In this post, a group of Master’s students studying International Business Administration at Carlos III University – Madrid, analyzes the competitiveness of the industry of Spanish wine in USA.

Product’s definition

Spain is a country with marvelous geography and an abundance of vineyards. The total area of the vineyards covers about 950,000 hectares according to the data of the Ministry of Agriculture, Food, and Environment. Therefore, by transferring this truth into wine, any lover of the beverage will certainly be able to find a variety, style, or region that enchants their specific taste palate.

According to the data published by the FEGA, Spain produces a total of 42 million hectoliters. In fact, the Castilla la Mancha region is responsible for producing more than 50% of the country’s wine. Therefore, we find Spain to be one of the major wine producers along with France and Italy.

Statistics on the production of Spanish wine

Spanish wine in USA. Market definition

Our objective is to study the wine market and the companies that export and distribute wine in the United States. In this respect, there will be domestic competitors that export and distribute, as well as international competitors who also distribute coming into the American market.

When referring to volume, the United States is the largest consumer of wine in the world. It’s true that the consumption per capita is still low when compared to countries such as France or Spain. However, globally it still remains at the top in terms of consumer volume. In this regard, the possibilities of demand are very high. However, in 2015, the percentage of imported wine consumption was only 23.18%. Among the importers, Spain takes 6th place. This is the reason why we encounter a great international rivalry. Nevertheless, the market is still new and somewhat attractive due to its high demand.

A selection of wine corks, including Spanish wine corks

Market analysis – Porter’s 5 forces

Supplier Power:
The Spanish alcoholic beverage distributing industry has a numerous amount suppliers. This is due to the abundance of vineyards as well as the ideal climate to produce grapes in regions geographically all over Spain. There are over 600 companies in Spain that supply wine. The United States is the main consumer of bottled wine exported from Spain. In 2016, with up to a 7.2 % change since 2012, Spain is listed as the 6th top importer of wine in the USA. The exportation and popularity of Spanish wines into the USA is at an all-time high.

The bargaining power of suppliers is low because there are hundreds of suppliers that are available to choose from. Many suppliers exist with whom you can work; this makes suppliers easily substitutable if there is a sudden switch of costs. However, most Spanish suppliers are integrated, which means that they are in charge of wine production as well as distribution. In this case, suppliers do not represent a threat.

Buyer Power:
In the United States, there is a “three-tier system” when it comes to the importation of alcoholic beverages. This system requires the entry of wine into the United States of America by being passed through an importer, distributor, and then a retailer.

The importers, the first tier of the system, are buyers of the wine exporters. The investment in which the importer acquires are the wine purchases from the international wine exporters as well as the commercialization cost. They sell the goods to the distributors and in some cases as long as it has a different business name, the importers also own a distributor company.

There are a large number of international wine manufacturers that are interested in selling within the American market. This gives the importer great bargaining power, adding to the fact that any wine exporter must pass through them if they want their products to be sold in USA.

Another thing to consider is that the product is not highly differentiated. This means buyers could easily change from one supplier to another. This is related not only to the first tier, but also with the third one (the retailers), which is translated to a large array of imported and national wines.

When defining the American importers as the buyers of the wine exporters, we can conclude they have a great bargain power due the large offer of international wine exporters, and the existence of a low differentiated product that allows a quick supplier change.

Threat of Entry:
The potential entry of competitors to the wine distribution in the USA can be considered at a medium to high level because of the following factors:

The main factor of potential entry being considerably high is the low switching costs of changing the importation company as well as the low loyalty rate among consumers. Unless, there has been an agreed marketing incentive to distribute the product, which would hinder the change minimally.

Although this system protects American wines, which are offered at lower prices and are more competitive than the Spanish ones. However, this situation does not prevent the consumer from discovering new Spanish wines. An example of this is that year after year Spanish wine imports grow more and more making Spain the sixth largest importer in the USA.

However, there happens to be slight difficulty to be in the standardized market according to the “three-tier system” (as previously explained in this document). This system generates problems, however minimally, to the search for an importer who assumes the risk of commercializing the Spanish product within the American market. The distribution companies prefer to market products already known within the market, making it easier for them and in turn receive higher commission. In addition, it is a very regulated market and little homogenized in terms of legal requirements. These requirements vary depending on the state as the country commercialization of the product.

Threat of substitution:
The United States of America, being the worldwide leader of wine consumption, doesn’t have the local production capabilities in order to satisfy the demand of a wide range of products. This high demand is the reason why it is necessary to import wine.

Principally, French, Italian, and Californian wines are perceived by the American clients as a high quality wines in comparison with the Spanish ones.

Moreover, countries such as Chile, Argentina, Australia or China have improved their production processes and have increased their marketing investments. Hence, making the market more competitive and therefore becoming a big threat concerning substitutive distributors in a short period of time.

All in all, the threat of substitutes is high. Spanish wine in USA should take action in marketing campaigns to increase the loyalty of products, as well as provide product differentiation to beat the competition.

There are a great number of Spanish companies which export wine to the USA. In 2016, according to ICEX, 3,992 Spanish companies had exported wine to other countries and 1,617 did it in USA and this figure is still growing.

The investment in terms of being able to export these products is not very high, which is why the exit barriers are fairly low. This increases the level of competition.

On the other hand, the demand within the sector with a growing, so the margin of growth and profitability is attractive for the exporter. Spanish wine imports have grown by 50% between 2009 and 2013.

Thus, in order to gain power over many rivals, it may be advisable to offer a differentiated product in respect to the others. This way it may avoid a price war. Hence, differentiation in a newer market with a good offer is the main weapon in terms of competition. Until now, Spanish wines have not gained great popularity. However, they have gradually gained prestige, especially in restaurants of certain standards.

Industry´s sector potential / SWOT


  • Constant and increasing demand for wine in the American marketAmerican flag
  • Spanish wine is already the sixth most imported wine in the USA only behind countries such as France, Italy, Chile, Argentina, or Australia.
  • Steady growth of Spanish wine’s performance in USA
  • The USA is the world’s number one wine consumer and although its per capita consumption (10.25 L) in 2015 is still far behind the French (42 L) or Spanish (22 L) consumption, it grows year after year.
  • It is a market in which wine culture is relatively new to the average consumer. This shows increasing interest in the product, which can be seen by the growing supply of Argentine, Chilean, Australian, and Spanish wine exports and activities such as wine tastings or winery tourism
  • There is an increase in the Hispanic population that appreciates and values wine in their day to day lives


  • Competitiveness with other international wines such as Argentinean, Chilean, and Australian wines (whose demands have increased in recent years)
  • Competitive prices of local wines
  • Low consumer loyalty to a particular brand
  • Low cost of substitution of another product from one of the competitors
  • Low barriers of entry into the market It is only necessary to find an importer of your product that is willing to the risk of distributing your product within the USA
  • Legal requirements, licenses, and permits
  • The “Three-tier system,” making it difficult to enter the US market at competitive prices


The wine industry is a market of great interest in the United States. The buyers of Spanish wine in USA are considered to be the importers of the market. Due to the numerous amounts of exporters of wine worldwide, they also have great bargaining power.

When considering the competition within the industry, there is great possibility of entries of potential competitors due to the attractiveness of the market. The threat of substitute products is high because of the competition of international wines. These wines consist of French, Italian, Chilean, Argentinean, and Australian wines, all of which that have a good reputation.

The United States has a wine market that develops year after year, and is highly competitive. It’s the country with the highest volume of world wine consumption, and this rate grows higher constantly. Spain also happens to be the 6th exporter of wine in the USA and its demand has been increasing in recent years.

The differentiation of the product will help control the competition. That being said, it is important that the distributors strive to present differentiated products, not only having to do with factors surrounding quality, but also in product design and presentation. This will help make it more attractive to consumers; in turn, the appropriate publicity must be made so that the product is made known in this great market.

When considering the Spanish wine market and the companies that export and distribute wine in the United States, we can conclude that in general the USA has a risky market, but with positive aspects that make it attractive and can lead to success. Nevertheless, the negative aspects that have just been discussed must be taken into account in order to avoid failure.