When Lafite came
onto the market in 1868, the French Rothschilds snapped it up – seemingly just
another toy for their toy box. In November of that year, they auctioned off
surplus stocks from the cellars, including some of the 1797s, the earliest
vintage in the vinoteque. Selling a few thousand bottles ranging in price from
12 to 120 francs each was never intended to recoup the 4.5 million francs Baron
James had paid for the property, but it did signal that they intended the
estate to be run in a business-like fashion.
Within a few
years Lafite ceased to be an expensive trophy and began to show regular
profits. (Baron Eric de Rothschild, the present gerant, mentions that this
period of prosperity was depressingly brief: by the late 1870s the phylloxera
plague had decimated the vineyards and destroyed the Bordeaux fine wine trade.
No sooner had it recovered than the 20th century arrived with two world wars, a
prolonged depression, inflation and wealth taxes. A gap of almost 100 years
separated the last profitable 19th century vintage from the first one of the
20th century).
Throughout this
time the Rothschilds did not neglect Lafite. They may not have imbued the
winemaking with the effort and focus we expect of First Growth proprietors
today but they also did not disregard its stature and importance in the world
of wine. Even before it became fashionable to vinify the best wines of the
Medoc in new barrels, this was pretty much the regime at Lafite. Every year
they would write out a cheque for 800 to 1200 new barrels. This kind of
investment comes with the territory.
In 1962 Lord
Cowdray and the Pearson Group bought Château Latour. They too applied a
business-like approach to their new asset. Their timing, as it turns out, was
immaculate: the fine wine trade was about to see its first real boom in over a
century and they recouped their purchase price within five years. Of course,
they had to spend money along the way. There’s the famous story of Latour’s
directeur watching the heavens open just as the 1964 vintage was coming into
the cellar and using Pearson’s cash resources to contract every available
picker to harvest the crop before it was destroyed by the weather.
While all the
other Firsts made mediocre wine, Latour’s 1964 is a legend. Of course, it
helped that the new owners had also decided to install stainless steel tanks in
the cuverie in time for that vintage – giving them far greater control over the
fermentation. Without the capital – and the willingness to invest – they would
have lost the 1964 vintage to the weather. Having saved it (while most of their
competitors in the Medoc struggled to make anything from the water-logged
grapes), they were then able to optimise the winemaking process. The reputation
of Latour was greatly enhanced – as was its revenues: the extraordinarily
prolific harvest – some 20 000 cases – fetched a premium of at least 20% over
Château Margaux.
Admittedly, the
price of Château Margaux was depressed (relative to the other Firsts) for a number
of reasons – of which shortage of capital was the key factor. In fact, the
property and the quality of its wines continued to deteriorate until André
Mentzelopoulos bought it from the Ginestets in 1977. The estate had actually
been in the market since 1975. The previous owners had been cash-strapped for
years, and lacked the funds for even basic maintenance.
Conditions were
so primitive that the only way to get the wine from the fermentation tanks to
the barrel cellar was along an open gutter. The Mentzelopoulos family had to
spend a lot of money bringing the estate back to its former glory. It wasn’t
wasted investment; by the turn of the century Château Margaux’s net annual
profits exceeded the 1977 purchase price.
It takes money
to make money – and this is as true of the fine wine business as it is of most
other enterprises. It doesn’t follow that those with money will always be
successful, or even that they will make optimum use of their resources. A
branch of the Rothschild family has spent vast sums at Château Clarke in
Listrac. While the profile of the property has obviously been raised, the wines
have not been dramatically improved.
They are
obviously technically good, but they still display the tight, austere and
slightly ungiving style typical of the appellation. Money can’t transform the terroir,
nor can foreign investors take it away. In 1962, when the French public
discovered that Château Latour was about to be acquired by British interests,
there was widespread anxiety about the apparent loss of Gallic patrimony. The
French president, Charles de Gaulle, introduced a note of rationality to the
debate by observing drily that the English company could scarcely remove the
soil from France.
South Africa has
not been immune to this parochial anxiety about foreign ownership. When Marino
Chiavelli attempted to acquire Meerlust from the late Nico Myburgh, tendering
the then insane amount of 20 million to 30 million rand, there were dark
mutterings about letting the historic estate fall into alien hands. There was
slightly less concern when Hans Schreiber bought the Helderberg property now
known as Stellenzicht, but it surfaced when he acquired Neethlingshof a few
years later.
Those wishing to
chase away foreign buyers should ask themselves whether local land owners would
be willing to invest on the scale of a Schreiber – or more recently, a Laurence
Graff. Neither, it would appear, are as concerned about profitability as they
are about doing the best thing for the property. Hans Schreiber, by his own admission,
has put more money into Neethlingshof and Stellenzicht than he has seen from
them.
The folly of
this kind of business model is mitigated by the inflation in viticultural real
estate. In the case of Schreiber’s original properties you could comfortably
off-set their purchase prices and accrued losses against their current market
value. Investment has preserved them even if it hasn’t made them profitable.
Not all the money thrown at them has been well-spent, but the assets, because
they are in good condition, are worth more than what has been thrown at them.
While money alone cannot guarantee a successful or profitable outcome, it delivers
preservation value. Inflation does the rest.
Since these
early, slightly tentative attempts at outside investment in the Cape Winelands,
the number of newcomers, whether from every one of the properties on this list
has seen massive investment – ranging from restoration of old buildings,
replanting of vineyards, establishment of appropriately equipped wine cellars.
All of this expenditure in tangible assets remains part of the land.
Proprietors come and go: they, or their heirs, bear the costs, carry the
losses, bank the profits and enjoy a brief moment of custodianship. Without
their vision and their willingness to spend on a scale (usually deemed
extravagant, if not downright irresponsible, by the locals) the land would fall
into disuse.
When the Joostes
bought Klein Constantia in the early 1980s (which was before the appellation
had the cachet that it enjoys today) there were virtually no vineyards left in
production, the buildings were derelict, old farming implements lay rusting in
the undergrowth. Land has as much need of maintenance as a vehicle or a
factory.
There are today
very few ultra-premium estates and cellars which go about their business
without massive investment, or significant reserves. Even smell-of-an-oil-rag
start-ups finally need working capital to fund their ongoing success, and to
secure the sites crucial to their business. Anyone who thinks that the
Swartland’s cutting edge adventurers have a sustainable model needs to remove
the rose-tinted spectacles and look carefully at the exposure. If what makes
these little operations successful is the winemaker, then the edifice rests on
mortality. If it’s the carefully selected sites, ask yourself who owns them.
To ensure that
these enterprises don’t remain ephemeral, the purchase of key vineyards becomes
inevitable. If you want to sell the wine, year in and year out, you need more
than a winemaker with the gift of the gab and a dog-and-pony show using the
prospect of perennial shortage to secure sales. In short, you need to pull it
together with structure, and structure takes money. A wine industry without
investment is called “the bad old days”. That was when growers delivered
unloved grapes to the co-op or waited for the KWV to fund their farming
operations with a voorskot and to
bail them out with an agterskot
whatever we do, let’s not go there again.