1. SECTOR RESEARCH
WINE IN SPAIN
An in-depth look at strategies employed in Spain and the impact on firms
and consumers.
Report Compiled by Daniel Minjares

2. TABLE OF CONTENTS
Table of Contents
Country Background _____________________________________________________________________________________ 1
A Brief Overview of Spain....................................................................................................................................................................1
Sector Background..................................................................................................................................................................................1
Ownership patterns & Relevant Mergers and Acquistions...................................................................................................2
Importance of Wine in the economy ..............................................................................................................................................2
Key Deveopments in the last five years.........................................................................................................................................2
Strategy Exploration _____________________________________________________________________________________ 3
Defintion .....................................................................................................................................................................................................3
Focus.............................................................................................................................................................................................................3
Strategy Analysis _________________________________________________________________________________________ 4
Stakeholder Impact Analysis Table .................................................................................................................................................4
Significant Stakeholder Relationships ...........................................................................................................................................5
Competitive Position Analysis...........................................................................................................................................................6
Conclusion ________________________________________________________________________________________________ 8
Long term changes in the sector ......................................................................................................................................................8
Interesting expereinces........................................................................................................................................................................8
Closing thoughts on sector strategies ............................................................................................................................................9
Bibliography ____________________________________________________________________________________________ 10

3. STRATEGIES OF THE WINE SECTOR IN SPAIN
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Country Background
A BRIEF OVERVIEW OF SPAIN
Spain is the ninth largest economy in the world, the fifth largest in Europe, and third
largest producer of Wine in the world. Spain is the world’s 51st largest country with a
landmass of 504,782 square kilometers. Spain attracts many immigrants; it doubled it’s
Spain is bordered to the north by France, Andorra and the Bay of Biscay (Mar Cantabrico);
to the east by the Mediterranean; to the south by the Mediterranean and Gibraltar and to
the west, Portugal and the Atlantic Ocean. This is relevant as it is a predominantly warm
climate – one of the warmest countries in Europe—with over 3,000 hours of sunshine a
year. It is home to a diverse set of landscapes and geography, which yields a myriad of
wine regions. (Angloinfo)
SECTOR BACKGROUND
The wine industry is quite important to the Spanish Agriculture economy. The average
wine contribution to the total agriculture output is about 3%. (Bardaji and Mili) The wine
sector as a whole is evolving in an increasingly competitive international scenario
characterized by the irruption of new producing countries with innovative strategies in
production and trade (Campbell and Guibert). International positioning of new producers
is also favored by high business concentration: the five top companies control 73% of
wine production in the United States, 68% in Australia and 47% in Chile, against
respective figures of 13% in France, 10% in Spain and 5% in Italy (Anderson et al).

4. STRATEGIES OF THE WINE SECTOR IN SPAIN
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OWNERSHIP PATTERNS & RELEVANT MERGERS AND ACQUISTIONS
As shown in the graph, there is
fierce competition in the wine
sector with a number of large
mergers and acquisitions. As in the
case with Napa country in the US,
wineries may change hands many
times before even the first bottling
occurs but act as a subsidiary of a
larger holding company. The reason
for many more deals is the
attractive valuation in later years.
IMPORTANCE OF WINE IN THE ECONOMY
Spain is the third largest producer of wine, accounting for 4.2 billion liters in 2004 .
Spaniards have a strong tradition of wine consumption with the country ranked fifth in
the world, though the 1.4 billion liters is a third of national production. Spain is a major
exporter, tied with Italy for first place with 1.45 billion liters of wine exported in 2004 .
Spain‟s openness to foreign trade and investment has encouraged foreign producers‟
investment. For instance, Allied Domecq has recently acquired two large Spanish brands,
Maques de Arienzo and Bodegas y Bebidas. (Hussain et al)
KEY DEVEOPMENTS IN THE LAST FIVE YEARS
In recent years, the average consumption of wine has decreased, both on a whole and in a
regional scope, (Cholette et al; Hussain et al.) Therefore, the market has shifted to put an
emphasis on exports and a large shift to a more global marketplace, heavily influencing
the market strategies discussed in this paper.

5. STRATEGIES OF THE WINE SECTOR IN SPAIN
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Strategy Exploration
DEFINTION
Economies of Scope – This is an economic theory that states the average total cost of
production decreases when an increasing number of different goods are produced.
Differentiation – One of the generic marketing strategies, this is a process that displays the
differences between products. It creates a perceived advantage in the customer’s view and
can be the result of positioning it as a more attractive product by contrasting its unique
qualities with competing brands.
Exporting – The sale of goods produced in one country and shipped to another for future
sale or trade. Such sale helps an economy grow and is a core function of diplomacy and
foreign policy, fostering economic trade that can benefit both parties involved.
FOCUS
Economies of Scope – The driving factor behind the main M&As in Europe and
subsequently Spain come from strategically acquiring wineries. A single winery may make
a multitude of variations, not to mention regional and unique grape variables, many that
are used in jams, fruit juices, and even selling the barrels for spirits.
Differentiation – Wine is inherently strategically positioned as a differentiated product.
Somalis are trained to understand these unique differences, but even the standard
consumer can understand the differences in general price point segments; as such, Spain
implements specific strategies in the upper tier segments.
Exporting – As consumption has taken a downturn in the region, Spain has responded by
focusing on the outside market, producing nearly as much as the previous years but
exporting a significantly increasing amount each year.

6. STRATEGIES OF THE WINE SECTOR IN SPAIN
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Strategy Analysis
STAKEHOLDER IMPACT ANALYSIS TABLE
(IMPACT ON) ECONOMIES OF
SCOPE
DIFFERENTIATION EXPORTING
CUSTOMERS Customers are able
to have a variety of
product choices
from the same
brand or region.
Products are highly
different and have
unique appeals.
Customers are able
to choose from a
very wide selection
of choices.
Spanish wine is
paired commonly in
worldwide markets,
and a particular
favorite in the US.
EMPLOYEES With a wide scope
of related products,
marketing, PR, and
many other fields
are able to work on
multiple projects
within the same
firm.
There is a high level
of skill and
knowledge about
correctly growing a
specific grape
varietal and the
region is home to
many, employing
many skilled
workers.
With many local
wineries are
looking to export
overseas,
employees are
being trained to
become experts in
transitioning with
the firm, expanding
their horizons.
COMMUNITY With Spain being
the largest
landmass filled with
grapes, the region
enjoys many of it’s
products at a
significantly
reduced price.
Spain as of late has
put a higher
emphasis on locally
grown high quality
product and foreign
mid-tiered
selections.
The community has
shown firms that
lower end
selections are not
needed and prefer
foreign ones.
GOVERNMENT Taxes are collected
on all sales, so the
firms which go after
many products
increase the tax
collected.
Taxes on wines in
Spain are based on
the alcohol content
and therefore the
many varieties are
taxed at various
rates.
As Spain is one of
the major exporters
of wine, the
government has
created many tariffs
and strategic
partnerships.

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(IMPACT ON) Economies of Scope Differentiation Exporting
ALLIANCES Some wine is
created from a
number of wineries
mixed together,
often from multiple
region varieties.
Some labels hold a
number of wineries
and enjoy the
advantage of
multiple grape
varietals.
Small-scale
wineries are able to
get their name out
overseas and are
quite competitive in
the world market.
COMPETITORS This intensifies
internal pressure
within the market,
in term of Porter’s
five forces.
Nearly all wines are
positioned with
differentiation, and
as such,
competitors must
constantly create a
unique product.
With France as a
local rival, Spain
must capture the
world market as a
result of
globalization.
INVESTORS Investors often
purchase labels
based not on just
wine but rather the
economies of scope
that the firm has
created; major M+E
activities can result
in huge jumps in
market capture.
With all the
varieties, investors
can choose very
specific wineries to
invest in, or select a
holding firm that
adds value by
bundling.
With Spanish wine
being assumed
across the world,
even smaller firms
can export to a
global scale with
the right investor.
SIGNIFICANT STAKEHOLDER RELATIONSHIPS
• Investors in regards to economies of scope:
As previously mentioned, investors often make major M+E to capture the market in
not only the wine industry but jams, juices, and related markets. Consolidation in the
wine industry is not uncommon, even in the top producers in the region. Between 26 –
28% of all the M&A of all deals in Europe occurred in Spain (M&A International). The
largest transaction was between Carrion’s $117mn acquisition of Grupo de Bodegas
Vintaris from Ranobank; this allowed it to grow 3% in market share in just one year’s
time.

8. STRATEGIES OF THE WINE SECTOR IN SPAIN
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• Government in regards to exporting:
The government plays a huge part in regards to exporting. As shown above, Spain has
the largest world surface area of wine grapes in the world and is one of the largest
exporters. Many New and Old World wineries attempt to imitate Spain’s choices of
viticulture and horticulture but the market often demands the superior products.
COMPETITIVE POSITION ANALYSIS
• Changes after implementation of strategies:
The sector has greatly expanded after implementing these strategies. Consumer taste
has shifted in recent years and prompted the region to become a powerhouse exporter.
Due to fierce overseas competition, individual firms have placed a strong
differentiation strategy in place to strategically position their mid-tiered labels up to
their top-tiered ones. Spain consumers have still taken a liking to their home
countries’ superior label, and because of heavy taxes on exports, placed proportionally
by alcohol content, the country has created a cost-effective market for premium
brands.

9. STRATEGIES OF THE WINE SECTOR IN SPAIN
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• Weakness in competitive position:
In regards to the three chosen statgieis, there is not a real inherenet weakness in of
itself, but rather a weakness in the executuion of singular firms in the industry. For
example, a firm that produces only a single variety of wine must stay competitive and
implement a model that encompasses economies of scale, which is a daunting task for
smaller vineyards. However, because of this, they miss the opportunity to ever work
alongside each other (Catavino). Spanish wineries rarely work together and instead
rely on a third party holding companies to created blended wines. The choice to be an
all-in-one from the start has effectively become an double edged sword. Instead, a
savvy firm could work with neighboring vineyards, all whom are vastly differentiated,
and showcase these differences which will appeal to a consumer’s taste.
• Potential changes in the future:
The only foreseeable change in the future of the wine industry is the fact that
consumer’s taste will change with the generation and the market has to respond
accordingly. After the crash in 2008, total sales of wine have dramatically decreased.
Markup in restaurants may be tenfold the listed price and consumption rates have
dwindled (Baigorri). Wine is a status symbol beverage, which is shown when
correlated to the increase consumption of beer and the push to the export market. On
the world market, Spanish wines are known to be some of the cheaper ones but in
recent years that image has been shed to showcase a much stronger range of price
points.

10. STRATEGIES OF THE WINE SECTOR IN SPAIN
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Conclusion
LONG TERM CHANGES IN THE SECTOR
All of the strategies presented have made a strong long term economic impact on the
market. The new model of the industry has shifted from being one of the best in one
variety but to putting an emphasis in building towards economies of scope. As previously
mentioned, by
achieving this, even
a small vineyard can
be competitive in
the world market.
Though various
rating systems and
exporting, a firm
that produces a
superior product
can carve out a
respectable profit
and return, which seems why Spanish wine has put a greater and greater emphasis on
increasing the planting of grapes. While consumption has tapered off, due to changes in
consumer tastes and bolstered on by economic downturn, Spain has continued to make
it’s selections available on the world market.
INTERESTING EXPEREINCES
Over the time I’ve conducted this research and paper, I’ve tried a number of Spanish wines
per the instructions of my wine professor and friends in the industry. It seemed like the
state of affairs in Spain are widely known to have been at one time a cheap alterative to

11. STRATEGIES OF THE WINE SECTOR IN SPAIN
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French wine, but there are a number of stars. While wine has become more widely
consumed as the economy has returned to a more stable state, the industry has once again
shifted to respond to the changes in demand.
In regards to the sheer number of wines produced, I was simply amazed. Because of the
wide variety of climates and topography, Spain is able to put out some of the best and
affordable choices. However there is no obvious “Brand Spain” which is a clear favorite
among seasoned critics of Spanish wine. While one can point out that the Marlborough
Sauvignon Blanc put New Zealand on the map, it is hard to do the same for Spain; the
regional identity is rather unclear. Now this has not been historically a downside – as is
the case with Washington – but just another barrier when entering new markets. Whereas
the average consumer is not highly educated on Spanish wine, it poses a bit of “consumer
shock” (Veseth), where consumers panicky stroll up the wine aisle and grab the first label
they are able to pronounce instead of comparing two labels in minute detail.
CLOSING THOUGHTS ON SECTOR STRATEGIES
Overall, I believe that the general role of strategy in Spain is as complex and unique as its
wine selection: Firms employ a number of strategies and nearly all of them use a degree of
differentiation. Spanish wine is at an interesting strategic inflection point as it can choose
to focus in on carving out a brand identity or continue to create a strong presence in
existing markets, expanding the selection even more. Spain may actually begin to make
wine selection choices not on what it’s home country needs are but rather for overseas, as
we are already seeing sherry selection be traded out for more favorable alternatives.
However, it seems that Spain is in a strong position to navigate this complicated passage.

12. STRATEGIES OF THE WINE SECTOR IN SPAIN
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Bibliography
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Campbell, G. and Guibert, N. (2006). Old World strategies against New World competition in a
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