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The price is wrong

Earlier this year, the Consejo Regulador de Rioja held a series of events to celebrate the 75th birthday of Spain's most famous denominacin de origen. An impressive array of winemakers, viticulturists, academics and journalists came to the region to talk about the Tempranillo grape, to discuss the importance of appellations and to taste a line-up of historic vintages. Most of the people who attended agreed that Rioja deserves its place as a member of the recently created Forum of Historic European Wine Appellations, alongside Bordeaux, Burgundy, Champagne, Cognac, Barolo, Port and Sherry. Richard Smart, the world-famous Australian viticulturist, predicted a brilliant future for Tempranillo in general and for Rioja in particular, calling the region's leading variety "one of the best red grapes" on the planet. He was not alone. One American visitor, possibly after a glass or two of Gran Reserva, claimed that "Rioja wines are the best in the world." So much for the anniversary bash. Out in the marketplace, Rioja has had far less cause for celebration. Global exports fell by 37% in the first eight months of 2000, from 37.37 million to 23.53 million litres. The UK has mirrored the general trend, down 32.4% by volume and 18.54% by value. Elsewhere, the figures have been equally alarming: Germany (-71.41% by volume), Sweden (-39.42%), Switzerland (-16.76%), Denmark (-40.09%), Holland (-58.68%), Norway (-24.42%), Japan (-34.93%) and France (-21.44%). Of Rioja's major markets, only Mexico (+19.57%) and the USA (+1.9%) were in the black. At home, the slide was slightly less dramatic, but sales still dipped by 20.41%. The reason for the downturn was easy to pinpoint. As a result of a short harvest and correspondingly high grape prices in 1999, many bodegas increased their bottle prices by as much as 20% or more. The result has been disastrous for Spain, according to Manuel Moreno of Moreno Wine Importers: "It's been a real struggle over the last year. Rioja put up its prices and everyone else followed its lead. The 1999 harvest was short, but not that short. Despite what people say, it's not just about supply and demand. Greed on the part of the growers and political manoeuvring by the big groups were an important part of the equation too." Tony Brown MW, managing director of Meridian Wine (importer of Bodegas y Bebidas's AGE and Campo Viejo) said that companies which took a long-term view were better placed to survive the turbulence in the marketplace. "Bodegas y Bebidas has been able to take a realistic approach based on the requirements of export markets, rather than on the price of grapes. In a year when strong demand (combined with a small vintage in many areas of Spain thanks to frost) pushed up prices to unprecedented levels in many regions, we were able to hold DPD prices on most of the wines in our Spanish portfolio with our producers' help." Tom Perry, managing director of the Rioja Wine Exporters' Group, said that the UK figures are not as bad as they appear. "If you look at the breakdown, it was the Sin Crianza category which really suffered, that is young wines from 1998 and 1999. We are confident that sales will pick up between now and the end of the year." According to Perry, large wineries are starting to turn away from Sin Crianza towards Crianza, Reserva and Gran Reserva wines. "When grape prices reach 400pta a kilo, Sin Crianza is not a commercially viable thing. The tendency in future will be to hit sub-5 price points with wines from other areas, rather than trying to hammer Rioja into that slot. The number of new oak barrels is increasing by 100,000 a year, so more and more Rioja is being aged in oak." Jon Atkinson of Scatchard Wines, importer of Muga and Bodegas de la Marquesa, is almost bullish about the UK market. "Thus far, we've had a good year with Rioja," he said, "largely because we concentrate on Crianza quality and above as opposed to entry-level wines. We are confident that Rioja will continue to be Spain's leading quality wine region for some time to come, given the high level of consumer confidence in its name. There are some very exciting developments in various regions throughout Spain, but this has been the case for some years now. At the end of the day, Rioja appears to be evergreen - the perennial Spanish favourite." Opinions on the extent of Rioja's problems differ widely in the region itself. Oscar Urrutia of Bodegas El Coto argued that: "Rioja is in a state of re-adjustment. We've come to the end of a cycle that started in 1992. Sales had been expanding everywhere, and so quickly, that with a limited supply of grapes, prices have outstripped perceived quality, culminating in a nightmare from hell in 1999. Prices will come down this year. There's so much wine in producers' cellars." For Angel de Jaime, president of the Consejo Regulador, the region is going through a "crisis of growth", if anything. "Sales and plantings have both increased in the last ten years. There have been problems of supply and demand - two years ago we didn't have enough wine - but that will always happen in a marginal grape-growing climate. I'm happy that Rioja is moving away from the low price sector. The downturn is worrying, but it's not a desperate situation in my view." De Jaime said Rioja will reach a "new equilibrium", but that it could take five years. "Rioja is like an ocean liner, not a speedboat. It can't change course quickly." De Jaime is too much of a politician to admit that Rioja's difficulties are built into the region's very structure. Eighty-five per cent of Rioja's 55,000ha is divided up between a total of 18,000 growers, who either sell to the area's 20 co-operatives or 160 bodegas, or in a few cases, produce and market their own wine as cosecheros. Lacking any sort of interprofessional body, which might inject a dose of caution in years like 1999, most bodegas in Rioja are at the mercy of the growers. As Rodolfo Bastida of Ramn Bilbao put it: "There has to be some form of co-operation. The separation of production and sales cannot continue."

Material advantage

For the time being, the lucky bodegas are the ones with vineyard holdings that account for most of their needs - Barn de Ley, Martnez Bujanda, Miguel Merino, Remelluri, Contino, Finca Allende, Ijalba, Marqus de Murrieta, Bodegas Ontaon, Lpez de Heredia, Bilbainas, Remirez de Ganuza and Marqus de Vargas, to name some of the most prominent examples. Carlos Martnez Bujanda said that owning your raw material is a huge advantage, but that everyone, whatever their situation, has to show greater responsibility. "Rioja needs stable prices at the moment. You can't increase your prices by 20% one year, then drop them by 40% the next. We can't ask consumers to pay for market fluctuations. We've been through a crisis this year. We'll get some of the sales back when prices come down, but once you've lost your position in the marketplace, it can be difficult to regain it." The last five years have been extremely profitable ones for those 18,000 vineyard owners. The average grape price has increased with every vintage: 70pta in 1995; 100pta in 1996; 170pta in 1997; 220pta in 1998 and an astronomical 440pta in 1999. But in 2000, it is the bodegas which have the whip hand. The harvest was one of the biggest on record with a reported 350-400 million kilos of average to very good quality. The arrival of a dozen new tanks outside the co-operative in Haro in October was an indication of the size of the vintage. The area produced 180 million litres in 1999, compared with 300 million litres this year. Sales are currently running at about 175 million litres. Unsurprisingly, given the amount of wine sloshing around the region, the average per kilo price has fallen back to where it was in 1997. Or lower in many cases. Miguel Merino said that the market is changing. Last year, there was a saying in Rioja: "If you see a tractor, follow it." This year, the bodegas can wait for the tractors to come to them. "The only good thing to have come out of the crisis," according to Merino, "is that there are two grape markets now, with prices varying between 115pta and 200pta. Last year the grape market was like an auction with everyone saying I'll pay you 5pta more', but this year it's a buyer's market." Jorge Muga of Bodegas Muga commented that the spread of grape prices had been even greater this year, from 70pta to 285pta. He agreed that there are at least two grape markets in Rioja now, "and that has never happened before". Muga, too, thinks that the market is shifting for the better. "Historically, people in Rioja paid growers according to alcohol levels. Now we're looking at a range of parameters and being much more selective." This, he said, is part of a move towards greater vineyard selection. "You can grow Tempranillo on a sandy soil and a clay-based soil, no more than a few metres apart in some cases, and it tastes like a completely different grape. Tempranillo reflects its terroir much more than Cabernet Sauvignon." Muga believes that Rioja is only just beginning to fulfil its true potential. "Lots of people are using great grapes to make second-rate wines. There are lots of vineyards that could make fantastic wine if growers halved their yields." Having worked in South Africa and the Barossa Valley, he is in a position to assess Rioja's strengths and weaknesses. His conclusion? "Not many people in the world have what we have: great soils, great varieties and a great climate." Miguel Angel de Gregorio, the outspokenly passionate winemaker at Finca Allende, is in total agreement. He argues that Rioja's wines have been underpriced in the past. "Our prices are no higher than those in Bordeaux, Madiran or the Ctes du Rhne," he said. De Gregorio believes that there is a new mentality at work in the region, one which "seeks to explore our roots and our terroirs". He said that the style of Rioja that was popular in the 1970s - and which established the area's reputation in the UK - is and remains a "standardised product", a form of "Rioja lite". Those wines, in his opinion, are all about "American oak and an absence of fruit character" and are a pallid reflection of what the region can produce. De Gregorio does not stop there, either. The blended style created by the Bordeaux-style ngociants" in the late 19th century, coupled with the arrival of phylloxera, meant that "Rioja lost sight of the concept of terroir. We've lived in fear of producers to the north for too long. In the last 20 years, ever since CVNE released Contino in 1982, we've started to rediscover our vineyards, some of which have existed for 300 years or more. We've stopped saying we want to make the best-value wines in the world; now we want to make the best wines in the world, full stop." The quality of Rioja is arguably better than it has ever been, especially at the top end. Wines such as Aurus (from Finca Allende), Culmen (Lan), Finca Valpiedra (Martnez Bujanda), Torre Muga (Muga), Cirsion (Roda), Dalmau (Marqus de Murrieta), Via del Olivo (Contino), Rmirez de Ganuza, Luis Caas, Marqus de Vitoria Reserva, Barn de Chirel (Riscal), Miguel Merino, Ijalba, Grandes Aadas (Artadi), Seleccin Pedro Guash (El Coto), Barn de Ley and Izarbe (Bodegas Larchago) have taken Rioja to a new level. According to Jorge Muga, there could be ten times as many great wines in the future, once people develop confidence in their raw material. Falling sales This brings us back to those falling sales. Should Rioja abandon the sub-4 market and concentrate on Crianza, Reserva and Gran Reserva wines, as Buenaventura Lasanta of Bodegas Lan believes it should? Or should it struggle to meet the demands of the mass market in the hope that grape prices are, at last, returning to more sustainable levels. The fact that several of the biggest groups, such as Berberana and Bodegas y Bebidas, have begun to develop winemaking projects outside the region suggests that they favour the former solution. Vicente Cebrian of Marqus de Murrieta is adamant that: "You can't change the whole image and philosophy of a region in two years; it will take us 20 years." If he is right, then the 2000 vintage could be remembered as a turning point in Rioja, as the vintage when growers and wineries abandoned the mass market and decided, belatedly perhaps, that for Spain's leading wine region, medium and premium quality are the only credible option.

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