Thirty-five years ago Spain had, effectively, just Sherry and Rioja to boast about, while the luxury market was confined to one estate, Vega Sicilia. Now, real investment and critical recognition of Spain’s potential has instigated a change in both fine wine production and in the quality of wine from lesser regions. There are currently approximately 15 wineries producing expensive labels, some of which are fetching high prices. Although this pales in comparison with the fine wine production of, say, France and California, it is significant growth from a once almost non-existent base, in a country that forestalled its entry into the premium arena.
A long gestation
Simon Field MW, Berry Bros & Rudd’s (BBR) Spanish wine buyer, has keenly observed the Spanish wine industry for many years. “I don’t think one magical factor ‘kick-started’ the movement into premium production; its gestation has been long and dependent on pioneers, some of whom (Alvaro Palacios, Peter Sisseck) were not native to their selected regions,” he says. “A comparison with Italy is also pertinent: the latter (unlike Spain) has had the personalities with a shared vision, not to mention the fact that all the top wines are in the same half of the country.”
“Spain has been very slow in exploiting its viticultural and human resources: our old Tempranillo vineyards, our unique terroir, and adapting to modern winemaking techniques, to produce what today’s consumer wants from a luxury wine,” adds Vega Sicilia’s managing director Pablo Álvarez. “Held back by our conservative outlook, we needed pushing outside of our comfort zone.” In other words, the country needed individuals to jolt Spain out of its inertia and traditions.
Pingus, created by Dane Peter Sisseck in 1995, was one of the first estates to price itself above $150.00 a bottle. Investing in the Ribera del Duero region, Sisseck’s wine soon found an eager market in the US after a shipping accident which lost 75 cases (325 were produced in total in 1995) and rave reviews by Parker sent the wine into the stratosphere of cult status.
Alvaro Palacios is another godfather to the Spanish luxury movement. Born in Rioja, Palacios worked with his contemporaries René Barbier from Penedès and Switzerland’s Daphne Glorian, who, amongst others, arrived in Priorat in the late 1980s and saw the potential of the region’s ancient Garnacha vineyards. Applying modern winemaking techniques and utilising new French oak, they made powerful and hitherto unseen wines from the best local fruit.
L’Ermita is now one of Spain’s most expensive wines, whose 2006 vintage retails at BBR for £427.90 ($718.00), from a region that barely existed 15 years ago.
Observing the success of Sisseck and the Priorat pioneers, several estates invested in producing and marketing premium wines in the late 1990s. “There was now a more prevalent sense of self-worth in the industry, allied, inevitably to examples of imitation, both factors building momentum in the Spanish premium market,” notes Field MW. In Rioja, producers like Bodegas Artadi, Contador and Finca Allende sought unique parcels of old vines to form the basis of single-vineyard luxury Riojas, something previously unheard of in a region committed to blending. Their new wines, like the majority of Spain’s premium output, were crafted in a distinctly modern international style: deeply coloured, very ripe, and high in alcohol. “We can’t discount the Parker factor when analysing the rise of high-priced Spanish wine and it is true to say that the wines are ones in a style that he and his publication are fans of,” says Matthew Tipping, Fine Wine Buyer at BBR.
Juan-Carlos López de Lacalle of Bodegas Artadi agrees. “Parker’s 100-point score for our top label luxury wine El Pison 2004 [the 2008 retails at £690.00 for a six-bottle case] helped Artadi attain reasonable price levels for our creation, considering the investment we put into our wines.” He is joined by several Rioja producers, who now release premium, super-rich luxury cuvées. Consumers take their pick from Roda’s cuvée Cirsion, Finca Allende’s Aurus, Remirez de Ganuza’s Gran Reserva, all available for €100.00-plus. Ribera del Duero has Pesquera’s Janus, Pingus and others.
Crisis equals opportunity
Yet, despite the international outlook of this new generation of Spanish winemakers, their creations were initially aimed mainly at the Spanish consumer, according to Juan Muga Peña of Bodegas Muga in Rioja. “These luxury wines, known in Spain as ‘Vinos de Alta Expresión’, found a market in Spain in the late ‘90s and early 21st century, due to rising standards of living in Spain during that period,” explains Muga. “The economy was doing well, disposable incomes had never been higher and the Spanish are generally reluctant to drink imported wines. Quality-led wineries realised that they could start marketing expensive cuvées to a willing market.”
Today, with the Spanish market being described as “difficult” and “bleak” by Spanish producers, and unemployment running at just over 25%, it’s likely that most of these wines are destined for consumption abroad. “The premium wine market in Spain is completely moribund as the crisis continues to encourage consumers to trade down to the lower-priced wines,” says IWSR analyst Daniel Mettyear.
This is borne out by Rioja producers Roda and Remírez de Ganuza, who admit that, while Spain accounts for over 60% of all Rioja sales, around 75% of their top-end now goes abroad, with the key markets being Germany, Switzerland, the US and the UK. “In the last financial year our revenue from premium Spanish sales grew 50%. Consumers who previously didn’t drink Spanish wines are being tempted into the fray by successful brands like Remírez de Ganuza and L’Ermita,” says BRR’s Tipping. “The sales are, nonetheless, largely brand-led rather than regional, and Spain’s overall market image is still value rather than luxury.”
Not that this will bother Spain’s export-led premium wineries, who are finding success in the US, which is now Spain’s third-biggest export market. “We make approximately 18,000 bottles and as of 2013, we have already sold all the 2006 and part of the 2007 vintage,” says Remírez de Ganuza’s export director Luis Martinez. “The US is our biggest export market, accounting for around 30% of total sales,” he adds. Bodegas Artadi echoed his sentiment, while it has long been the key market of Priorat’s Clos Erasmus. “Sales have been consistent over the past five years,” says Daphne Glorian of Erasmus. “We haven’t increased our volumes significantly, but we sell each vintage very quickly.”
This demand is generally coming from wealthy drinkers rather than speculators, as indicated by the lack of interest shown in Spanish wines on the secondary market. The Liv-ex Fine Wine 1000 Index only records any activity from Vega, and occasionally Pingus, on the market. “Wines like Pingus, L’Ermita, etc, do of course go up in value, but they are distributed through tight agency channels and retained by younger collectors who wish to consume rather than profit from their Spanish purchases,” says Liv-ex director Justin Gibbs.
However, Spanish premium wine has yet to find any real traction in China, where the market for expensive labels is contracting due to the government’s austerity drive. “We have had some success with Vega Sicilia, which of course has both the volumes and historical pedigree that Chinese collectors and connoisseurs admire, but through our retail shops we sell relatively small amounts of Spanish fine wines overall,” says Miguel Torres Jr, who established Torres China in 1997. Spain exported over 3m 9 L cases of wine to China in 2013, but over a third of that was bulk production.
In terms of prices, they naturally vary from estate to estate; the average retail cost for a bottle of premium Rioja or Ribera del Duero ranges from €150.00 ($206.00) to €200.00. The majority don’t go beyond prices of €800.00 to €900.00, with Palacios’ La Faraona from Bierzo, L’Ermita and Sisseck’s Pingus leading the way, with average prices of €500.00 to €660.00. According to Tipping, prices have generally remained stable for Spain’s top wines in the UK over the last five years, but equally are very sensitive to vintage yields. Palacios only made 760 bottles of L’Ermita in 2013 with a forecast retail price in the region of £1,000.00 a bottle – a new record for the wine.
By far Spain’s most expensive wine, however, is a brand that’s barely five years old. AurumRed was founded by Hilario Garcia in La Mancha and first released in 2009, with just under 1,000 bottles available. The area had absolutely no association with premium wine whatsoever; in fact, it was viewed (and still is) as Spain’s bulk wine capital. Yet the AurumRed Gold fetched prices of over $17,000.00 per bottle in the US.
These wines form a tiny part of the Spanish market – less than 1% of overall sales of Spanish wine abroad. But as niche products they continue to do well. Pingus release around 4,500 bottles each year, Roda produce around 8,000 bottles of Cirsion, and Bodega Contador make just under 6,000 bottles on average. Only Vega Sicilia releases higher volumes, with an average of 25,000 cases per annum. The output continues to be almost exclusively red, apart from one or two rare sherries, as Spain has no super-expensive whites to rival Le Montrachet or Corton-Charlemagne.
So as it stands, the Spanish luxury segment appears to be healthy. The country’s leading producers have circumvented Spain’s economic crisis very well, successfully exploiting key export markets where a growing fan base now exists for luxury Spanish wines. Moreover, this niche segment looks likely to expand over the next five years – Alvaro Palacios is planning to release a new “game-changing Rioja” in 2015, a single vineyard 100% Grenache Rioja, due to be called Valmira. Others will likely follow, encouraged by the prices being achieved on the marketplace. Spain has not lacked continued foreign investment either: Bordeaux giant Bernard Magrez recently purchased vineyards in Jumilla, in addition to his existing projects in Toro and Priorat. Michel Rolland has invested in Toro, Rioja, Ribera del Duero and Rueda. Whether this investment is capable of transforming a niche segment into a wider one remains to be seen.