Wineries as investments: the 2009 shake-out

There was an interesting article in Sunday’s La Vanguardia by Ramon Francàs that looked at difficulties faced by wineries headed by celebrities. The trend of stars getting into the wine business was all the rage prior to the latest financial downturn, but now things are looking rougher.

Francàs’ article took as its prime focus the Mas Perinet winery in Priorat-Montsant regions, headed by Catalan singer-songwriter Joan Manuel Serrat. The winery was founded in 1989. The winery has some 300 hectares of vines and has sold some 180,000 bottles since their market launch in 2004. 2008 sales reached 900,000 euros. Not bad, but not enough to compensate for the roughly 20 million euros invested in the project.

According the newspaper where the article appeared, anonymous sources close to Mr. Sarrat said that Mas Perinet has been in touch with wineries such as Vega Sicilia and Valbuena, as well as the González Byass winery group. Talks with the sherry giant Gonzalez Byass had progressed to the point of pricing, at roughly 18 million euros, and looking at ways to keep Mr. Serrat involved in the project. However, the potential buyers changed their minds and a few weeks ago purchased Viñas el Vero of the Somontano D.O.

The La Vanguardia article mentioned that the Torres winery group told them that in the past two months they have been approached by six different wineries with offers to be bought-out.

Given the prestige of the wines, the Priorat D.O.C. has attracted stars such as Gerard Depardieu, Serrat and fellow Catalan Lluis Llach and winery groups such as Codorníu, Freixenet, Albet i Noya, Torres, Pinord, Castell de Peralada, Osborne and Parés Baltà, as well as investors from other sectors. However, according to sources close to the Priorat D.O.C. regulatory council more than a few wineries there are either up for sale, searching for capital or are considering laying off employees and trimming operations.

The article stated that the Buil & Giné winery is experiencing financial difficulties and that the El Molar winery, belonging to the Osborne sherry group may soon be sold. Also looking for financing is the Viñedos de Ithaca winery. The winery produces annually some 50,000 bottles an invoices nearly half a million euros has seen bank credit dry up. However, according to owner Josep Puig, they have yet to find a new backer. “People hear about the current problems and only want near give-away terms.” But he remains confident his winery will make it. “I’m a fourth generation viticulturalist and have never been a professional singer.”

According to the president of the Priorat D.O.C. Salustià Álvarez, many people attracted by the glamour of the wine business have gotten into without really knowing what they were doing. Wineries have never been sector know for quickly generating rapid profits. The norm is that a father will start a winery, his son will finish paying for it and his son will enjoy the benefits.

Valentí Roqueta, owner of Abadal winery in D.O. Pla de Bages puts it plainly: “To make a good wine today, if one has money, is not difficult. What is truly difficult is commercializing it, finding a market for it. That is very slow and complex. It is not something that everyone is cut out for.