual Report

Madrid \[SP1\]

\[SP\]

#  

[Executive Summary 3](#executive-summary)

[Production 5](#production)

[CONSUMPTION 9](#consumption)

[TRADE 11](#trade)

[Trade Flows 11](#trade-flows)

[Trade Market Profile 12](#trade-market-profile)

[Market Access 14](#market-access)

[Market Opportunities 14](#market-opportunities)

[MARKETING 16](#marketing)

[Distribution 16](#distribution)

[Foreign Market Development 16](#foreign-market-development)

[Government Support 17](#government-support)

[Regulations 17](#regulations)

#   {#section-1 .unnumbered}

# Executive Summary

Spain\'s 2003 wine vintage is currently estimated at about 37 million
hectoliters (one hectoliter=100 liters), 1 million hectoliters more than
in the preceding year. As in other European wine producing areas, last
summer's heat wave reduced harvest size but enhanced quality.

The long-lasting trend toward declining wine consumption continued last
year. Total bottled wine sales in the distribution system in Spain fell
to 11.99 million hectoliters in 2002, a drop of 2.8 percent from the
previous year. The decline is largely due to shrinking use of cheaper
\"table\" wines. Consumption of quality wine is still growing slowly.

Spanish wine exports in CY 2002 remained practically stable at about
10.6 million hectoliters worth €1.4 billion. The main destinations,
value basis, were the rest of the EU (69 percent), the United States (10
percent) Switzerland (5 percent), and Japan, Norway, and Canada (2
percent each). The value of Spanish wine exports to the U.S. in 2002
increased 17 percent to €136 million. Wine exports so far 2003 are
notably increasing. For the next couple of years, current abundant
inventories coupled with reduced prices and declining EU wine production
may boost Spanish wine exports. For the longer term, however, forecasts
are difficult to make since Spanish grape harvests are very vulnerable
to drought and frost.

Wine imports in CY 2002 increased moderately to 0.26 million hectoliters
but in terms of value increased 13 percent to €80 million. Spain\'s wine
imports are mainly French champagne and a few narrow market segments of
quality wines and \"table\" wines that come mainly from France, Italy
and Portugal.

The vineyard restructuring program (which is part of the EU's wine
regime) is renewing about 100,000 hectares of vineyards in Spain
(representing 8 percent of total vineyards) with more profitable,
market-oriented varieties. The program is active mainly in central
Spain.

The negotiations for the renewal of the United States-EU wine accord
have intensified lately since the current EU derogation for the U.S.
wine making practices expires on December 31, 2003. Since big
differences still exist -- protection of geographic names, wine-making
practices and registered trade marks in particular \-- it is likely that
a minimum, temporary accord aimed at preventing trade disruption will be
reached. Spain, however, is seeking a broader accord that includes
effective protection to its semi-generic wine names such as "Sherry" and
"Malaga."

(€(euro)1.00 = \$1.17)

![](media/image2.wmf)

PRODUCT NARRATIVE

# Production

Despite a recent major reduction in Spanish vineyards, the area planted
to vines in Spain continues to be the largest in the EU, accounting for
about one third of the EU vineyard area. Nevertheless, Spain's total
wine production ranks behind France and Italy, mainly due to the
country's limited rainfall, poor soils in certain areas, and restrictive
measures on vineyard irrigation. The size of wine grape crops is highly
variable depending on each year's weather. Spanish vineyards are mostly
rain-fed (only 10 percent of vineyards are under irrigation) and thus
are highly sensitive to the country's dry climate.

The area planted to vineyards has being shrunk by the EU's vineyard
uprooting program, which has been mainly applied to Spain. The latest
estimate of the wine grape area is about 1.17 million hectares, compared
with 1.50 million hectares in 1985, when Spain joined the EU. Despite
this acreage reduction, production levels have not diminished
significantly. Greater marketing opportunities in the EU have led to
increased growers' returns, which have been invested in modernizing
vineyards, increasing mechanization and irrigation.

![](media/image3.wmf)

The 2003 vintage would have been significantly larger were it not for a
summer heat wave that hurt vineyards. A breakdown of \"wine and must\"
production by areas in the last two years follows:

Due to the diversity of Spanish soils and climates, there are many wine
areas which produce a broad range of wine types. There are currently
about 60 different Appellation of Origins (AO) throughout the country.
Of Spain's 17 Autonomous regions, only two-- Asturias and Cantabria-- do
not have an AO. Total area planted to AO vineyards is currently at about
620,000 ha, representing over half of the total vineyard area.
Castilla-La Mancha, LaRioja, Utiel-Requena, Valdepenas, Valencia,
Carinena and Navarra are the regions with the most AO vineyards.

AO's control both vineyards and wines produced in their particular
region. Controls to vineyards include pruning and irrigation practices,
yields per hectare and per variety. AO's control wines through
analytical and tasting tests. Only wines that pass those tests can be
labeled under their AO appellation.

Below is a Spanish Wine Appellation of Origin Map.

![](media/image4.png){width="6.466666666666667in"
height="5.760416666666667in"}

The EU's latest wine program (EU Regulation 1493/99) has been applied
since MY 2000/01. The program aims to enhance wine quality, to provide a
greater market orientation and to renew old vineyards. These goals are
mostly pursued with EU regulation 493/99 for the restructuring of
vineyards. Spain will absorb most of the restructuring funds, with about
100,000 hectares undergoing restructuring during the ten-year program.
\"Restructuring\" means either to change to better varieties (especially
surplus white grapes to more commercially-oriented red grapes) or to
change the pruning system from vase to the more modern espaliers. The
EU's share for the financing of restructuring programs is 50 percent,
but in the least developed areas it can go up to 75 percent. Castilla-La
Mancha is by far the principal recipient of these aids in Spain.
Farmers' groups, such as cooperatives, get a higher aid rate for
restructuring than do individual farmers.

The current EU ban on planting new vineyards was extended through July
31, 2010. A reserve of planting rights of no more than one percent of
the total vineyard area permits the transfer of planting rights between
regions; young farmers are supposed to be the main beneficiaries of
these transfers. This reserve would allow Spain's vineyard area to reach
a maximum of 1.22 million hectares.

The current EU wine regime includes a special distillation scheme to
secure alcohol to producers of fortified wines and brandy, as well as a
"crisis" distillation scheme for years with surges in wine stocks or
severe quality reductions. During MY 2001/02, nearly 7 million
hectoliters of \"table\" wine were used in Spain for the production of
the so-called \"edible\" alcohol, representing 56 percent of the EU
total. Distillers received a subsidy of nearly €2.50 per hectograde.
Unlike the preceding year, no crisis distillation was done in Spain in
MY2001/02. Subsidies paid for crisis distillation are very low,
generally well under wine market prices. EU storage aids are also
available for \"table\" wine producers.

The EU wine regime supports some enological practices, including
*chaptalization*, the practice of adding sugar to wine during the
fermentation process to increase the alcohol content. This is a very
contentious issue between Northern and Southern EU countries. The former
use *chaptalization* because the sugar content of northern grape
varieties is low and the latter, including Spain, believe that only
grape must or concentrated juice should be used to enhance the alcohol
content of wines. The EU budget for the entire EU wine sector is being
increased from €1.29 billion in 2001 to €1.33 billion in 2003.

The negotiations for the renewal of the United States-EU wine accord
have stalled in the last decade due to disagreements about several
trade-related issues. Discussions are focused primarily on differences
in enological practices and procedures to approve new practices. The
United States has been proposing a mutual recognition of approval
systems. The major EU argument against mutual recognition centers on its
desire to control \"good wine making practices.\" The EU wants to use a
positive list of practices and the United States wants a system of
mutual recognition for practices approved in either country

Another point of contention \-- the protection of EU
semi-generic/geographic names -- has been heated lately, especially
after the Doha WTO Agenda pushed to complete negotiations by September,
2003. "Jerez" and/or "Sherry" (the name for Spanish Jerez wines abroad)
and "Malaga" are the semi-generic Spanish names for which protection is
sought. The U.S. has been joined by several other trading partners who
believe that current trade rules provide adequate rights and effective
protection of geographical names.

Also at issue is the EU's use of traditional expressions (such as
\"vintage\", \"reserve,\" or \"aged five years\") associated with a wine
produced in a specific region to which the EU grants protection.
Marketing of U.S. wine labeled with any of the EU's self-designated
\"traditional terms\" would be banned in the EU.

The negotiations for the renewal of the United States-EU wine accord
have intensified lately, since the current EU derogation (which permits
U.S. wine made with practices not approved in the EU to be marketed in
the EU) expires on December 31, 2003. Since major differences still
exist -- protection of geographic names, wine making practices and
registered trade marks in particular \-- it is likely that a temporary
accord aimed at preventing trade disruption will be tabled. Spain,
however, is seeking a broader accord that includes protection to its
semi-generic names.

# CONSUMPTION

While total wine consumption in Spain ranks fifth in the world, after
France, Italy, United States and Germany; per capita consumption ranks
seventh after Luxembourg, France, Italy, Portugal, Croatia and
Switzerland.

As shown below, bottled wine sales (tetra-packed cheap wine included) in
the distribution system in 2002 declined to 11.99 million hectoliters, a
2.78 percent decline from 2001. This is a continuation of the downward
trend in wine consumption that Spain has seen for many years, table wine
in particular. However, domestic sales of quality wine continue to show
steady growth.

![](media/image5.wmf)

Per capita bottled wine consumption in Spain declined to 29.6 liters in
2002, one liter less than in 2001 and 5 liters less than in 1999. Last
year, quality wine use increased 1.1 percent to 8 liters, while
\"table\" wine use declined 3.3 percent to 19.7 liters.

A change in consumer habits, anti-alcohol campaigns and increased
competition from other beverages are generally cited as the main factors
explaining the decline in wine consumption in Spain. Mineral water and
soft drinks are the beverages showing most growth during the last
decade. Beer also has a higher per capita consumption (75 liters last
year) than wine.

\"Table\" wines, which remain the most popular type consumed in Spain,
are mostly sold in tetra-brick packs, followed by 3/4 liter bottles and
by returnable containers; these are mostly consumed in homes.

Quality wine sales in the 2001/02 marketing year increased by 6 percent
to 10.46 million hectoliters, accounting for 44 percent of total wine
sales. About 62 percent of quality wines sales were made domestically
and the remaining 38 percent, in export markets. Sales of bottled
quality wine are showing steady growth, accounting for 83 percent of
total quality wine sales.

![](media/image6.wmf)

In the quality wine market, Rioja is the leading AO wine type sold in
the domestic market and cavas (sparkling) are the most sold in export
markets. Reds account for 55 percent of domestic sales; whites, for 21
percent; sparkling wines, 13 percent; and roses, 7 percent.

# TRADE

## Trade Flows

  --------- ----- -------------- -------- -------- ------ -------------- -------- --------
  ** **           **CY 2000**    **CY     **CY            **CY 2000**    **CY     **CY
                                 2001**   2002**                         2001**   2002**

                                                                                  

                  **VOLUME OF                             **VOLUME OF             
                  WINE IMPORTS**                          WINE EXPORTS**          

                  (1000                                   (1000                   
                  Hectoliters)                            Hectoliters)            

  -Intra EU       632            234      247             7,099          8,199    7,898
  Imports                                                                         

  -Extra EU       10             18       15              2,251          2,409    2,678
  Imports                                                                         

  TOTAL           642            252      262             9,350          10,608   10,576

                                                                                  

                  **CIF VALUE OF                          **FOB VALUE OF          
                  WINE IMPORTS**                          WINE EXPORTS**          

                  (Million                                (Million                
                  Euros)                                  Euros)                  

  -Intra EU       84             66       72              907            1,022    971
  Imports                                                                         

  -Extra EU       4              5        8               379            397      430
  Imports                                                                         

  TOTAL           88             71       80              1,286          1,419    1,401
  --------- ----- -------------- -------- -------- ------ -------------- -------- --------

##  Trade Market Profile

  -------------- -------------- ------- -------- ------- -------------- -------- --------
                 CY 2000        CY 2001 CY 2002          CY 2000        CY 2001  CY 2002

                                                                                 

                 **VOLUME OF                             **VOLUME OF             
                 WINE IMPORTS**                          WINE EXPORTS**          

                 (1000                                   (1000                   
                 Hectoliters)                            Hectoliters)            

  Wines          584            192     155              8,714          10,047   9,783

  -Sparkling     17             17      18               717            796      875

  -Quality,      40             26      38               2,749          3,088    3,148
  still                                                                          

  -\"Table\",    486            134     85               4,854          5,819    5,407
  still                                                                          

  -Fortified     41             15      14               394            344      353

                                                                                 

  Other (1)      58             60      107              636            561      793

                                                                                 

  TOTAL          642            252     262              9,350          10,608   10,576

                                                                                 

                 **CIF VALUE OF                          **FOB VALUE OF          
                 WINE IMPORTS**                          WINE EXPORTS**          

                 (Million                                (Million                
                 Euros)                                  Euros)                  

                                                                                 

  Wines          77             62      64               1,254          1,350    1,293

  -Sparkling     29             27      31               229            245      253

  -Quality,      16             20      12               648            713      737
  still                                                                          

  -\"Table\",    25             9       15               277            286      197
  still                                                                          

  -Fortified     7              6       6                100            106      106

                                                                                 

  Other (1)      11             9       16               32             68       108

                                                                                 

  TOTAL          88             71      80               1,286          1,418    1,401

                                                                                 

  \(1\)                                                                          
  effervescent                                                                   
  (carbon                                                                        
  dioxide added)                                                                 
  wines, grape                                                                   
  must,                                                                          
  vermouth,                                                                      
  sangria and                                                                    
  other flavored                                                                 
  wines                                                                          
  -------------- -------------- ------- -------- ------- -------------- -------- --------

![](media/image7.wmf)Spanish wine exports in CY 2002 remained
practically stable from the preceding year at about 10.6 million
hectoliters worth €1.40 million. The main destinations, value basis,
were the rest of the EU (69 percent), the United States (10 percent)
Switzerland (5 percent), Japan, Norway, and Canada (2 percent each). The
main EU markets for Spanish wines last year were Germany, the U.K. and
France. During the first half of 2003, Spanish wine exports increased 29
percent in terms of volume and 10 percent in terms of value over the
comparable period of a year earlier. The increase is mainly due to
larger exports of table wines, which increased by 46 percent.

Wine imports in CY 2002 increased nearly 4 percent to 0.26 million
hectoliters but in terms of value increased 13 percent to €80 million.
Spain\'s wine imports are mainly French champagne and a few narrow
market segments of quality wines and \"table\" wines that come mainly
from France, Italy and Portugal. During the first half of 2003, Spanish
wine imports increased by about 5 percent in value over the comparable
period of a year earlier.

Concerning Spain-U.S. wine trade, the value of Spanish wine exports to
the U.S. in 2002 increased 17 percent to €136 million. These exports
were mainly composed of cava (sparkling) wines (€34 million), Rioja (€32
million), quality red wines of an alcoholic strength of between 13 and
15 percent (€19 million), and Sherry wines (€11 million). U.S. wine
exports to Spain last year were about 500 hectoliters worth €0.63
million.

For the next couple of years, current abundant inventories coupled with
reduced prices and declining EU wine production may boost Spanish wine
exports. For the longer term, however, forecasts are difficult to make
since Spanish grape harvests are very vulnerable to drought and frost.

## Market Access

1\. Import Tariffs: Current import tariffs are as follows:

  -------------------------------------------- --------------------------
                                               

                                               (€/100 liters)

                                               

  Bottled wine, still                          13.10

                                               

  Sparkling wine                               32.00
  -------------------------------------------- --------------------------

2\. Excise taxes: no excise taxes apply to domestic or imported wines in
Spain.

3\. Value Added Tax: Like domestic wines, imported wines are subject to
a 16 percent VAT.

## Market Opportunities 

As indicated above, Spain\'s wine imports are basically limited to a few
narrow market segments. Thus, Spain should be considered as only a
specialty market for wine imports. Some high priced U.S. brands already
have in‑country distribution made by distributors based either in Spain
or elsewhere in the EU. There are also some marketing opportunities for
medium-priced wines. Madrid and Barcelona appear to be the cities most
open to new wine types and to foreign wines.

Import Requirements:

Importers may be any individual or company located in Spain or in any
other EU country. Spanish importers with an address in Spain must have a
fiscal I.D. from the Ministry of Finance (Ministerio de Economia y
Hacienda). For wine shipments larger than 3,000 liters, an import
certificate-- called AGRIM-- is required. A deposit, with rates
depending on the type of the wine, must be made; however, deposits not
exceeding €120 are exempted. The import certificate must be requested
prior to the shipment; it is valid for the rest of the month in which it
is issued plus 4 months, i.e. a certificate issued on November 24 will
be valid through March 31. The certificate is valid for the entire EU.

The following documentation is required for customs clearance of wines:

1\) Bill of Lading

2\) Certificate of Origin

3\) An original Commercial Invoice with a copy

4\) An import declaration

As indicated above, wine imports into Spain are subject to the EU import
duty rates shown on the table as well as to a 16 percent VAT.

Wines are also subject to sanitary inspection at Customs. Importers must
be registered at the Public Health Unit of the Autonomous Region\'s
Government where they are located. Importers based in other EU countries
and not having a domicile in Spain should be registered with the Central
Government\'s Ministry of Health at the following address:

Registro Sanitario de Alimentos

Direccion General de la Salud Publica

Subdireccion General de Higiene de los Alimentos

Ministerio de Sanidad y Consumo

Paseo de Prado, 18-20

28071 Madrid

Phone: (34) 91 596-1966 and 91 596-1950

Fax: (34) 91 596-4487

Please note that importers must have a sanitary registration number,
which, along with their names and addresses, must appear on the label.

As in other EU countries, product labeling must comply with stringent
information requirements including net content, alcoholic degree, lot
marking, country of origin and importer\'s name, address and sanitary
registration number. Label information must be in Spanish. Stickers are
allowed. A new wine-labeling norm regulates the use geographical
indications, traditional terminology (such as fino, oloroso,
amontillado, etc.) as well as varietal information.

Some labeling information that is mandatory in the United States -- the
U.S. Government's warning statement and the sulfite declaration \-- are
prohibited in the EU. In addition, generic or semi-generic designations
having geographic significance such as "Sherry" or "Champagne", or the
terms "Method Champanoise", "table wine", and "reserve" are prohibited
on labels of U.S. wine sold in the EU.

A customs agent or broker is normally involved in clearing products at
customs. Import declarations are made at the State Secretariat of
Commerce or its branch delegations in major port cities throughout the
country. Declarations must use the exact terminology of the tariff
classification under which the goods are being imported. A three-month
grace period is allowed for United States‑origin goods arriving without
proper documentation, subject to a written guarantee by the customs
agent.

# MARKETING

## Distribution 

In-country distribution is normally made through wineries' distributors.
As shown in the table below, consumption of quality wines takes mainly
place in the hotel, restaurant, and institution (HRI) channel.
Consumption of \"table\" wines and sparkling wines, however, is more
balanced between the HRI channel and homes.

![](media/image9.wmf)

About 80 percent of HRI market is supplied by distributors. The balance
is met by wholesalers (8 percent), supermarkets (6 percent) and cash &
carries (4 percent). Home consumption, by contrast, is mainly supplied
by retailers.

The average price for quality wines sold in Spain in 2002 was €3.8 per
liter, down 1.2 percent from 2001. \"Table\" wine prices recovered from
last year's low, averaging €1.2 per liter. Sparking wine prices
increased significantly to €4.8 per liter on average.

For exports, Spanish wineries usually sell directly to an importer
located in the destination country. Lack of industry concentration and
organization on the part of Spanish wine producers usually enables
distributors to fully extract price concessions in both domestic and
foreign markets. Only a very few large producers are able to implement
their own marketing criteria. There are about 4,500 wineries in Spain;
however, 50 account for 80 percent of total wine exports. Although
larger firms are merging (the five largest wineries had a 32 percent
market share last year) there are still a great number of small
wineries.

## Foreign Market Development 

The Spanish Foreign Trade Institute (ICEX), an Agency of the Ministry of
Industry, Commerce and Tourism, is responsible for diversified
government‑funded foreign market promotion programs for food products as
well as other non‑food items such as industrial products, consumer
goods, and fashion.

ICEX food product promotional activities are focused on EU markets and
include sponsorship and participation in trade fairs, point‑of‑sales
promotions, market research, trade missions, training and direct
assistance to exporters. The Institute\'s promotional activities abroad
are supported by eleven promotional centers (seven of which are
food/beverage‑related, located in New York, Toronto, Dusseldorf, The
Hague, London, Paris and Milan), and by 80 trade offices around the
world. Five trade offices are located in the United States (Chicago, Los
Angeles, Miami, New York, and Washington). There is also an office in
San Juan, Puerto Rico.

Competitors' market promotion activities are mainly conducted by other
EU countries, including Portugal's Port Wines Institute, Italy's
Institute for Foreign Trade, and France's SOPEXA. Market development
efforts for wine in Spain are for the most part focused on participation
in Intervin, a wine and spirit show associated with ALIMENTARIA, which
is held biannually in Barcelona. (ALIMENTARIA is the third largest such
event held in Europe, after ANUGA and SIAL.) In 2002, Intervin, with 561
companies occupying over 13,000 square meters of exhibition space, was
the most popular section of Alimentaria, attracting nearly 18 percent of
the show's total visitors. The next Intervin show is scheduled for
February/March 2004. For more information on Intervin, please visit the
following internet address:

http://http://www.alimentaria.com/index02e.html

## Government Support

Under the current limits of the WTO, EU export refunds are available for
\"table\" wines and certain fortified wines to certain destinations.
Subsidies given to wine exports are being cut back. For Spain, they
amounted to €13.5 million in 2001, €2.5 million less than in the
preceding year.

## 

Spanish wine exports with EU export refunds primarily consist of bulk
reds and roses destined for African markets. Other destinations include
Asian and Eastern European markets (bulk whites).

## Regulations

EU regulation 1493/99 defines the EU wine regime. The Spanish Vineyard,
Wine and Alcohol Act of 1971 was recently superseded by a new wine law
which aligns Spain's wine regime with the EU legal framework. It will
also provide greater protection for the origin and quality of Spanish
wine in order to increase their competitiveness in international
markets.