Freixenet S.A.

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Freixenet S.A.

Joan Sala 2
Sant Sadurni d'Anoia
E-08770
Spain
Telephone: +34 93 891 70 00
Fax: +34 93 818 30 95
Web site: http://www.freixenet.es

Private Company
Incorporated: 1928
Employees: 1,260
Sales: EUR 514 million ($590 million) (2004 est.)
NAIC: 312130 Wineries

Freixenet S.A. is one of Spain's leading producers of cava (Spain's sparkling wine alternative to champagne) and a leading producer of still wines as well. Founded in 1861, the company has been producing cava since 1914, including its world-renowned Carta Nevada, launched in 1941, and Cordon Negro, launched in 1974. More recently, the company has released premium Cordon Negro Vintage Cava Brut, launched in 2001. Lower wages and lower production costs in general have enabled Freixenet to position its award-winning cavas at prices far lower than France's premium champagne. Freixenet also has established an international presence, with sales to more than 150 countries. International sales account for more than 50 percent of the group's total. The company also has become an international wine producer, with wineries in the United States (Gloria Ferrer), Australia (Wingara Wine Group), and France (Yvon Mau in Bordeaux and Henri Abelé in the Champagne region), as well as vineyards in Mexico, Argentina, and Chile. This expansion is also part of the group's efforts, begun in the 1980s, to gain scale in the still wines category. By 2005, still wines represented 40 percent of the group's annual sales. Freixenet remains a private company controlled by the founding Ferrer family, led by Chairman and CEO Jose Luis Bonet Ferrer and his cousins Enrique Hevia Ferrer and Eudaldo Bonet Ferrer.

Founding a Sparkling Wine Dynasty
in the 19th Century

Grape-growing and winemaking were long a part of Spanish culture, with evidence of Spanish wines dating back to pre-Phoenician times. For the most part, the country's wineries remained small, local affairs, and even into the beginning of the 20th century, Spanish wines stimulated little interest from the international wine community. If the country's wines had not yet reached levels meeting international wine standards, Spain's wine industry flourished, and into the 20th century the country boasted the world's largest number of acres of vineyards. At the same time, the country continued to develop and refine its own wine types, including its soon-to-be-famous cava.

A product of the Pinedes region south of Barcelona, cava (the word means "cave" in Spanish) employed French champagne-making techniques, but used only local grape varieties, including Macabeu, Parellada, and Xarello. Like champagne, cava was fermented in the bottle, producing a sparkling wine. While cava had long been a regional and national favorite (one company, Cordorniu, traced its own origins back to 1551), the sparkling wine's greatest success came through the efforts of a relatively young company, Freixenet.

Based in the tiny village of Sant Sadurni d'Anoia, south of Barcelona, Freixenet had its roots in the mid-19th century, when Francesc Sala I Ferrés founded a winery, Casa Sala, in 1861. That winery later became the first in the region to begin exporting its wines by the end of the century.

Sala's son Joan Sala i Tubella became head of the family business toward the end of the 1800s and launched the company into the production of cava as well. Sala's daughter, Dolors Sala i Vivé married Pere Ferrer i Bosch, whose family owned another local wine estate, La Freixeneda, in existence since the 13th century. It was this generation that transformed the small family-owned winery into one of the world's leading producers of sparkling wines.

In 1914, the Ferrers decided to focus their winery exclusively on the production of cava. The company also adopted a new name, Freixenet, and adopted a new label, Freixenet Casa Sala. Freixenet also built new cellars for aging its sparkling wines. These cellars, constructed in Sant Sadurni d'Anoia, later became renowned for their beauty. They were also among the world's largest, holding more than 150 million bottles at the beginning of the 21st century.

International Sparkling Wine Leader from the 1950s

By the 1920s, Freixenet's cava began to be recognized for its high quality, and sales grew steadily through that decade. The company formally incorporated as Freixenet in 1928, and by 1930 had begun its first exports. In 1935, the company established its first international subsidiary, opening an office in New Jersey, in the United States, as its exports to that country began to climb.

The Spanish Civil War spelled disaster for the company, when Pere Ferrer and a son were kidnapped and killed. Instead of folding, however, the company, now led solely by Dolors Ferrer, went on to still greater triumphs. A new turning point in the company's history came in 1941, with the launch of a new cava label, Carta Nevada. Packaged in a distinctive frosted white glass bottle, Carta Nevada proved a huge success both in Spain and abroad and, despite the difficult export market during World War II, helped establish Freixenet as one of the world's leading sparkling wine names.

A large part of Freixenet's success in the latter half of the century came through the efforts of another of Dolors's sons, Jose Ferrer i Sala, who took over as head of the company in 1957. Into the early 1970s, Freixenet grew to become Spain's leading cava house, backed by the continued success of the Carta Nevada brand. The company's marketing efforts were also particularly successful, and later campaigns were to feature notable personalities such as Liza Minelli, Shirley MacClaine, Raquel Welch, Sharon Stone, Penelope Cruz, Antonio Banderas, and others.

The introduction of a classification system, codifying production methods, grape varieties, and aging methods, among other factors, helped establish higher wine standards for the country's wine industry. Cava became an early beneficiary of the new Denominacion de Origen appellation (DO), introduced in 1970.

Ferrer in particular recognized a new opportunity to promote the Freixenet brand on an international level. With lower production costs, but often boasting equal or superior quality, Spain's cavas were able to position themselves as low-priced alternatives to premium-priced champagne and other sparkling wine types. Freixenet adopted this pricing policy especially with the launch of a new, internationally oriented label, Cordon Negro. Launched in 1974, and packaged in a distinctive specially ground black bottle, Cordon Negro became a huge success for Freixenet and served as its flagship. By the early 2000s, the company's exports reached more than 150 countries.

Ferrer spotted a new opportunity in the early 1980s—the introduction of cava-styled sparkling wines in the newly emerging Sonoma County wine center in California. Ferrer bought land (a former cow pasture) in Carneros and began planting vines there, establishing a new winery, named Gloria Ferrer after his wife, in 1986. By then, Freixenet also had expanded its sparkling wine production elsewhere, launching the Dolores Sala Vivé winery in Querétaro state in Mexico, in 1980.

Adding Premium Still Wines in the New Century

While remaining committed to its sparkling wine production, Freixenet sought to extend its portfolio into the premium still wines category. The company made its first extension into this market in 1985, when it acquired Rene Barbier, a Pinedes region winery founded by Avignon native Léon Barbier in the late 19th century.

Company Perspectives:

The Freixenet Group includes several production centres based in the most well-known, prestigious wine-making areas to produce quality sparkling wines in the traditional method.

Key Dates:

1861:: Francesc Sala I Ferrés founds a winery, Casa Sala, in Sant Sadurni d'Anoia, Spain.
1889:: Son Joan Sala i Tubella begins production of cava; his daughter, Dolors, later marries Pere Ferrer of the La Freixeneda estate.
1914:: Under Pere Ferrer and Dolors Ferrer Sala, the winery begins exclusive production of cava and builds new cellars, then markets sparkling wine under the Freixenet Casa Sala label.
1928:: The company incorporates as Freixenet S.A.
1935:: The company opens an export office in New Jersey.
1941:: The company launches the highly successful Carta Nevada cava.
1957:: Jose Ferrer takes over as head of the company and leads a national, then international, expansion.
1974:: The international bestseller Cordon Negro cava is launched.
1980:: The company establishes the Dolores Ferrer winery in Mexico.
1985:: The company acquires Rene Barbier in Spain and begins producing still wines, later expanding its still wine portfolio to include five Spanish DOs.
1986:: The Gloria Ferrer winery is established in Sonoma County, California.
2001:: The company acquires the Wingara Wine Group in Australia and Yvon Mau in Bordeaux, France.
2003:: The company launches luxury label Cordon Negro Vintage Brut; a winery is built in Australia; wine production begins in Chile.
2004:: The company launches its first Chilean label, Terra Nova; Santamaria Lopez in Spain's rioja wine region is acquired.

Through the 1990s and into the new century, Freixenet continued to add to its portfolio of still and sparkling wines. The company added a new Pinedes area winery, Segura Viudas, a sparkling wine producer that had begun marketing its label in 1969. The company then began seeking to expand beyond the Pinedes DO region, acquiring Valdubón in Ribera de Duero, Morlanda in Priorat, and Vionta in Rías Baixas. The company then grouped these wineries under an umbrella label, The Heredad Collection.

Freixenet's expansion continued into the 2000s. In 2001, the company turned to Australia, buying up the Wingara Wine Group for $18 million. That company's operations included the Katnook, Riddoch, and Deakin wine estates in Coonawarra and Mildura, with more than 2,400 acres of vineyards, and a strong export business, particularly to the United Kingdom and North America.

In 2001, also, Freixenet entered the French still wine market, buying up the Bordeaux region's Yvon Mau. The company also moved into the French champagne market, buying Reims-based Henri Abelé, one of the oldest of the region's champagne producers. By then, Freixenet had passed to a new generation of the Ferrer family, under Josep Ferrer, after father Jose's retirement in 2000.

Back at home, Freixenet found a new outlet for its cava division, when it acquired Chandon Cava from the French luxury products group LVMH for $12.8 million in 2003. That same year, the company launched a new luxury cava label, Cordon Negro Vintage Cava 2001, designed to meet a price point between premium cava and the higher-priced champagnes.

As it moved toward mid-decade, Freixenet showed no signs of slowing down. The company entered Argentina in the early part of the decade, before launching its own winery there in 2003. That year, also, the company began establishing a wine producing presence in Chile as well. By 2004, Freixenet had launched its first Chilean label, Terra Nova.

At the end of 2004, Freixenet grew again, this time with the EUR 10 million purchase of Santamaria Lopez, a winery located in the well-known Rioja region. The company then announced its interest in expanding into another increasingly popular wine producing market, South Africa. A number of observers suggested that the group's further expansion might require a public offering; nonetheless, the founding Ferrer family retained tight control of their company. By 2005, Freixenet had succeeded in balancing its portfolio, with still wines representing some 40 percent of the group's sales of more than EUR 514 million in 2004, while remaining the world's leading seller of sparkling wines.

Principal Subsidiaries

Freixenet (Dws) Ltd. (U.K.); Freixenet Alpes GmbH (Switzerland); Freixenet Argentina, S.A.; Freixenet Atlantic (U.S.A.); Freixenet Australia; Freixenet Canada; Freixenet Caribe (Cuba); Freixenet France S.A.R.L.; Freixenet GmbH; Freixenet Japan Inc; Freixenet Mexico, S.A. de C.V.; Freixenet Nordic AB (Sweden); Freixenet Portugal Lda.; Freixenet Sp. z.o.o. (Poland); Freixenet S.p.A. (Italy); Freixenet USA; Z.A.O. Freixenet (Russia).

Principal Competitors

LVMH-Moet Hennessy Louis Vuitton S.A.; Dr. August Oetker KG; Allied Domecq PLC; Sapporo Holdings Ltd.; Pernod Ricard S.A.; Larios Pernod Ricard S.A.; Bacardi Espana S.A.; Osborne Compania S.A.; Ricard S.A.; Marie Brizard et Roger International S.A.; Remy Martin et Cie S.A.; J Garcia Carrion S.A.