We have chosen the wine industry in Spain in this report to analise its strategy in te US and make the following benchmarking report. The Alvear winery company will be compared in terms of strategy to the Barbadillo, Perez Barquero, and Gonzalez Byass Spanish wine companies.
For the purpose of this report and the continuation of research regarding this topic, the group attended the XVIII Hall of the Best Wines of Spain at IFEMA,
organized by the Peñin Guide, which is the most complete Spanish wine manual in the world. This guide is used by both amateurs as well as professionals in order to make fundamental decisions while purchasing Spanish wines by national distributors and international importers. At the event, communication was made possible between different export employees from a variety of wineries, importers, and distributors. With the information obtained, Barbadillo, Perez Barquero, and Gonzalez Byass Spanish wineries seemed to be the best fit for the purpose of this report as they are direct competition for Alvear.
Alvear is the company that has been previously analyzed in regards to exportation of products into the USA. The Alvear winery was established in 1729 by a Spanish family based in the Andalucian region of Sierra de Montilla y Moriles, Córdoba, Spain. Presently, it is regarded as one of the most prestigious and internationally renowned wineries (bodegas) in Andalucia. What makes Alvear’s wines special is the type of grape produced in the region which is called the Pedro Ximénez grape. This fruit originates from the Rhine region and is used in the winery due to its unique base as a wine for sweet, fine, aromatic, and dry wines. Alvear distributes its wines and products throughout Spain and abroad. They sell to 25 countries including the UK, Netherlands, Japan, Canada, and Australia, and this export rate internationally makes up 40% of sales.
The current internationalization strategy used by Alvear is a global strategy. Alvear distributes its products to various parts of Spain. It’s main market is the Mediterranean region from Catalonia to Algeciras.
Barbadillo is a Spanish wine company established in 1821 which is originally based in Cadiz. Their best-selling wine is the “Castillo de San Diego” wine. In comparison to Alvear, they also export to more than 40% of their products and happen to sell to over 50 countries. Perez Barquero was established after 1905, and is originally based in Montilla, Cordoba. They have been exporting internationally since the 1950’s and sell currently to over 45 countries. Gonzalez Byass was established in 1835. Their first international export was to the UK in 1844. Their origin is Jerez de la Frontera, Cadiz. They export to many countries such as USA, Mexico, Japan, and the UK. The similarity between these companies and Alvear is that we can see that they all use the same precious Pedro Ximenez grape in order to produce high quality wines. Also, it seems to be a trend that these companies all started to export similarly to the UK at first before expanding world-wide. It is evident throughout the rest of this report exactly how the internationalization strategies are similar between these Spanish winery companies of Alvear, Barbadillo, Perez Barquero, and Gonzalez Byass.
The internationalization strategy for the Barbadillo wineries is a global strategy. The adaptation made to the product is basically little to no adaption. Among changes made, usually the label is modified due to laws in force within the country that it is being exported to. The production of Barbadillo is centralized only in Spain. The international operation includes access to the international market through agreements with distribution companies and local importers that are responsible for the distribution to the country it is to be exported for. Some examples of these companies include John E. Fells & Sons Ltd for the market in England. International sites include Ireland, England, and the United States among others.
Bodegas Barquero (Barquero Wineries) were established in the year of 1905 in Montilla-Moriles, located in the South of Cordoba, similar to Alvear. This is the territory where the Pedro Ximénez grape originated from. The strategy of internationalization by this winery is a global one because the main product doesn’t change. The only changes are if the design of the back label is modified, changing the language. This way, while internationalizing, it complies with the laws that are enforced abroad.
Regarding its production, it is located in Montilla where most of the vineyards are which is also its foundation where there is access to raw materials. These fine wines are aromatic and sweet 100% due to the Pedro Ximenez grape. This grape is present in five continents exporting to a totality of 40 countries, among which England and the United States stand out by their high demands.
For this, they export through importers and distribution agreements. The conditions for exporting are included within the international trade clause, EXW, which is used for international sales and transactions.
The international strategy for Gonzalez Byass is a transnational one. Their adaptation of the product differs from other companies because it tends to adapt its product to the international market. Among the changes we can find that the degree of alcohol (when required by the destination country) and labels will change or be adapted according to local legislations. The name change and development of new products are better perceived by the country of export. The Croft Original products are an example of this. They are a product designed solely for the foreign market and the Croft twist (the name of the semi-sweet wine of this winery for the English market.)
International operation, This winery has a great international orientation, it was created with the main purpose of exporting wine to England due the high commercial volume present in those years.
Nowadays Gonzalez Byass has three different ways of internationalization: Local distributors, own distributors and representation offices.
they work with local distributors for most of the countries, they have two own distributor companies in Mexico and in London, besides the two representation offices in Shanghai and New York. The last two offices can be considered a high expense to the company but they can be justified because both are attractive markets, so being closer to the consumers allows better market research and more product control that can be translated to better benefits.
Gonzalez Byass with the intention of increasing the range of products and their internationalization, in 2016 acquired a Chilean winery Veramonte, which has more than 600 hectares. This has been the first time the company produces outside the Spanish territory.
In 2017 in association with Emperador the Filipino group, they sign an agreement to acquire Domecq and Pedro Domec brands from Pernod Ricar, these new brands have it major market in Mexico and California.
Even though Gonzalez Byass is one of the biggest wine companies in the world, still they never stop researching new ways of expanding.
In terms of internationalization sites, they are present in more than 100 countries of which the United States, Colombia, Peru, England, Italy, France, India, and Saudi Arabia, and many others can be mentioned.
After studying Alvear and its competitors we can conclude upon the following statements:
The main international market where Spanish wines are more exported is the United Kingdom. This can be said due to historical reasons as in the case of González Byass, where similar consumption habits or the market size can be observed in the US.
In general, wine is a product which is easy to export and it can see benefits from economies of scale, however, it is necessary to mention that it is an annual product that the land provides. That is why the possibility exists that in unsuccessful years the winery can not reach the full potential of production. Thus, making it difficult to satisfy international and national demand.
Therefore, we can conclude that it is a product with high pressure to be internationalized and with a low demand to be adapted in the markets where the product is going to be sold. Simply, the product needs minimal modifications, such as label adaptation in order to meet dietary requirements of the country, or name change in order to make the product more attractive and easy to remember for the final consumer depending on the exportation country. All in all, wine, the majority of wine producers use the global strategy for its internationalization.
Finally, the exportation is done through distribution agreements with local importers and local distributors which does not imply high costs and a better knowledge of the market and possible points of sale. Nevertheless, this type of agreements implies to lose the control among the product once it is delivered to the local agent.