Question

a.) The article notes that Spanish and Italian wine were exported for the same price in 2000, but in 2014, “Italy was selling its wine for an average of $2.78… while Spain’s sold for $1.30.” Explain what has happened to the supply and/or demand curves for exported wine from Italy and Spain to cause the price of wine from Spain to decline relative to the price of wine from Italy.

Answer 1

The issue lies in the actuality that the majority of Spanish wine intended for export is sold in bulk (12600000 hectolitres in 2017 compared to 10200000 hectolitres of bottled wines)

France is the biggest purchaser of Spanish wines, buying it inexpensive in bulk subsequently rebottling it & selling it on at a greater price as “vin table”.

In terms of vineyard belt, Spain has the greatest amount in the world – nearly 1 million hectares but several cooperatives sell their produce in bulk as it is faster & simpler than having to bottle it, market it, & distribute it themselves.

Moreover, Spain was late in entering the international market.

Both Italy & France have a better international presence, they’ve greater experience in marketing their produce & have been exporting since much before the Spanish producers started to .

The chief challenge facing Spain is lessening the sale of inexpensive, mass-produced wine, that’s flooding the marketplace despite a dearth of internal structures to tackle with its distribution.

Producing of wine in bulk has, however, diminished recently, though it still represents greater than half of Spain's sales in 2017