With a growing global demand for high quality wines, investing in Spanish wineries and vineyards is a business opportunity worth considering.
Below are seven things you should know if you would like to invest.
- Red Gold
In the investment world, wine is now considered to be very profitable, so much so that some have started to call it “red gold”. And we are not talking about wine alone, but also about the means of wine production. Sales of wineries and vineyards are booming, with specialty auctions focused on this particular category of investment real estate increasingly commonplace.
- Spain, a leader
The global demand for high quality wines is growing, and Spain is leading the way. In 2015, Spanish exports reached record levels both in volume and value positioning Spain as the global leader in wine exports with important growth in the USA and China. The Spanish wine sector moved 18,5 million euros during the period 2001-2008, and another 45 million in 2009-2015.
According the Spanish Ministry of Agriculture, Food and Environment (MAGRAMA), Spain enjoys the largest vine area in the world with 954,659 hectares planted to wine grapes in 2015.
- Types of wines
When it comes to types of wine available in the market, as stated by the USDA Foreign Agricultural Service in its 2016 report, “2015 was a record year for Spanish wine exports”, the most common Spanish wine varieties are Airen (24%), Tempranillo (21%), Bobal (8%), Garnacha Tinta, Monastrell, Pardina, Macabeo and Palomino. Of these, red grape varieties are Tempranillo, Bobal, Garnacha and Monastrell, the others are white grape varieties.
- Best wines
Part of the success of Spanish wines in international markets is due to the “Robert Parker effect”. Robert Parker is a North American wine guru who sets trends with his rankings. He has given 90-100 points (100 point scale) to several Spanish reds, such as Pingus, L’Ermita, Vega Sicilia, Artadi, Clos Mogador and Remírez de Ganuza. In most cases, they are high priced wines with limited production. But investing in wine does not always require picking expensive wines. You can get a significant return on investment with more affordable wines. There are enough reds in Rioja, Ribera del Duero, Priorato, Bierzo, Toro, and other areas—not to mention Jerez—to have many good options to choose from.
The increasing interest from consumers in Asia, and especially from China, for Spanish wines is one of the reasons profitability has increased. The Chinese increasingly are acquiring a taste for red wine. This interest may be attributed to their newfound urban affluence, and also, and funnily enough, because of their fondness for the color red, which is considered a lucky color – while white, on the other hand, is associated with death and funerals. In 2013, the Chinese bought 1.86bn bottles of Spanish wine, representing a 136% increase over the last handful of years, putting France into second place as market leader.
- Types of investment funds
If you are thinking in investing in the Spanish wine industry, you will want to familiarize yourself with the most common types of investment funds operating in the market:
- Funds that invest in vineyards. These funds buy existing wineries in their entirely. Commonly, these funds are American and Asian based funds managers.
- Restaurants chains that invest in vineyards. These chains buy the total production of one or more wineries or buy shares the production in order to secure access to the wines that will be consumed in their restaurants.
- Funds that create pools (syndicates) to enter the wine business. These funds, mainly Asian and American, are specialized in investments in the food and beverage sector.
- Funds interested in biotechnology investment. Mostly European funds, the focus will be on the development of new varieties of grapes to innovative pesticide treatments.
- Innovation funds. These funds seek to identify different wine varieties to introduce them in new markets. They are mostly American, with some European.
- Funds interested in software development and control systems for the wine industry. The funds are mostly American and Israeli.
- Funds interested in tourism developments. There are not many, and what few exist are mainly European.
There are two specialized publications worth checking out:
- The Wine Advocate: Robert Parker and the ¨Wine Advocate¨ team of reviewers (Lisa Perrotti-Brown MW, Neal Martin, Monica Larner, David Schildknecht, Luis Gutierrez, Jeb Dunnuckand Mark Squires) travel the globe in search of the best wines and the best wine values with only one interest in mind — the wine consumer. Each wine is candidly reviewed and rated using Parker’s 100 point system, first introduced in the September, 1978 Issue 1 of his ¨Baltimore-Washington Wine Advocate¨ and now widely adopted by wine writers in every continent.
- Decanter: Decanter is the world’s best wine magazine – exclusive wine news, recommendations, videos, competitions and the home of the Decanter World Wine Awards.
If you are considering an invest in any fashion or manner in the Spanish wine industry and want legal advice on how to do so, please don’t hesitate to contact us.