We published an article here at The Wine Economist a few years ago, asking “Can Sherry be the Next Big Thing?” “Probably not,” we said. “But it doesn’t have to be. It is a timeless wine waiting to be re-discovered by a new generation of wine drinkers.”
I’m glad we didn’t go too far in our assessment of Sherry’s potential back in 2017 because Sherry producers who have been around for a while are cautious about booms because they know they can be followed by busts. That was one message we heard when we met with César Saldaña, the President of the Sherry D.O. Consejo Regulador, the industry organization that makes and enforces the rules that govern Sherry production and promotes the product, too.
A Sherry boom? Not a good idea, he told us. Sherry has a history of booms and busts, and what it needs today is stability to build a foundation for the future.
UK Supermarket Boom
Sherry’s most recent boom occurred in the 1980s when British supermarket wine sales were growing so fast. Britain has long been the key export market for Sherry wines, and the surge in sales of inexpensive private label Sherry combined with government subsidies to encourage exports caused the industry to explode. How big was the boom? Vineyard area increased from about 7000 hectares to over 20,000 hectares!
Booms are often followed by busts, and Sherry sales have fallen. The crisis came in 1986-87 when Spain entered the European Union and the flow of subsidies suddenly dried up. Sherry’s diminished reputation made it difficult to command prices necessary to sustain production without government assistance.
It has taken a while, but vineyard areas are finally back in the 6000 to 7000 hectare range again. Consolidation has occurred, with the large bodegas growing and acquiring brands as the number of independent producers has fallen. Cooperatives, which account for about half of total production according to my sources, sell young base wines to the big bodegas where they are aged, blended, bottled, and sold.
Sherry Crystal Ball
What does the future look like for the Sherry industry in this market environment? We will answer this question in more detail next week, when we look at five specific wineries and their particular strategies. But here are some general patterns we observed.
Innovation: Think about Sherry as an ingredient and not just a beverage. Sherry-based cocktails were featured in that Financial Times article about Sherry’s chic appeal, for example, and a popular drink hereabouts is Fino and Sprite or 7-Up. It is called Rebujito.
And then there is Croft Twist Fino Spritz, a delicious white spritz wine that blends Fino Sherry with elder flower, lemon, and mint cordials, along with sparkling water. It reminded us a little of the White Port Spritz drinks we enjoy in Porto. Finally, Sherry can be the base of delicious Vermut (Vermouth) drinks, which is another growing category.
Non-fortified wines. If fortified wines have plateaued, as they have in Spain and also in Portugal, attention naturally shifts to unfortified wines, which are seen as an opportunity for both growth and diversification. As noted last week, Sue and I found the red wines we sampled (made by Alvear and Gonzalez Byass wineries) more interesting than the white wines we sampled with a couple of exceptions (Forlong Blanco from Cadiz, for example).
Spanish brandy. Sherry wines are fortified with spirits, so stills are everywhere in the Sherry Triangle, and brandy production is common. Spanish brandy is popular both in Spain and in the Spanish-speaking world. In fact, I think brandy from Jerez is probably better known and more popular in some places than the region’s signature Sherry wine. It is an important source of revenue for the Sherry producers we met.
Sherry barrels. Forget the wine. Sometimes it is the barrel customers want. If you have ever toured a Sherry house you know that the barrels are painted black, so when you see a bunch of unpainted barrels they really stand out. And we saw many of these barrels because whiskey aged in Sherry barrels is a popular beverage these days. Sherry firms age their wines for a period in new barrels that they profitably sell to whiskey makers. It is interesting that some consumers who would probably not drink Sherry wine want to enjoy Sherry’s influence in this way.
Wine tourism. Jerez is a popular destination with good tourist facilities. The sherry bodegas receive about 240,000 visitors today. The region hosts many fairs and festivals and, when we were there, MotoGP races at the Jerez circuit that once was home to Formula One competitions. You can find Jerez wine tours out of both Seville to the north and Cadiz, a popular cruise ship port, to the south. Many Sherry houses have ambitious wine tours and hospitality programs with restaurants and even hotels (we stayed at the Hotel Bodega Tio Pepe, for example, and dined at the winery’s Pedro Nolasco Restaurant).
Multi-region wine businesses. Finally, we have noticed in Spain (and in Italy, too) the tendency of wine businesses to build a portfolio of wineries across different regions. The ability to fill efficient production and distribution pipelines with a variety of products can be an advantage if done well. The addition of Sherry to a Spanish wine portfolio makes as much sense today as linking Port and Sherry producers together (think Sandeman or Osborne) did at an earlier stage.
César Saldaña is right. Sherry doesn’t need to boom (and bust) to succeed. There are many ways for the industry to broaden and deepen without supercharging sales. Next week, we will examine several case studies to see what paths individual producers are taking to move beyond boom and bust.