Equilibrium heralds new dawn for Rioja
By just-drinks.com editorial team | 26 March 2002
Over the last five years the economics of Rioja haven't just fluctuated, they have soared and dipped with all the skittishness of a barometer in an Indian Ocean trawler. An extreme demand for Rioja's reds (particularly from northern European markets) has put enormous strain on production and exaggerated the historical sine curve of prices.
The problems started in the early 1990s, when fast-growing emerging countries such as the UK, Sweden and Denmark developed a taste for easy-drinking reds - if possible with a bit of barrel age. Rioja - with grape prices (and, therefore, bottle prices) at one of their periodical low points - represented good value for money.
Then came 1994. This was a fabulous year, but tiny, and it further exacerbated the pressures on the market, particularly since many of the wineries elected to put as much of this wine away for ageing as they could.
By the mid-1990s, the wineries were starting to panic. Merchants all round the world were crying out for their wine, and they simply could not supply enough to go round. The bigger companies with powerful financial institutions behind them would offer higher prices for grapes simply because they had to have them. Their price would then become the market rate. Until, that is, someone with an even larger wallet and an even greater need offered 10% on top of that…
It was a damaging cycle of desperation, and it saw eye-watering prices being paid for grapes, irrespective of quality. Significantly, the years that were worst affected by the über-prices were the most mediocre vintages: 1997, 1998 and 1999. In other words, the wineries were paying the highest prices for the worst quality grapes. There was no connection between price tag and wine.
How had this illogical situation come about? Partly through tradition and partly through recent politics. If this were Australia or California, the wineries would simply plant more vines to sate demand, but this isn't an option. The EU has frozen vineyard plantings across Europe to avoid the re-emergence of a wine lake, which many see as a flawed, destructive policy. It is possible to 'transfer' land rights from other regions, but this is a slow, highly political process and is too slow to alleviate the strain.
Alas for Rioja, not only was it faced with the situation of soaring demand and (largely) static plantings, but the situation was further exacerbated by the fact that the wineries themselves own only 10% of all the vineyards planted in the region.
The vast majority of the region's growers are part time vignerons, who have little interest in wine's performance on the international markets - beyond its capacity to furnish them with a sizable cheque once a year - and even less interest in investing any more money than is absolutely necessary in their vineyards. This is particularly true when they can sell their crop easily, irrespective of quality.
"As soon as one person starts picking, the others often start too, even though it may not be the best time," says Alberto Herrero of Bodegas Primicia.
In all this, 1999 was something of a watershed. The quality was patchy and following a devastating late frost, volumes were way down, so prices of raw material soared. Something had to give, and it did. When 2000 came round and the wineries took their wines on to the market with 20% price rises to bankroll the last vintage, the markets were less than impressed.
"Export markets don't like big price rises, especially when they're not accompanied by a rise in quality," says Guillermo de Aranzabal at La Rioja Alta, dryly. Sure enough, stores the world over de-listed Riojan wines in droves. One source claimed exports halved practically over night.
At the start of the new millennium, the region's regulating council (Consejo Regulador) realised that something had to be done. For the 2000 vintage, which was naturally abundant, they relaxed the yield restrictions and allowed an extra 25% production to ease the strain on prices. It worked, but perhaps not in the way they might have wanted. The vintage was over-cropped and characterless and buyers remained unimpressed. 2000 wines piled up within wineries, unsold and unwanted.
But here, at last, the pendulum has swung back towards the wineries. They may still not own as much of the vineyard area as they would like, but a cooling in demand has seen the price of raw material fall off, from Pta400 per kilo to around Pta100 last year. As well as lower prices, the fall in demand has seen quality control return to the equation, with wineries able once again to pick and choose their grapes and pay accordingly, rather than having to shell out big bucks for grapes irrespective of their quality.
It's all come at a good time. 2001 was a great year - already tentatively being talked about as the best since 1964 - and this, combined with the growers and wineries finding themselves in a rare state of equilibrium, has seen the year's potential coming close to being realised. For the first time in about six years, the laws of the free market became a liberation rather than a hinderance. Conscientious growers carried out green harvests and were rewarded for their diligence with higher prices, while the quality-driven wineries that were prepared to offer meaningful financial incentives duly received the best grapes.
"There's been a real change of mentality by the growers and the wineries this year," says Aranzabal - an astute observer of the Riojan situation, and not one given to over-optimism. After a turbulent five years, Rioja, it seems, might just be approaching a brave new dawn. At least until next year…
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Equilibrium heralds new dawn for Rioja
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