A Review of the Sherry Trade 2012

The Sherry zone is facing a more optimistic future after long hard years of vine uprooting, vineyard abandonment, lack of profitability and falling sales. Now, however, there are many good signs. The balance of supply and demand has been corrected, sales have bottomed out, and there has been a shift back to focus on the vineyards, an essential element in the history, culture and business of Sherry. For example, there is the Plan Especial, which is aimed at agro-tourism. There is a return to belief in Sherry, even among the most sceptical who are resisting the necessary changes – but yet don’t want to be left behind. The future is in their hands.

Justice offered the bodegas the opportunity – which they missed – in the 2010 elections, when they miscalculated their strength, allowing their interests to mix with politics – a time bomb which did not take long to explode. The shadows of his previous political life hovered over the new president of the Consejo, the ex-minister of employment at the Junta de Andalucia, Antonio Fernandez, whose preventative imprisonment for his alleged part in employment fraud undermined the Consejo and set alarm bells ringing about the image of Sherry.

Fernandez, who had resisted attempts by the bodegas to get him to resign, ended up resigning from a prison cell, and after some deep thought, consensus was regained and Beltran Domecq, a real Sherry man and much more suitable, was appointed in his place. No time was wasted, and the Consejo got back into its stride, restoring good relations between growers and bodegas, which allowed it to concentrate on the drought-stricken 2012 harvest, and promoting the wine.

There was still another hurdle, however, and that was to do with labour. After negotiations at the XXIV Convenio de la Vid broke down, the result was a full day of stoppages and the threat of strike action at harvest time by bodega workers. In the end, Fedejerez and the unions worked out a mutually acceptable formula at the start of summer, an example of cooperation for stability of employment in the face of crisis.

Meanwhile, the Consejo and its new president forged ahead with a plan to eradicate the political stain and recuperate the good image of Sherry, with Beltran Domecq working away quietly with his considerable diplomatic skills. With a new stage set, and production more closely matching sales, the next matter was the harvest, which was going to be very small due to the lack of rainfall over the past year. In the event, the harvest came in 20% smaller, and left some bodegas without enough grapes, but at the same time there was a welcome rise in grape and must prices, which mitigated in part the previous ruinous years.

Everything now points to this trend being continued in forthcoming years, and the contracts signed between growers and bodegas will be extended for a minimum of three years with a progressive annual increase. All the same, the price of grapes in Jerez continues to be well below average, as is the price of the wine, but there is still work to be done.

Bad news never comes on its own, but it appears that neither does good news. The Audiencia Nacional (High Court), which had already reduced by 75% the fine imposed by the Comision Nacional de Competencia (Office of Fair Trading) on the Consejo for alleged discriminatory sales allocations, again pleasantly surprised the Consejo and Aecovi (growers association) with the first annulations of fines for agreements on grape and must prices. Before long, fines on bodegas and other institutions were also drastically reduced. The Sherry trade has been especially critical of the “persecution” by the CNC, and this has obviously resulted in exemplary fines, such as 7 million euros on about 10 bodegas for their part in what is known as the Fino Cartel. It is worth noting that the CNC punished agreements which were not even profitable, as demonstrated by the uprooting and abandonment of hundreds of hectares of vineyard.

Sherry is now undergoing a renaissance, what with the tabancos in Jerez, the Sherry bars in in the UK and US, consumer interest is re-awakening, and even better, among the younger generation. This is great news, as in traditional markets such as the UK, Sherry has for far too long been widely perceived as what grannies drink; sweet and old fashioned.

The team at the Consejo have had to stretch the tiny budget for development and generic promotion to the last euro, and is therefore imposing a higher levy on bodegas, who pay little enough as it is – especially compared to other wine regions – and some of whom spend more on promoting their other wines than on Sherry, the wine that made their names. The fact that Sherry matches so well with food has created another promotional opportunity, as demonstrated by the Copa Jerez, a competition open to chefs and sommeliers for the best combination of food and Sherry. This was piloted by Jorge Pascual, a former president of the Consejo, and has gradually become a major event. The resurrection of Vinoble (Feria de Vinos Nobles) in 2014 is also good news for the Sherry trade, and is considered an excellent shop window by the Consejo.

Jerez is not entirely about Sherry, however; it also produces outstanding vinegar and Brandy. A new category has been introduced for vinegar: Dulce (balsamic) to take advantage of surging sales over the last decade, but which have slowed down due to the crisis. With 90% of sales going to only France and Spain itself, there is room to open new markets over the short to medium term.

Brandy still has a cheap image with the vast majority of sales being in the “solera” category where products can be below 36%, and the base spirit does not even need to come from wine. The Philippines is the biggest export market, but they are increasing duties on it in line with a World Business Organisation resolution, allowing domestic products a price advantage.

And finally, the famous Tio Pepe sign will be re-installed in the Madrid’s Puerta del Sol square in good time for the New Year 2013/4 grapes.