Freixenet (DWS) Limited Bursary Scholarship Report
What are the advantages of a product portfolio such as that of Freixenet (DWS) Limited?
by Caroline Shepherd
Table of Contents
Freixenet (DWS) Limited Bursary Scholarship Report __________________________ 1
Appendix 1 – Spanish Wine Exports in Euros ____________________________ 9
Appendix 2 – Boston Consulting Group’s growth share matrix ______________ 10
Bibliography _____________________________________________________ 11
Acknowledgements _______________________________________________ 11
Photo diary _____________________________________________________ 12
March 2006
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Most consumers of their flagship Cordon Negro Brut NV are probably unaware that
Freixenet (DWS) Limited, owns a diverse, international brand portfolio and acts as agent
for other, equally reputable, wineries in Spain. This report seeks to lay out the
advantages of a brand portfolio, from the perspective of the company, and by extension
the wineries, using as illustration the eight wineries visited during my sun-drenched tour
last May.
The UK is the second largest export market for Spanish wines after Germany,
representing 18% (or €279.8million) of total wine exports by value in 2004. However,
exports to the UK have increased by 40% since 2000 compared with 20% for exports to
Germany, a trend which closes the gap between the two countries in terms of their
importance to the Spanish wine industry. See Appendix 1.
In such a positive context, how does a brand portfolio benefit a well-established name
such as Freixenet? Is having a brand portfolio a matter of choice or necessity? Security
in diverse markets, leverage in financial deals, economies of scale in distribution and
support functions such as sales and marketing, as well as the depth of the product
offering are all considerations for a company like Freixenet operating in the highlycompetitive UK market. Offering a simplified buying process for “time-poor” wine
buyers is another advantage. Meanwhile, winemakers can concentrate on their wines,
maintaining their individuality, with scope for research and development through
investment at group level.
Based on my theoretical knowledge of marketing and the Boston Consulting Group
Product Portfolio Analysis, there is usually one brand that generates high-volume sales,
occupies a high market share position, yet displays relatively low growth potential.1 This
is known as the “cash cow” of which Freixenet’s Cordon Negro is a prime example. See
Appendix 2. Without doubt, Freixenet is the leading Spanish brand, rising in volume
terms from 7.8% to 8.3% market share (MAT October 2005/04), far outstripping its
nearest competitor in the sparkling wine market. 2
1
2
Marketing Concepts & Strategies, W. Pride and O.C Ferrel, page 649
The Drinks Business, Spanish Report, 05/06, page 12
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The volume of Cava produced at Freixenet’s winery in Sant Sadurní d’Anoia is
staggering: 100 million bottles per year of which only 1% is vintage or special cuvée
production. Emphasis at the plant, for it resembles more a factory that a winery, is on
automated processes, from riddling in massive gyro-palettes, to robotic stacking of
bottles for the minimum 2 years ageing required for the Cordon Negro brand. It is a
slick operation and there is ongoing investment in modernisation, as evidenced in the
building work being carried out to expand the underground cellars and link all sections of
the plant with ramps for motorised access. The massive scale of production implies vast
spaces for bottle storage, as even the entry level Carta Nevada benefits from a minimum
of 1 year’s bottle-ageing.
The current situation is a double-edged sword for Freixenet’s Cava brands – to remain
the number one sparkling wine in the UK has put pressure on margins as rising costs
associated with buying-in grapes and other production elements take their toll.
Freixenet only owns 300ha of vineyards for its Cava production, a tiny percentage of
their overall requirements. Yet the benefit of a portfolio enables the Freixenet group to
successfully balance costs and revenus.
Equally important is the depth of the product range, to encourage consumers of
Freixenet Cordon Negro Brut NV to “trade up” to a premium Cava, e.g. Cordon Negro
Vintage Brut. While growth may be slowing down in the Cava category as a whole, the
fact that the premium sector is performing well highlights the necessity of being present
in different market segments.3
The Freixenet owning family, Ferrer, saw an opportunity to acquire estates outside
Penedès and thus capitalise on the growing demand for premium wines firmly
reminiscent of their terroir. Freixenet’s Morlanda winery in Priorat sources 100% of its
grapes from its 22ha of vineyards. A boutique winery, its annual production
approximates 67000 bottles. The Morlanda brand (the actual winery is managed by the
Viticultors del Priorat) is aiming at the more discerning, adventurous wine consumer and
has aspirations of cult wine status with its newly launched Prior Terrae brand.
Freixenet’s strategy enables the group to be present in diverse markets at all price points,
thus benefiting from the security of not “having all one’s eggs in one basket”. My hosts
3
The Drinks Business, Spanish Report 05/06, pages 13-14
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at Morlanda were careful to point out the quality factors of their vineyard: of the 22ha
vineyard, 11ha has an average age of vine of 50 years, the terroir being unique and
boasting the famous “llicorella” soils, and at altitudes of 190-220m above sea level.
The advantage for Morlanda of belonging to the Freixenet group is the economic
security with which to make further investments (e.g. new plantings, re-training of vines
along wires in the Royat system to allow for some mechanical harvesting) and to justify
purchasing new barrels every year, at €700 per piece for French oak. There is a search
for quality at every level and with such small scale production, this is only feasible with
the backing of a parent company such as Freixenet. The results yielded from such
careful husbandry in the vineyard and a quality-at-all-costs approach in the winery were
entirely palpable – it was a pity that the lunchtime tasting preceded a four hour drive
tracing the River Ebro to Navarre.
Bodegas Ochoa is situated within walking distance of the medieval town of Olite in
Navarre. It is a family-run winery, owning all 143ha of vineyards used in the production
of a modern style of wine. Competitively priced and with an annual production of
800,000 bottles, the brand is an important addition to Freixenet’s product offering. The
range includes a single varietal Tempranillo, a Garnacha based rosé, a dry
Viura/Chardonnay blend and a sweet Muscat à Petits Grains, all positioned at the midmarket level.
Meanwhile, for the Ochoa family, having Freixenet as their UK agent allows their wines
to reach a wide audience through a well-established distribution network and dedicated
sales and marketing teams. Moreover, they are free to develop their business according
to their own philosophy, which embraces the best of tradition and of innovation. Their
appetite for learning and quest for new ideas are apparent in the way Javier Ochoa has
fostered close links with the nearby oenological research station EVENA, while Adriana
had only recently returned from a stint at winemaking in Australia. During my visit, they
were proud to present their new label concept – blending the distinctive skyline of old
Olite into a modern, minimalist design – a true reflection of their ethos.
Bodegas Miguel Merino in La Rioja Alta has an even smaller production than Morlanda,
standing at 30,000 bottles per year. Whereas the Priorat winery is owned by the
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Freixenet group, Bodegas Miguel Merino is still very much a family run affair with Miguel
“senior” at the top and “junior” involved in all sales and marketing activity (including
hosting visits such as mine). However, Freixenet saw the advantage of keeping this
brand in their portfolio when Freixenet bought Direct Wine Supplier (DWS) who used
to import their wines into the UK. Access to a wide distribution network is of enormous
benefit to a small operation such as Bodegas Miguel Merino while for Freixenet, it is
another string to their bow, a superbly run, boutique winery where the owning family can
devote all their energy and passion to producing wines at the top of the quality scale.
Unlike the issues faced by Freixenet in terms of buying-in grapes in Penedès, Miguel
Merino senior has forged close relationships with four growers in Briones who supply
hand-harvested bunches in small containers which are then sorted at the winery by five
full-time staff during harvest. His own vineyard, located within the town itself and next
to the winery, is used for various experiments with grape varieties, a natural curiosity and
pursuit of excellence that runs in the family.
Freixenet’s alliance with CVNE (Compañia Vinícola del Norte de España) strengthens
and enhances its product range, thus simplifying the purchasing function through single
point of contact and invoice. In this way, buyers can source their requirement for topselling Cava and Rioja brands in one hit. Another advantage of listing CVNE wines as
part of the brand portfolio is the trust customers place in such well-established names,
on which Freixenet can capitalise and encourage buyers to enlarge their own offering by
introducing a lesser-known brand. This is what one winery owner refers to as “a foot in
the door” approach.4 Thus small wineries such as Morlanda and Bodegas Miguel Merino
can benefit from a wider audience than would otherwise be accessible.
CVNE was one of the most intriguing visits on the tour, a large-scale operation coupling
tradition with modernity. It produces 6 million bottles per year and sources grapes from
its own vineyards for approximately 40% of production, the majority being sourced from
long-term growers in La Rioja Alta. Traditional hand-harvesting is employed but upon
arrival at the winery, it is all hi-tech. Crushed grapes are placed in what is known as
“identified flying objects” or IFOs which are lifted into position by cranes. Using
gravity, the contents are emptied into 25,000 litre fermentation tanks. Walking on the
concrete floor above these vats, one has the impression of being on a sea-faring vessel,
4
Harpers Spain supplement 2005, page 18
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all steel covers and valves. In the bodega, the ambience is one of tradition once again,
with American and French oak barrels stacked for the necessary maturation period,
which can reach 3 years in barrel and 3 years in bottle for the Gran Reservas.
The iconic Real de Asúa is a single-vineyard, premium wine from the CVNE range where
the average age of vines is over 50 years. After careful selection in the vineyard and
sorting on arrival at the winery, the grapes are fermented in oak barrels with a capacity of
40,000 litres, costing nearly as much in euros. Unfortunately, the post-visit tasting
omitted this jewel in the CVNE crown.
The inclusion of CVNE in Freixenet’s portfolio has the added benefit of the two
associated brands – Viña Real and Contino. While Viña Real is wholly owned by CVNE,
Contino is owned jointly by the founding family and CVNE. The panoply of wines in
the portfolio enables Freixenet to respond to diverse customer segments. Each brand
retains its individual identity, each winery evoking a distinct atmosphere while ultimately
delivering appealing, quality-driven wines to the consumer.
The juxtaposition of Viñedos del Contino and Viña Real could not be more striking,
although the respective winemakers are friends and share a joke or two. The Contino
estate has sought to mirror the Bordeaux châteaux by owning its own vineyards and
locating the winery in situ. The range is considered to be one of the most progressive in
Spain, thanks to the curiosity, perfectionism and vision of the winemaker, Jesus Madrazo.
He has pioneered a single varietal Graciano, labelled Rioja, and has developed the Viña
del Olivo as a single vineyard plot “high expression” wine that, in the 2000 vintage, was
the tasting pinnacle of the tour.
Viña Real, just on the other side of a hill known as “Cerro de la Mesa”, is a state-of-theart winery built by French architect Philippe Mazières of Château Lafite fame. To be
exact, the winery is situated on top of the hill to enable gravity to do the work of pumps,
with the aid of those “identified flying objects” encountered at CVNE, to move crushed
grapes into fermentation tanks with minimal intervention. Some 3 million kilos of grapes
are processed annually, mostly from vineyards around the town of Laguardia, a short hop
from the winery. Viña Real offers a range of Rioja wines from the Rioja Alavesa subregion which are, unusually, sold in Burgundy style bottles. Two cavernous tunnels
bored into the hillside at a depth of 40m serve as the bodega where barrel ageing takes
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place at a constant 13°C and 85% humidity. Such huge investment and the scale of the
undertaking are impressive, and remind one of the pervading confidence in La Rioja.
The final leg of my tour took me on a 2-hour drive west to Ribera del Duero and the
Valdubón winery near Milagros. Freixenet bought a 99% stake of the winery in 1999, as
part of its strategy to diversify its portfolio and thus enter the market for “new wave”
wines from Spain.
As a young business (it was founded in 1997), Valdubón has witnessed considerable
investment and is undergoing an expansion programme to achieve the group’s
production objective of 1 million bottles per year. Given the current figure of 750,000
bottles, this is an ambitious target and underlines the confidence placed in the region and
in particular, Valdubón. For instance, in 2003, Valdubón’s Cosecha 2000 was
recommended by a Decanter tasting panel of new wave Spanish reds.5 However, the
potential for growth at the premium end is such that Valdubón is due to release a new
addition to its range, “Honoris”. This is a premium, single varietal Tempranillo,
fermented in oak tiñas and aged for 20 months in French oak followed by 2 years in
bottle.
It was clear that winemaker Javier Aladro could feel the pressures of economic reality: to
increase production to the set target, he faces not only the challenge of ensuring an
adequate supply of quality grapes but also the “volume conundrum” in a winery and
bodega that appeared, already, to be operating at capacity.
Freixenet (DWS) Limited has engineered a wide product portfolio both through choice
and necessity. The Ferrer family saw the opportunity to acquire wineries outside of its
stronghold in Penedès in order to respond to the varying demands of consumers.
Increased competition in the wine industry today continues to justify such an approach,
all the more critical against the current backdrop of industry consolidation and the
tendency toward market polarisation.
Essentially, Freixenet’s own wineries together with its agency brands offer a broad range
of wines across the full spectrum of price-points and markets in the UK. As we have
5
Decanter, Buying Guide, March 2003
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seen, numerous advantages stem from this strategy: greater leverage in financial deals
with key customers, economies of scale in distribution, sales and marketing, and financial
security in diverse markets, allowing for investment, research and development. The
most encouraging revelation of my tour was that, despite the size of Freixenet’s group
portfolio, there is a marked distinction between the wines, emphasizing their authenticity
and individuality. And fortunately for us consumers, all share one common denominator
– consistent quality.
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Appendix 1 – Spanish Wine Exports in Euros
2000
2004
% change
1)
Germany
257.6m
309.14m
+20%
2)
United Kingdom
199.8m
279.8m
+40%
3)
USA
101.3m
145.3m
+43%
4)
France
65.5m
127.2m
+94%
Source: Wines from Spain, taken from Drinks International, November 2005, page 15
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Product-market growth (percent)
Appendix 2 – Boston Consulting Group’s growth share matrix
High
Low
STAR
 market leaders
 fast growing
 substantial profits
 require large investment
to finance growth
PROBLEM CHILD
 rapid growth
 poor profit margins
 enormous demand for
cash
CASH COW
 profitable products
 generate more cash
than need to maintain
market share
DOG
 operate at a cost
disadvantage
 few opportunities for
growth at a reasonable
cost
 markets not growing,
little new business
High
Low
Market share (actual or relative)
Source: Marketing Concepts and Strategies, Pride & Ferrell, page 653
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Bibliography
The Drinks Business, Spanish Report, “Cava: Aiming High”, Chris Orr, 05/06
Drinks International, “Spanish Wines: Food for thought”, November 2005
Harpers supplement Spain, “A Tale of Two Industries”, John Radford, September 2005
Decanter, “Buying Guide, New Wave Spanish Reds”, March 2003
Marketing Concepts and Strategies, William M. Pride and O. C. Ferrel, 6th Edition.
Freixenet (DWS) Limited Price List, May 2005
Background reading
The Drinks Business, “Variety is the Spice of Spain”, Patrick Schmitt, April 2005
Harpers, “Beyond Rioja”, Jack Hibberd, 8 April 2005
Acknowledgements
Graham Fortune, Managing Director, Freixenet (DWS) Limited
Philip Rowles, Export Director, Freixenet (DWS) Limited
Toni Domenech, Public Relations Manager, Freixenet
Gemma Puxeu, Winemaker, Morlanda
Judith Llop, Winemaker, Morlanda
Miguel Merino Navajas, Export Director, Bodegas Ochoa
Javier Ochoa, Winemaker, Bodegas Ochoa
Adriana Ochoa, Winemaker, Bodegas Ochoa
Alvaro Ochoa, Commercial Director, Bodegas Ochoa
Carlos Garcia, Public Relations Manager, CVNE
Chema Ryan, Winemaker, Viña Real
Jesus Madrazo, Winemaker, Viñedos del Contino
Javier Aladro, Bodegas Valdubón
And finally:
Antony Moss, Researcher, WSET
Serena Sutcliffe, M.W., Head of International Wine Department, Sotheby’s
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Photo diary
Figure 1 – Automated bottle stacking at Freixenet’s winery at Sant Sadurní d’Anoia in Penedès
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Figure 2 – Poor “Llicorella” soil, derived from underlying slate and quartz, typical of Priorat
Figure 3 – Bodegas Ochoa, combining tradition and modernity in Navarre
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Figure 4 – The experimental vineyard at Bodegas Miguel Merino in the heart of Briones
Figure 5 – Wines at CVNE undergoing racking in the bodega
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Figure 6 – The winery of Viña Real in Rioja Alavesa, designed by Philippe Mazières
Figure 7 – View of the single plot “Viña del Olivo” at sundown, Viñedos del Contino
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Figure 8 – The Valdubón winery in Ribera del Duero, with limestone top-soil exposed